Doing business in Nigeria is challenging, but can be exciting when all resource all available. When it comes to starting a business in Nigeria whether small, medium or large-scale enterprise, one of the hardest parts is sourcing funds to finance the business. This is a threat and a great challenge to many entrepreneurs who want to start up a business. It has often resulted in the fall of supposed multi-millionaire business of which many who had such business idea have dreamed and thought that it will be launched.
Can one now say that there no ways to source funds for a business in Nigeria? The answer is NO. There are so many great ways to get/source funds for business in Nigeria. Below are the top 13 valuable means to source funds for a business in Nigeria; you can tap into any of these means of raising funds to get your business started.
- 1 4 Reasons why sourcing funds for business seems difficult
- 2 13 Ways to source Funds for Business in Nigeria
- 2.1 Personal savings
- 2.2 Relatives and families
- 2.3 Friends and well-wishers
- 2.4 Grants from Philanthropists and organizations
- 2.5 Business Angel and Angel Investors
- 2.6 Co-operatives
- 2.7 Partnership
- 2.8 Sponsorship
- 2.9 Bank of Industry (BOI)
- 2.10 Banks Loan
- 2.11 Published press articles
- 2.12 Get a Job That finances your needs
- 2.13 Government SME support
- 3 Conclusion
4 Reasons why sourcing funds for business seems difficult
Some key reasons why people find it difficult to source funds for a business in Nigeria include:
- The business Idea is Not Right – Your business idea(s) must be such that it can attract investors. So, you must get a good business idea before sourcing funds for a business. You can select from our list of business ideas before embarking on fundraising for business.
- Your business values and goals are bad -Your dream business must have concrete core values and goals. This concrete values and goals must align with your business mission and vision statement.
- Poor Business Plan and Design – Business plan is a vital element of every successful business. It serves a blueprint which you must refer to at all time. If you don’t have a good business plan, you will find it difficult to get funds or loan from banks. You can look at how to write a winning business plan.
- Integrity and Reputation – You need to earn yourself reputation and integrity. If you don’t have reputation and integrity; I bet you, your family members will not even listen to you when present your business plan to them talk more of your friends.
13 Ways to source Funds for Business in Nigeria
Here are the top 13 ways to source funds for business in Nigeria:
This is the best source of capital for a new business. Personal savings is one of the easiest ways to raise funds for business, especially for small and medium scale business enterprise. When you have a business idea and there is no capital for startup, cutting down your expenses to save for the business is a good strategy of raising at least the initial capital.
Use of piggy bank is the best method for personal savings. You can commit to saving as little as ₦100 a day into your online Piggybank or PiggyVest.com account and also earn accrue interest annually. So, knowing that you can save as low as ₦100 daily to your Piggy Bank account, you can decide on your own how much you will save daily. This is the best method to make a saving plan. I use PiggyVest to save and invest. So, you can Sign up for Piggy bank here and get ₦1,000.00 to start your own savings journey.
Timing, and the amount of money you were able to save within a given month matters a lot. You can apply the 50/50 technique in your personal saving style. In this technique, you will not spend more than you save. You put 50% of every income you earn into savings. For example, if you increase your saving by N40000, you know that you’ve earned the right to raise your lifestyle by that same amount (N40000). By so doing, you will be able to raise capital for your business within the shortest possible time
Most people wait to start saving when they have some extra money lying around -a comfortable surplus. But it doesn’t work like that. You start to save for your business at least 2 years of time you propose to start the business. But it is not necessary that you have to wait till 2 years before you begin the business.
Relatives and families
Your relatives and family members are the second-best sources of funds for new business. Apart from the money you saved through the Piggybank, another way of raising substantial money for your business is through family and relatives whom you have earned their trust.
It may difficult f to get money from your family and relative if they don’t believe in you. Of course, you have to trust yourself first, if you want people to trust you. You need to earn a high reputation from family and relatives and present your business idea as one that is achievable for you to get money from your relatives and family members.
Friends and well-wishers
Outside your family members, the nearest persons that can help you raise startup capital for your business are your friends and well-wishers. Again, they need to trust and believe in your ability before you can get money out from them.
