Question: How can I source for fund to finance my Business Idea?
Chinyere Ogbonnaya, Enugu
Answer: Your question is not specific as to the kind of business you want to start. Hence my response will be general and applicable to any kind of business.
To raise money for your business, you need to present a convincing case. you have to be clear about how much money you want, who to ask for money, how long you will use the money, how you plan to repay and the security, if any, you can offer. I will presume that you have thought through your idea, and have a business plan incorporates your financial figures and your understanding of the market-place.
In your search for funds, the starting point is your own money, which you have saved from prior earnings or have available from previous profit-making activities. It will be unreasonable to ask others to invest in your business idea if you, the prime mover is not investing in it. You must have some skin in the game.
Next, you can meet family members and friends who have faith and confidence in you and are able and willing to back your idea with their resources.
Aspiring entrepreneurs almost always toy with the idea of approaching the commercial banks for money to start their businesses. My advice is that you should perish the thought. Visit all the banks you can find, the most likely response you will get from the first to the last is that you do not have a bankable proposal.
What that means is that you are high-risk borrower, and the bank is not sure it will be able to recover, principal plus interest, the money it lends to your business.
You may be tempted to blame the bank, for not seeing the ‘potential’ in your business. You may be right but, trust me, the banks will not look your way until you have proven your concept, and your trading activities tell them that you and your business have the capacity to make money. At that time, the game will be half-time, and you and the banks will change sides. The banks will then be the ones running after you, begging you to place deposits with them, and asking if you need a line of credit!
Until then, you have only one way to look. Set your eyes on intervention funds available through the various institutions and agencies of government, for the purpose of developing enterprises. Some of such funding sources that readily come to mind are:
- The N220 billion Central Bank of Nigeria Fund for Micro, Small and Medium Enterprises (MSMEs) seeks to channel low interest funds to Nigerian MSMEs, through primary financial institutions like banks and microfinance banks. Its broad objectives are to enhance access by MSMEs to financial services, increase productivity and output of microenterprises, increase employment and create wealth, and engender inclusive growth. See https://www.cbn.gov.ng.
- The Bank of Industry (BoI) focuses on financing industrial projects in agro and food processing, light manufacturing, gas and petrochemicals, engineering and technology, solid mineralsand creative industries, and promoting youth entrepreneurship, women-owned businesses and renewable energy projects. Visit https://www.boi.ng
- The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) is a Federal Government agency established to help individuals who have viable business ideas but lack the funds to monetise them. SMEDAN has offices in the Six geo-political zones in Nigeria, and Abuja. Check https://www.smedan.gov.ng.
Needless to say, the funding available from these and similar sources are not for free. They are what you may call soft loans but accessing them also requires meeting certain minimum standards, although not as stringent as what the commercial banks ask for.
Best of luck in your search.