How to Get Funding for a Small Business in Nigeria

Just like it is in most other developing countries, getting funding for a small business in Nigeria can be quite a hurdle.

Compared to bigger enterprises with access to funds and credit facilities from banks and major financial institutions, same cannot be said of small businesses who’ll often times have to go out of their way to source for funds.

With such realities, more and more small businesses are finding it difficult to raise the funding they need for their ideas. The few that have been able to sort out their funding have had to go through a lot just to get that coming.

And this is not supposed to be so.

That’s why in the following paragraphs, I’ll be sharing with you some of the easiest and most realistic ways you can get funding for a small business here in Nigeria.

Personal Savings

One of the easiest and most practical ways to raise funding for a small business is through your own personal savings.

The good thing about personal savings is that it doesn’t come with a lot of drawbacks. For instance, you won’t risk giving out a large part of your business to someone else as equity or having to think about how you can repay the debt.

The money is yours to disburse. And whether you make huge or little returns on investment, you do not have anyone to question you.

Of course critics have always argued that your savings might not be able to fund your business in most cases but thing is, you don’t have to fund your entire business using your savings. That’s the truth.

You can always save up funds and then launch your business when your savings gets substantial. And you can always get other sources of funds along the way as the business gets traction.

Friends and Family

Another easy and popular way to get funding for a small business in Nigeria is to go through family and friends.

Considering that your family and friends already know you too well, it is always easy to convince them to support your idea.

The good thing about family and friend is that most times they are not just investing in your business, they are investing in you. So, it’s always easy to rally around their support.

But, that doesn’t mean you have to take their support for granted.

So, before applying for small business funding from family and friends, you need to come up with a realistic business plan that captures your business idea and other details.

Also, be able to explain in details your business idea, what you want from them and what they will gain in return, explicitly.

Let them know whether what you need is a grant, a loan or an equity investment.

If it’s a loan, come up with terms and agreement and when they can get it back. Where it’s an equity investment on the other hand, inform them in your agreement of the possible risks involved, what they are supposed to get as returns on investment and time range they should expect that etc.

Engage in Partnership

Instead of waiting to own 100 percent equity in your business, you can engage in a strategic partnership, to get funding for a small business.

What happens with strategic partnership is that instead of you bringing in 100 percent funding for the business, you can partner with one or two other persons to come up with funds for the business.

Good thing about partnerships is that it spreads the risk. So, should things go out of plan, you don’t have to be the only person taking the entire risks.

Another thing is that it helps in getting the needed funding. Although you won’t keep 100 percent profits if you choose to raise your funding using partnerships the benefits far outweighs the drawbacks, especially where you can get the right kind of partners and business models.

While shopping for partners however, be sure you’re looking out for people with similar interests as yours. Also, look out for the kind of business partners with a decent experience and trust worthiness. This will help you in building your business without a lot of rancor.

Again, before getting started; come up with a realistic agreement that will work for both you and your business partner, putting into consideration, the current stage of the business and the future.

Borrowing from Microfinance Banks

You can also get funding for a small business in Nigeria by borrowing from microfinance banks.

There are a handful of microfinance banks in Nigeria who are well involved in the business of giving out soft loans for small businesses.

Where you can’t raise funds for your small business through the other avenues listed here, you can get over to microfinance banks.

A lot of these microfinance banks offer both personal and business loans that’s up to 7 figures with a flexible repayment plan.

Instead of allowing your business idea to die out for lack of funds, you can always approach these banks for funding for your business.

One thing you must note while going for these banks is that some may require some form of collateral which you’ll have to provide before you can access their credit facility.

Also, take note of their repayment plans and interest rates before deciding on the ones you need to settle for.

Always remember that some of these microfinance banks will want to see your business plans and other items you’ve already put in place for the success of your business.

In general, I will only advice you borrow from microfinance banks either as a last resort or where you’ve already started your business but in need of funding to grow the business and take it to the next level.

Crowd funding

Crowd funding is one of the most recent ways to raise funds for a small business. It leverages a large number of funders, to raise funds for small businesses.

Although it is relatively new compared to the other small business fund raising channels, it is one of the easiest ways you can get a large number of people to sponsor or raise funds for your small business.

Even though it is not so popular in Nigeria and Africa in general, a good number of businesses are using crowd funding to start their businesses and you can do exactly the same, to get the needed fund for your small business.

Typically it takes 6-8 months between starting an equity crowd funding campaign and getting the money over to your bank account, going by the formal way.

You can check out some crowd funding websites in Nigeria here.

Outside that, you can also try out the informal crowd funding by getting a number of your friends and family or acquaintances to contribute a certain amount for your business in order to get certain equity over a defined period of time.

Depending on what works for you, the second option can be very realistic where you don’t have a lot of money or connection to run a crowd funding campaign.

But in whatever you do, you must also realize crowd funding has its own shortcomings and requirements. And you should watch out for this.

Conclusion

Frankly, these are not just the only channels to get funding for a small business in Nigeria. There are so many other ways you can go about raising funds for your small business but these are the most realistic channels.

While choosing any of these, always remember to consider your own realities as per what you want for your business, the kind of funding that can work for you and your overall goal.

Also, remember that it’s not just funding that keeps a business going. A combination of the right business model, strategies, the right market and a whole lot of other factors will always play a role in the success of your business and you cannot ignore these factors.

So, there you have it. Do you need further help on how to start and grow your small business in Nigeria Talk to our team let’s mentor you here.

Now, it’s over to you. What’s your biggest challenge when it comes to starting and growing your small business? Let’s have your comments below.