Present your business idea and a good design business plan, no matter how small the business is; they will be willing to support you financially. Begin from your closest friends. You can promise to give them something in return as the business starts paying off in spades.
Grants from Philanthropists and organizations
Another source of fund for starting up a business is the grant. Grants are non-repayable money or products disbursed by grant makers, often a government department, organization or trust, to a recipient, often (but not always) a nonprofit entity, educational institution, business or an individual.
For you to receive a grant, some form of “Grant Writing” often referred to as either a proposal or an application may be required. The type of grants that I’m suggesting that look for is grants from non- profit organization or philanthropic organization.
You can easily outsource for grants to get your business started but remember, most organization that gives out grants look for fresh thinking and innovative people and organizations. They also set benchmarks to measure success and monitor your progress in the business.
Social exchange market promises to offer grants to its member (registered co-operatives under social exchange market). This has been on for a long time.
Business Angel and Angel Investors
Angel Investor is a wealthy individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership shares. Business Angel can be anybody who is willing to invest in your business. All you need is to prepare a good business plan and present it him or her.
Business Angel should be able to see why he should invest in your business. You can get such people in your locality, it can be your Uncle in Abuja, a director you know or even your own brother; look for them to help you raise fund for your business in exchange for ownership equity.
By joining cooperative and saving small amount every day can help you raise money for your business. Once you join any co-operative society, you are eligible to borrow money from your cooperative and you are eligible to receive funds on your turn.
Once, you receive your own turn of funds which can substantial enough to startup business, use it to start up the business. however, you must plan a way to pay at the due time.
The partnership works very well when you meet someone that has a similar business interest and core values like you. Two of you will pool funds together to start up the business together. Partnership is not necessary for two people business. In partnership, Profits are shared according to individual contribution or shares of the business. So, there is equity and justice.
Most multi-national and multi-international companies start from a partnership. Partnership business has many great advantages over the sole proprietorship business.
Getting sponsorship from interested individual, organizations or companies who finances your business project in exchange to promote the organization or individual business is another means of sourcing fund.
No organization, company or individual that will agree to sponsor project without seeing how she will benefit from the project. So, before you begin approaching any organization or individual for sponsorship you must have made sure that you have included the interest of the organization or individual sponsor.
Bank of Industry (BOI)
Bank of Industry (BOI) provide Small, medium and large enterprises, excluding cottage industries with funds for starting their business. New or existing companies, seeking expansion, modernization or diversification; creditworthy promoters are offer loan by bank of industry 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 the 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.
You can obtain access to the Bank of Industry facilities in 3 easy steps;
Step 1: Write a formal application letter
Step 2: Completion of BOI’s Questionnaire
Step 3: Submission of Forms and Questionnaire. So, if you think you’ve meet up with the bank of Industry requirement you can comfortably visit boinigeria.com to download the appraisal form and complete their questionnaire for your business funds
I decided to add banks loan because I still believe that bank loan serves as a means of raising fund for business startup. The only problem with commercial banks in Nigeria is they demand a lot (collateral and security) and they often turn down the request of small scale and medium scale business enterprise.
Published press articles
Actually, it is not the press article that you’ve published that will give fund for your business but rather the attention of the investors that you’ve attracted through your press article.
Many large scale business entrepreneurs have secured their seed funds via this means. Many startups are capitalizing on this method to attract investors who fund their businesses.
Get a Job That finances your needs
There are so many jobs and task you can do online to make money in Nigeria, they don’t necessary requires you having money before you can do. As you carried out these online jobs, keep part of the money to start up a business offline.
Government SME support
Actually, this is not a good means to raise fund for a business yet it is still very important I mention it. This is because many small and medium scale enterprise has started greatly via this means
I strongly believe that with the above 13 ways, you can actually source/raise funds for your business in Nigeria. Remember the key points that you must get right before outsourcing for funds for your business. Get those points right and you will be surprised that you will raise enough money than you actually need to start up the business.
Learn how to start a small profitable business in Nigeria
It is time to tell us how much you need for your business startup. Use the comments box below, only real names will be published, don’t add your contact details for security reasons. It is not accepted.
I wish you all the best as you kick-start your new business