Businesses need to have capital. Small businesses fail even before they begin because they do not have adequate funds to finance their ideas.
Most Nigerian Banks do not directly support start-ups as it often poses more of a risk to their bottom line. It is rumoured that up to 95% of SMEs in Nigeria fail within 5 years. Furthermore, banks do not support existing businesses that do not have the required collateral to secure financial assistance. Most of the non-conventional banks that give loans to start-ups have high interest rates and this can be very discouraging for entrepreneurs.
Tips
- The first point of call for financing your small business is your personal savings. As the idea for your business slowly develops, have a plan to put some money aside towards the realisation of your business. Retain this saving plan to slowly fund your business until it begins to turn a profit or until you can find another source of funding.
- Your family and friends are your first supporters, first customers, and they could also be your first funders! Don’t shy away from pitching your ideas to them. They are more likely to believe in your idea and may be willing to invest in seeing it come to fruition.
- Cooperative societies or local saving societies known as ‘’Esusu or Ajo’’ are known to help their members with funds to start or grow their businesses. Members of these cooperatives make daily/weekly contributions. You can join these cooperatives and take advantage of their money-lending programs.
- Financial institutions are another way of raising capital for your business. Although many commercial banks do not give loans to start-ups, the narrative is changing to reflect the times. Examples include Sterling Bank’s Asset Financing or Business Support Facility opportunities, or the offerings available from microfinance banks across the country, often with a low-interest rate. Bank of Industry (BOI) also provides some start-up loan opportunities for SMEs. Find their loans and other funding opportunities on our resource page.
- A partnership is another avenue for getting funds for your business. If you do decide to enter into a partnership with an investor, it is important to put everything in writing. Get a lawyer you trust – preferably one familiar with business laws in Nigeria – to document the partnership.
