6 Ways to Secure Financing for Your Small Business or Startup in Kenya

• By Clinton Wanjala

• 393

• Last updated Sep 20, 2025

Writing for fellow entrepreneurs is always a thrill for me. I like connecting with like-minded individuals. If you are just starting out your entrepreneurial journey and would like to outsource funds to help facilitate your small business or startup, you are in the right place. In this article, I’ll walk you through 6 sources of financing that will aid in transforming business idea into reality.

1. Self-funding (Bootstrapping)

There are times when you just want to use your savings or profits from other businesses to kick off a new venture. In such moments, you don’t want to take a loan or bring in a partner..., you just want to do you. This approach is known as self-funding or bootstrapping.

This method is always the best if you’ve got enough capital because you’ll have full ownership and control over the new entity. In Kenya, this is usually the first choice for most business people I’ve seen.

Sometimes, you might also be forced to choose self-funding, especially when external funding is hard to come by. Below are some of the advantages and disadvantages you might experience if you decide to go the solo route.

Advantages of Self-funding

• Full ownership and control: You make all the decisions and keep 100% of the profits.
• No debt: No need to worry about loan repayments or interest.
• Reduced financial pressure: Without external funding, you have fewer financial obligations.
• Faster decision-making: You can make quick decisions without needing approval from investors.
• Improved financial discipline: You are more likely to manage your money carefully since it's your own.
• Flexible growth pace: You can grow the business at your own pace without pressure from investors.
• Keeps future funding options open: If your business grows, you can later attract investors on better terms.

Disadvantages of Self-funding

• Limited capital: Your personal savings might not be enough to fully fund your business.
• Slower growth: Without external funding, scaling the business can take longer.
• Personal financial risk: You risk losing your own money if the business fails.
• Restricted opportunities: Some business opportunities might require more capital than you can provide on your own.
• Strain on personal finances: Using personal savings might affect your ability to handle other financial needs or emergencies.
• Limited networking and mentorship: Investors often bring valuable connections and advice that self-funded businesses may miss out on.

While bootstrapping is ideal for smaller ventures or businesses that can generate revenue early, it may not be sustainable for capital-intensive projects.

2. Small Business Loans

If you’re a business owner in Kenya, there are high chances you’re familiar with small business loans. In fact, this type of funding is very common, and almost every business person has sought it at some point. 

Banks like Equity, KCB, and Cooperative offer business loans that can help you cover operational costs, expand, or even buy equipment. To get these loans, you usually need to have a solid business plan, proof of cash flow, and some form of collateral. 

In the case whereby you’re looking for smaller amounts, microloans from places like Faulu Kenya and Kenya Women Microfinance Bank are also an option.

However, the tough part for many Kenyan entrepreneurs is meeting the strict requirements; like having a good credit history and enough collateral. On top of that, interest rates can be quite high, making loans a bit expensive for some.

3. Venture Capital and Angel Investors

Venture capital (VC) and angel investors are crucial funding sources for high-growth startups in Kenya. VCs, such as Savannah Fund and Chandaria Capital, typically invest in businesses with significant growth potential, offering large capital in exchange for equity. Angel investors are individual investors who fund startups at an earlier stage, often providing mentorship along with capital.

To attract venture capital or angel investment, a startup must demonstrate strong growth potential, a unique business model, and scalability. Founders must prepare a solid pitch deck and showcase traction or a working product to secure funding. However, equity financing means giving up a portion of ownership, which can dilute control over the company’s future direction.

4. Business Grants

Business grants are another excellent financing option for startups and small businesses in Kenya. Government grants, such as the Uwezo Fund, Youth Enterprise Development Fund (YEDF), and Women Enterprise Fund, provide capital to entrepreneurs with minimal or no repayment requirements. These grants are particularly useful for youth and women-led enterprises, with eligibility often tied to business plans, job creation potential, and community impact.

Private organizations, such as foundations or NGOs, may also offer grants to businesses aligned with specific social or environmental goals. Although grants are non-repayable, they are highly competitive, and the application process can be rigorous, requiring detailed business plans and proof of impact.

5. Crowdfunding

Crowdfunding has gained popularity in Kenya as an alternative financing model, particularly for startups looking to raise small amounts of capital from a large number of people. 

Platforms like M-Changa, Kickstarter, and GoFundMe allow entrepreneurs to present their business ideas and seek funding from friends, family, and even strangers.

To run a successful crowdfunding campaign, a compelling story, a clear use of funds, and rewards for contributors can be helpful. Crowdfunding is often used for projects that resonate with the public or those that have a social impact. 

However, a weak campaign can fail to raise sufficient funds, and the platform may take a percentage of the money raised.

6. Alternative Financing Options

For entrepreneurs who don't qualify for traditional loans or investors, alternative financing options such as peer-to-peer lending, invoice financing, and merchant cash advances can provide flexible capital. 

Peer-to-peer (P2P) lending platforms like Kiva and Zidisha connect businesses directly with individual lenders, often at lower interest rates than traditional loans.

Invoice financing allows businesses to borrow money against outstanding invoices, providing immediate cash flow while waiting for clients to pay. Merchant cash advances offer businesses a lump sum upfront, which is repaid through a percentage of future sales. 

These options can be more accessible than traditional bank loans but often come with higher fees and risks.