5 Different Ways to Finance Your Small Business in Nigeria
For most SMEs in Nigeria, the issue of finance is one of the most important aspects. Not only is it important, but it can also be a very challenging one.
To finance your small business in Nigeria, the first option that might come to mind will most likely be loans. However, this is not the only option there is. Below is a list of options available at your disposal to finance your business as a business owner in Nigeria.
Angel Investors
Angel investors are individuals who are so rich they can provide SMEs in Nigeria with capitals for starting up their businesses. For angel investors, they are usually on the lookout for businesses that possess great growth potential.
When going into partnership with an angel investor, the extent of control they have over your business is dependent upon the total amount of money invested in your business. While having an angel investor is a good way to finance your small business in Nigeria, care must be taken to avoid getting kicked out of your business.
Cases like this may arise when your investor puts more funds into the business than the business owner. However, for SMEs in Nigeria planning to let go of their business after a short while, the investor can own a larger share.
In a situation where you are a really smart business owner, your angel investor will have no problem with you running the business fully despite owning a larger share.
Family and Friends
A lot of SMEs in Nigeria have financed their small businesses through the collective efforts of family and friends. Getting family and friends to invest in your business has its own risks and benefits.
When going this route, care must be taken not to jeopardize your relationship with those you hold dear to you. Before getting them onboard with you fully, ensure you take time to mention the various risks involved in the business.
Doing this beforehand will help them prepare for whatever it is that comes along the line. When mentioning the risk, don’t leave out the fact that their money might get lost in the process. With this, they will be well prepared for the outcome, whatever it is. To make things easier, you should advise them to only invest an amount they can afford to lose if things go south.
When financing your small business in Nigeria through contributions from family and friends, you should decide if it’s going to be equity or a loan. For either of the arrangement, ensure you hire the services of a lawyer to draft all necessary legal agreement.
Venture Capital
Another way to finance your small business in Nigeria is through venture capital. Venture capital involves a group of wealthy individuals coming together to provide funds for small business owners.
These individuals are referred to as Venture Capitalists. Venture capitalists look out for businesses with prospect and huge potential for making profit. They rarely invest their money in new businesses. However, new businesses with profit that can be measured will benefit from this arrangement.
This form of finance for SMEs in Nigeria is a great option as more often than not, the money invested in your business doesn’t have to be repaid. However, care must be taken as a venture capitalist might demand some amount of control over your business with time.
Online Lending Platforms
SMEs in Nigeria looking to finance their small businesses can get funding from online lending platforms. Some online loan available for SMEs in Nigeria include:
- Carbon (Paylater): Over time, Carbon has become one of the most sought-after online loan platforms. With Carbon, no collateral or guarantor is needed to access funds. This makes it easy for you as a business owner to finance your small business in Nigeria.
- Fair Money Instant Loan: Small businesses can access loans as much as N150,000. The earlier loans gotten from this platform are repaid in time, the more benefits accruable to business owners.
- Branch Loan: Another online platform available for SMEs in Nigeria, all it takes is to meet up with all necessary requirements. This platform offers small business loan amounts as low as N1000 and as high as N200,000.
- GroFin Fund: GroFin Fund makes financing available for businesses contributing in a positive manner to the environment they operate from. In addition, there must be an ability for sustainability.
- Specta: Specta has a loan offer for small businesses called Specta4business. It is available for business owners in need of urgent funding for their businesses.
Crowdfunding
Crowdfunding is a process of raising funds from a large number of people. The people involved in crowdfunding aren’t usually investors, as a result, most likely do not expect a return of their money. With crowdfunding, all sole right to the business remains yours as a business owner.
This method of financing comes with very minimal risk for the business owner. If the business fails in the long run, you are under no obligation to refund anyone.
Some of the crowdfunding platforms in Nigeria include Kickstarter, Fundanenterprise, NaijaFund, amongst several others.
When financing your business through crowdfunding, note that crowdfunding campaigns won’t always yield the desired results. There will be instances where your target won’t be met. Having this at the back of your mind will help you prepare for the unexpected.
While there are several options available to finance your small business in Nigeria, the aforementioned are top on the list. Some factors should be put into consideration such as the size, and also nature of the business.
Once all these have been sorted, deciding what means of financing to go for will be easier.
