You can’t run a business without funds, from planning to the day to day operations of the business and even through different growth phases, you need finance to power it all.

But the problem is that finance is hard to come by for businesses and harder still for small business enterprises. SMEs and startups often find it difficult to get access to much-needed finance due to factors like lack of collateral, high risk of default and limited financing options, etc.

When fund-hunting, SMEs and startups are often constrained to source for funding from the few options available to them. They either ask for capital from friends and family or go the traditional route of securing a bank loan.

The problem with these options is that while it is relatively cheaper to ask for money from friends and family, for example, you would be unable to raise nearly enough for your business. The other alternative is a bank loan which is expensive and much more difficult to get.

Well, you may think that there are little to no options left right? But that’s because you have not seen the 3 most promising alternative routes you can take today to secure more finance for your small business.

Due to the difficulty for SMEs to source for funds via the traditional route, there has been an increase in the number of small businesses raising funds through the following sources:

  1. Peer-to-Peer Lending/ Crowd Funding – Peer to Peer Lending enables small business owners to source loan directly from individuals who want to offer loans at an interest usually through an online lending platform.  Crowdfunding is a way for SMEs to source for finance by pooling investment from different individuals through crowdfunding platforms in exchange for equity, rewards, debt, or nothing at all. Both per to peer lending and Crowdfunding provides a faster, more transparent, and accessible way for small businesses to raise funds than the traditional alternative. Some of the most popular platforms for peer to peer lending and crowdfunding include –
  • Kickstarter (Rewards)
  • CircleUp (Debt and Equity)
  • SeedInvest (Equity)
  • Lending Club (P2P)
  • Lendingtree (P2P)
  1. Grants and Government Schemes – Today, an increasing number of SMEs are applying for grants both private and government-sponsored as a way to secure funding for their ventures. And because with grants, they can get access to finance without worrying about paying back or losing any stake in their businesses, this route of business financing has become even more popular.  With Government schemes, you can get much easier access to funding at a cheaper interest rate than through banks. They are usually organized by the government, Central Bank of Nigeria (CBN), Bank of Industry (BOI), and other government agencies as a way to support different businesses. Some of the top grants and government schemes you can leverage to fund your business today include –
  • Tony Elumelu Entrepreneurship Fund
  • GroFin Fund
  • CBN MSMEs Fund
  • Lagos State Employment Trust Fund, etc.
  1. Invoice Financing – This is a short term funding solution where small businesses are able to get immediate cash by selling their receivables (invoice) to investors at a discount. It is a process in which small businesses embark upon to free up cash and solve the problem of overdue payments usually through an online platform.  Some of the most popular invoice trading platforms include –
  • Incomlend
  • Market Finance
  • Invoice Interchange etc

Whatever your funding target, there are increasingly more alternative ways of raise funds today than ever before, the knowledge of other available alternatives should help you to explore beyond traditional sources of funding to more innovative and accessible alternatives. The problem of SME funding is a continuous one but with more innovations and technology it will only get better.