Effective Ways to Fund a Small Business in Nigeria

Wednesday, October 14, 2020 / 12:00PM /By FCMB Business Zone / Header Image Credit: FCMB Business Zone

The need for financing has been one of the recurring challenges faced bymicro, small and medium scale enterprises in developing countries like Nigeria.In a 2013 MSME Survey by SMEDAN and the National Bureau of Statistics (NBS),the top area of assistance that most micro enterprises sort for was withrespect to finance. This was further corroborated in a June 2020 survey by PwC,which revealed that obtaining finance is the most pressing problem that MSMEscurrently face. This reflects how the problem of finance continues to persistand the need for further enlightenment on the various options available beyondthe ones publicised.

As smallbusiness owner, it is important to note that funding can be sourcedthrough diverse means. Though most small business owners are quick to seekloans from financial institutions, it is important to know that these are notthe only sources of finance. Thus, it is shrewd as a business owner to lookinwards and seek financial incentives that are not burdensome as explained inour article titled "Top 10 Financial Strategies to Help Grow Your Business". Some ofthese sources are explained below. To read seven moreeffective ways of funding discussed on the Business Zone Click HERE

1. Personal Finances

As an entrepreneur you need to first inject your personal finances (savingsor cash earned from an investments or asset either on a continuous basis orafter sale) into your business before requesting that others support same.This shows your level of commitment and confidence in your enterprise. By beingthe first investor, shareholder or director of your business, you are able toattract others to invest in same.

If you are just planning to start the business, it is advisable to savefrom your current earnings before venturing into the business. As an existingbusiness owner, it is also prudent to pay yourself like you would if you hiredsomeone to run the business like you do. This would enable you save from yourincome ahead of rainy days.

It is important to know that you are your own cheer leader and firstfinancial aid; so, when the days are blooming, plan for the gloomy days.

2. Friends and Family

Friends, family and well-wishers are one of the easiest sources offunds. With them, you sometimes do not have to show any major documents or payinterest. All you have to do is properly articulate how you intend to use thefunds, the importance and impact on you and the community as a whole, and theywill be open to supporting your business.

In a country like Nigeria where poverty and unemployment increasesdaily, friends and family that are capable will be willing to contribute tohelping you set up a business so they can be part of your success story ratherthan continue to give you money for expenses that will not yield anything inreturn.

Though some persons find it difficult to seek support from family andfriends because of the notion that business must be separated from family andfriends, it is important to note that friends and family are quite easy toconvince than a bank official, and should not be ignored as a source offinance. In addition, you can consider their financial support as payments inadvance for your products and service or investments in same for which you cangive them a percentage of your shareholding. Also, by investing in yourbusiness you can easily cultivate them to becoming loyal customers and brandambassadors.

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