Funding has always being a big problem for Small and Medium Enterprises (SMEs) in Nigeria, but knowing about the sources of funds for your SME could be part of the solution to get funds.
That’s why I have taken time to write this article to list out 7 sources of funds for SMEs in Nigeria and jut a brief explanation of sources of these funds.
SMEs have the capacity to generate employment to thousands of people in Nigeria and if the SMEs are ignored there would be high unemployment ration in Nigeria. That’s why investors and even the government should encourage the small and medium Enterprises in Nigeria.
Here are 7 sources of funds for SMEs in Nigeria that you need to know.
7 Sources Of Funds For SMEs In Nigeria
1. Personal Savings
2. Friends and family
3. Loan From Commercial Banks
4. Bank of industry
5. Co-operative Society
6. NGO
7. Venture Capitalists
1. Personal Savings;
In order for you to start your SME, there has to be some resources that were brought into the business by you. There has to be some savings that has being set aside for the purpose of your business.
It may look funny that your personal saving would turn out to be the source of fund for you business but that’s where it has to start from.
The advantage of this source of income is that no one asks you to show collateral and you are not paying back to anyone even with interest. So you should consider your personal savings as a source of income for your Small or medium Enterprise.
2. Friends and Family:
Another good source of income for Small and Medium Enterprises in Nigeria is from friends and families. Do you know why I said so? It’s because you don’t have to show collateral to your friend or family member.
You just have to simply explain what you want to use the money for and tell them the potentials of the business you are about starting or funding, they would be willing to help.
So your friends and family members can be a good source of income for you, if you want to start a SME in Nigeria.
3. Loan From Commercial Banks:
You can possibly get loan from commercial banks to fund your SME. It is even easier when you apply for the loan through your commercial bank where you normally deposit your money.
There are greater chances of getting your loan approved compared to when you request for loan from other banks. Commercial banks can offer short, medium and long term loans.
Commercial banks can be a good source of loan for Small and Medium Enterprises in Nigeria, but you will pay with interest and have to show collateral.
4. Bank Of Industry (BOI):
I know many of you are surprised that the Bank of Industry (BOI) can actually give loan to Small and Medium Enterprises but it is true.
The Bank of Industry was set up by the Federal Government of Nigeria to help kick start businesses in Nigeria that would benefit Nigerians. So long as you business is reasonable, you can apply for the BOI’s loan and you will get your loan approval very fast but you will be paying up with low interest.
5. Co-operative Society:
There are many co-operative societies in Nigeria that help their colleagues in setting up businesses and even handling immediate needs and these funds are gathered from contributions made by each member.
So it’s not a bad idea to fund your SME start up from co-operative societies.
6. NGO:
You can fund your SME from Non Governmental Organizations (NGO). There are many foundations that are set up by well meaning Nigerians who want to curb unemployment by offering financial assistance to SMEs.
If your business is mouth-watering then you can surely get funds from NGOs to start your SME.
7. Venture Capital:
This is not a common source of income for SMEs but it does exist. In this, Venture Capitalists who could be individuals or firms invest on businesses that may not have being tested and it doesn’t matter if the business was successful or not.
SMEs related to science and technology and medicine usually have better luck with Venture Capitalists.
I hope I have enlightened you by exposing to you 7 sources of funds for SMEs in Nigeria. You can explore to find out other sources of funds that suites your business.
That’s why I have taken time to write this article to list out 7 sources of funds for SMEs in Nigeria and jut a brief explanation of sources of these funds.
SMEs have the capacity to generate employment to thousands of people in Nigeria and if the SMEs are ignored there would be high unemployment ration in Nigeria. That’s why investors and even the government should encourage the small and medium Enterprises in Nigeria.
Here are 7 sources of funds for SMEs in Nigeria that you need to know.
7 Sources Of Funds For SMEs In Nigeria
1. Personal Savings
2. Friends and family
3. Loan From Commercial Banks
4. Bank of industry
5. Co-operative Society
6. NGO
7. Venture Capitalists
1. Personal Savings;
In order for you to start your SME, there has to be some resources that were brought into the business by you. There has to be some savings that has being set aside for the purpose of your business.
It may look funny that your personal saving would turn out to be the source of fund for you business but that’s where it has to start from.
The advantage of this source of income is that no one asks you to show collateral and you are not paying back to anyone even with interest. So you should consider your personal savings as a source of income for your Small or medium Enterprise.
2. Friends and Family:
Another good source of income for Small and Medium Enterprises in Nigeria is from friends and families. Do you know why I said so? It’s because you don’t have to show collateral to your friend or family member.
You just have to simply explain what you want to use the money for and tell them the potentials of the business you are about starting or funding, they would be willing to help.
So your friends and family members can be a good source of income for you, if you want to start a SME in Nigeria.
3. Loan From Commercial Banks:
You can possibly get loan from commercial banks to fund your SME. It is even easier when you apply for the loan through your commercial bank where you normally deposit your money.
There are greater chances of getting your loan approved compared to when you request for loan from other banks. Commercial banks can offer short, medium and long term loans.
Commercial banks can be a good source of loan for Small and Medium Enterprises in Nigeria, but you will pay with interest and have to show collateral.
4. Bank Of Industry (BOI):
I know many of you are surprised that the Bank of Industry (BOI) can actually give loan to Small and Medium Enterprises but it is true.
The Bank of Industry was set up by the Federal Government of Nigeria to help kick start businesses in Nigeria that would benefit Nigerians. So long as you business is reasonable, you can apply for the BOI’s loan and you will get your loan approval very fast but you will be paying up with low interest.
5. Co-operative Society:
There are many co-operative societies in Nigeria that help their colleagues in setting up businesses and even handling immediate needs and these funds are gathered from contributions made by each member.
So it’s not a bad idea to fund your SME start up from co-operative societies.
6. NGO:
You can fund your SME from Non Governmental Organizations (NGO). There are many foundations that are set up by well meaning Nigerians who want to curb unemployment by offering financial assistance to SMEs.
If your business is mouth-watering then you can surely get funds from NGOs to start your SME.
7. Venture Capital:
This is not a common source of income for SMEs but it does exist. In this, Venture Capitalists who could be individuals or firms invest on businesses that may not have being tested and it doesn’t matter if the business was successful or not.
SMEs related to science and technology and medicine usually have better luck with Venture Capitalists.
I hope I have enlightened you by exposing to you 7 sources of funds for SMEs in Nigeria. You can explore to find out other sources of funds that suites your business.
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