Financing Alternatives For Small Businesses In Nigeria

Several young men and women are willing to launch into the business world, but they often start out underfunded. This tends to make them smaller at the outset and grow more slowly.

The good news is that the number of funding alternatives is growing. A savvy owner should do his research to understand the pros and cons, as well as whether his business qualifies for these options.

The options available for your business depend on factors such as type of business, credit-worthiness, willingness to trade ownership or debt for access to capital, the attractiveness of the industry to investors and the amount of personal wealth you can leverage to guarantee a loan.

Bank of Industry – N19.8 billion Micro Small & Medium Enterprises Development (MSME) Funds in the following fifteen (15) states: Anambra, Delta, Kwara, Niger, Kogi, Osun, Edo, Ondo, Ekiti, Ogun, Oyo, Gombe, Benue, Akwa-Ibom and Cross River States, while others are in the pipeline.

• For the development of the MSME sector in each of the participating states majorly through the bank’s cooperative lending scheme
• Average interest rate is 5%
• The Bottom of the Pyramid Scheme is a new initiative aimed at deepening the bank’s credit offerings to micro entrepreneurs through Micro finance banks in each state.
• The bank in conjunction with SMEDAN and ITF is evolving the National Enterprise Development Programme (NEDEP) to fast track  the development of new micro enterprises while supporting existing ones on a sustainable basis. This fund is available to both men and women.

Factoring - Factoring is a process where a financial institution assumes your accounts receivables and advances you 70-80% of the total value.  Then they collect the full amount from your customers, forwarding the balance to you minus their fee.  This can be an effective way to obtain short-term capital, while also outsourcing the collections process.

Supplier Line Of Credit - If you have a good relationship with your suppliers, you may request a line of credit so that you can receive goods and pay for them over an extended period.

Angels - Some investors are dedicated to empowering women by financially supporting women-owned businesses.  Angel investors typically want to enter at an earlier stage than traditional equity investors, and they may have an industry focus. They may provide loans or equity investments and can even partner with local economic development organizations.

Equipment Leasing – This involves arrangement between a financial institution and its client, whereby the institution agrees to purchase fixed assets such as equipment/machines for its client who repays the cost of this equipment and interest accrued on it over an agreed period of time.

Grants – In an effort to assist small and medium scale entrepreneurs (SME) to grow, the Federal Government sometimes provides business grants in various forms. These funds can be accessed by those who meet certain criteria as stipulated by the government or the agencies involved. Some corporate organizations as part of their corporate responsibilities also make grants available to small business startups.

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