Funding Resources for Small Businesses in Nigeria
Small businesses need funding resources to survive. As an aspiring entrepreneur or small business owner, one of your foundational priorities should be to provide key solutions to specific problems. You should also aim to meet the demands of your target customers. However, there is only so much that can be done without the required funding to set things in motion. Without an adequate amount of funding, businesses might not be able to position themselves effectively for opportunities and even attract a wider audience.
When it comes to securing funding, there are various structured and unstructured platforms/sources that could be of benefit.
The following are just some of the funding resources that a business owner can leverage for success:
· Personal financial sources
The first set of funding resources are those that are tied to the business owner personally. At the very basic level, the following are some tips to maximize personal funding resources.
a) Get a job that will sustain you financially:
As opposed to being idle and plotting a way to get that bank loan to start up your business, why not try to get a side job? In a country like Nigeria, you do not necessarily have to be independent before starting up a business of your own. In the same vein, you might very well need to get a job and work for a few years. This will help you gather enough money to fund that business idea you have.
b) Personal savings:
An entrepreneur often invests personal money to start up or maintain an already established business. Personal savings is the most utilized method of generating capital for small and medium-scale businesses. After creating a good business idea and plan, you can reduce your expenses to save up for the capital. The capital will be used to kick-start your business.
Currently, in the country, several online banking platforms offer entrepreneurs the opportunity to invest in personal savings. Another great reason why your savings is one of the first funding resources to leverage is that it communicates your commitment towards your business affairs in the long run.
c) Financial assistance from family and friends:
Another method of raising funds for your business is through family and friends. Family and friends who are in support of your business idea can give you the financial push you need to set off. You may need to persuade them into lending money to you. It is, therefore, important that your reputation and integrity should precede you and help in gaining their trust.
Financial support from family or friends can be cheaper and quicker when compared with a bank loan or even getting a grant. Its terms of repayment, these people may be more flexible and you don’t need to wait for an extensive period to obtain required funds.
· Grants and Business Angels
Sometimes, you may find it difficult as a small business owner to fund your business sometimes. Even with so many family members and friends around, funding your business can sometimes be difficult. Other times, it may not just be the amount you need to get things going.
During situations as these, a business grant can prove very effective and attractive. Grants are funds given to a person or a business organization with no requirement for repayment. Through grants, you can establish and develop your business without the difficulties of repayment as with a bank loan.
You can also acquire funds from a business angel. A business angel is a wealthy and independent individual who provides funds for entrepreneurs to start up or expand their businesses. Otherwise called an angel investor, a business angel offers financial aid to entrepreneurs with creative and promising business ideas. Acting as a mentor or guide, the business angel invests their time and could also provide networking opportunities for entrepreneurs as required.
· Bank of Industry (BOI) and similar organizations
Bank of Industry in Nigeria provides long-term financing aids to the industrial sector of the Nigerian economy. Small, medium, and large business organizations that are after expansion or diversification can seek loans from this industry. However, you will be required to go through certain processes to prove that you are committed and credit-worthy. Having no record of unpaid loans, you must demonstrate your capacity to repay loans.
You can access the Bank of Industry by:
(1) Writing an application letter
(2) Filling a BOI questionnaire, and
(3) Submission of a questionnaire and other required forms.
There are also similar organizations within your industry that can provide loans or offer investments to businesses that need funding to scale their operations.
· Co-operatives or Partnerships
Joining a Cooperative and saving certain amounts of money periodically is also one of the low-hanging funding resources SMEs can make use of. By being a member of a cooperative association, you become eligible to borrow funds from them. You can also seek partnerships with other individuals or firms with similar business goals as yours. Partnerships, therefore, can be useful when it comes to generating funds as two separate parties join forces together to overcome financial difficulties. It is also beneficial when they aim to achieve common or separate goals.
Conclusion
It can be a very difficult task sourcing funds to start up or to grow a business in Nigeria; however, it is not impossible. As an entrepreneur or small business owner, it is also important that you work with a sound business idea and feasible plan. This will help convince potential and external financial sources to invest in your business.
