Accessing finance for your Nigerian business can sometimes be harder than getting a camel to pass through a needle but that won’t be the case if you know the right ways to get funds to finance your business.
A lack of adequate collateral is preventing many businesses in Nigeria from getting the funds they need from financial houses in the country. Nigeria is an entrepreneurial economy with an estimated 37 million micro, small and medium-sized companies, whose contribution to economic growth and job creation is significant.
The smaller the business, the less likely it is to get a loan from a bank. A large number of these businesses have the potential to become bigger and more prosperous, but their growth is restricted for a variety of reasons – chief among them, access to finance. I mean without money, you really can’t achieve a lot in your trade.
SME funding in Nigeria is getting better has the Central Bank of Nigeria recently established the National Collateral Registry to improve access to finance and is supporting the development of a modern credit reporting system in Nigeria with support from the World Bank Group.
Nigeria is among the 25 priority countries that are part of the World Bank Group’s Universal Financial Access 2020 initiatives, whose goal is to extend access to financial services to all adults by 2020. In 2014, 66% of adults in Nigeria (55 million adults) didn’t have access to a transaction account, according to the World Bank’s Global Findex data.
While it is clear that access to finance in Nigeria remains a challenge, there is a strong optimism that the business environment will improve in the next five years.
If you are a young entrepreneur in Nigeria hoping to be the next Aliko Dangote or Bill Gates,
Here are 10 ways you can get funds to finance your business in Nigeria.
1. Personal Funds
When searching for funds to start a business, the first point should be your personal funds. How much do you currently need to kickstart your idea and do you have enough to run your idea. Having an understanding of the current state of your finances will help you plan your business and also come up with the total amount you will be needing for the business.
2. Family and Friends
Apart from the money you have saved up, another way to raise money for your business is through relatives and friends Now the question is how can you convince them to give you the money. It might be a problem trying to get cash from your family and relatives in the event that they don’t believe in your idea. They are about to take a risk investing in your idea, and you need to sell the idea to them, for them to buy it.
Don’t just introduce your business idea with word of mouth, also have a well-outlined business plan regardless of how little the business will be; they might just be willing to assist you monetarily.
Start with your dearest friends; you can guarantee to give them something consequently as the business grows. Friends and well-wishers should come in handy when you want to start a business.
To raise capital for your startup through your family members, you need to trust yourself and idea first. You should need to fight for their trust and you need to show your business thought as one that is achievable with the funds you are requesting for. There is no shame in begging for assistance from your Family and close relatives at all, call for a family meeting if you have to, It’s a family emergency.
3. Bank of Industry (BOI)
The Bank of Industry Limited is the oldest and largest Development Finance Institution currently operating in Nigeria. The BOI offers small, medium and large enterprises, excluding cottage industries with funds for starting their business; new or existing companies, seeking expansion, modernisation or diversification; creditworthy promoters who will be required to prove their commitment to the project by contributing at least 25% of the project cost excluding land, borrowers whose management capability, financial situation (including availability of collateral and guarantee), character and reputation are incontrovertible; clients with demonstrable ability to meet loan repayments, borrowers with no record of unpaid loans to erstwhile development finance institutions and other banks. Follow the steps below to apply for a loan from the Bank of Industry to finance your business in Nigeria. But be sure you meet the criteria to apply for a loan.
Step 1: Write a formal application letter
Step 2: Completion of BOI’s Questionnaire
Step 3: Submission of Forms and Questionnaire.
Another way you can get finance for your business is a business grant. In Nigeria, one of the easiest and cheapest ways to get funds for your business is by applying for small business grants. Grants are non-repayable funds or items dispensed by grants givers, regularly by government, associations or trust, to a beneficiary.
Unlike business loans, grants don’t need to be repaid, so there’s no worry over term length, interest rates, APR, or refinancing. You just need to qualify, and boom—free money.
5. Angel Investors
Getting money from angel investors is also a way to get money and grants for your business in Nigeria. Angel investors are basically the wealthy individuals who provide capital for a business start-up, usually in exchange for convertible debt or ownership shares.
Both for the people willing to give you a grant in your business and the Angel investors, all you need to do is to convince these individuals with a very outstanding business proposal or plan as it may be.
6. Get a Business Partner
A business partner can help you bear the financial burden of starting a business in Nigeria. You and your partner(s) can come together and finance the business or you might be the one with the idea, and they with the funds. You then could form a partnership based on an agreed equity between the two parties. But the terms and conditions for this partnership need to be clearly laid down from the beginning to avoid issues in the future.
7. Venture Capital
Most venture capitalists invest in early startups or existing business with great potentials with the aim of taking a huge share in the business. So before you consider this option for your business, you really need to understand how they work. So if you are not comfortable with giving a large share of your business to someone else, this might not be for you.
8. Bank Loans
Bank loans are not new in Nigeria, and a lot of business owners have taken this route to finance their business. Banks require so many documentation and collateral before loans can be given. And unlike microfinance loans which could be accessed in a matter of days, bank loans often take longer and the interest rates can be killing.
Cooperative is another not new way you can fund your business in Nigeria. To finance your startup, you can join a cooperative of like-minded people that offer loan facilities to their members which could be in form of overdraft, soft loans, interest-free loans etc.
Crowdfunding is the act or practice of seeking for funds for a project, business idea or venture through many donors or contributors via the internet. This allows you to solicit for funds from the general public to fund your business