Practical Ways Business Owners In Nigeria Can Invest In Their Business
Many business owners in Nigeria don’t know that they are more than just entrepreneurs. Every entrepreneur doubles as an investor. This means that since we have more than 37.07 million SMEs in Nigeria, we have about the same number of small business investors. Imagine that this number of SME owners understood how to invest in their businesses the right way. The Nigerian economy would be buzzing with more established businesses. The investment decisions you make for your business will determine how fast it grows.
How business owners in Nigeria can invest in their business
Savings
This is one of the most popular and least-expensive methods of investing in your business. Most SMEs in Nigeria use this method even if they weren’t aware that it is a way to invest in their business. Start by depositing money in a dedicated account. Speak to your account officer to find out the best saving plans with fantastic interest rates. Saving is cheaper than getting bank loans or other forms of private equity investment.
Remortgages
In layman terms, remortgaging involves using a new mortgage to pay off an old one. The result of this is better access to equity and more favourable repayment terms, which allows you to use the same property as security. This method of investment helps you raise a lot of money to start and run your business. However, you may not be able to raise funds until you have paid a considerable proportion of the old mortgage. Remortgaging is also a great way to amass savings to run your business. This method isn’t common among SMEs in Nigeria yet, but it comes with incredible advantages.
Private Borrowing
Private borrowing is a cost-friendly way of investing in your business. The logical method is to approach the bank for a loan. Getting bank loans may be difficult for new businesses because of a lack of credit history. This is why you should consider private borrowing. Private borrowing is simply borrowing from family members or friends. This presents you with a cheaper option for investing in your business. It comes with pros and cons, so you need to be careful.
Pros of Private Borrowing –
a. It is a flexible investment option.
b. Little or no interest rates.
c. Lender benefits
Cons of Private Borrowing –
a. Lack of clarity.
b. Tax issues.
c. Social awkwardness.
When considering this option, ensure that you are as clear as possible with the terms. It is advised that you draw up a contract and be honest with communicating risks.
Online Loan Platforms
If you are not too sure about private borrowing, you can consider using online loan platforms. Many of these platforms do not require you to provide collateral. Instead, you need to build your credit score and in some cases, provide certain documents.
Advantages of Online Platforms
a. Saves time, especially when you need to invest in your business quickly.
b. A straightforward process with very little or no paperwork.
c. Convenience as you can apply on the go.
d. Allows you to compare several lending platforms.
This method is not without its disadvantages; the most prevailing is the high-interest rates. To beat this, you need to survey several platforms and pick the most favourable one for your business. Notwithstanding, using online loan platforms is a very reliable and convenient way to invest in your business.
Angel Investors
The idea of angel investors is not new but many SMEs in Nigeria haven’t tapped into its benefits. Angel investors are people that invest in a business by providing the funds for start-up or expansion. Of course, they don’t invest for free. They get to own an equity share in the business. Finding angel investors isn’t the easiest task, and it requires you to convince the investor to inject funds into your business.
Angel investing is a less risky investment since you don’t need to pay back the cash invested. Also, there is no pressure to grow the business. This is because angel investors are conversant with the business terrain. They don’t expect magical profits. The major disadvantage of using angel investors is that you will lose total control of your business. As stated above, angel investors assume equity roles in the business, so they have a say in decision-making.
What you should know about investing in your business
There are certain things business owners in Nigeria should know about investing in their business. There is always an array of investment options. You don’t have to invest all at once; you can do it in tranches. It is possible to lose money. You will not always make a profit, so you have to be prudent in investing in your business.
