7 Ways To Raise Money For Your Business in Nigeria Without A Bank Loan
When you are starting a new business you have a million and one things to think about. With so much to do, you will need to learn quickly.
Any entrepreneur will tell you that raising money for business in Nigeria can be the toughest part of starting your own business.
Of course, getting a bank loan isn’t an option for some business owners or potential ones, but one of the best decisions a business owner can make is to find alternative means that will contribute to their financial success.
If you’re one such entrepreneur, this article provides a comprehensive guide on how to raise money for your business.
How To Raise Money For Your Business in Nigeria
1) Tap Into Your Own Money: If you can’t invest in your own business, why should others? Moreover, who is the best candidate to get a loan from? The answer is you.
Dip hands into your savings, home equity, or retirement accounts. It’s risky, but who cares. Go for it. Knowledgeable investors want to see founders show confidence with cash. If you believe in your vision and have an absolute refusal to accept failure as an option, you should feel comfortable investing you own money into the business.
2) Participate in Entrepreneurship Funding Programs: These programmes are all over the place. Their purpose is simple: to encourage and support small business ownership, thereby creating jobs and fostering economic growth. Why not launch your internet browser and start searching for one?
These programs are like startup competitions and they are willing to contribute to your business without demanding payback. Free cash! Some examples are below:
- Tony Elumulu Entrepreneurship Programme
- Shell LiveWIRE
- Business Fund for Women
3) Get A Business Partner: Don’t think you can go about your business alone and keep all of the profits for yourself. Although a few people have gone the solopreneur route and have been successful, the same can’t be said for many others.
Why not spread the risk and responsibilities? It’s good to know that there’s someone else who is as committed to the success of the business as you are.
However, before any partners have invested significant time or money, you need a partnership agreement that sets out expectations and responsibilities. Decide who will do what, how these inputs will be measured, who has the right to make what decisions, how profits and losses will be shared, and what happens when partners disagree. The time to agree on these things is while you are all still friends. The business world will test you and you better be prepared.
4) Pay As You Go: This is a form of bootstrapping. Every profit you earn from early adopters & first set of customers is redirected back into the business or used to pay your suppliers (who supplied you on credit based on trust), and staff (who probably agreed to work for free in the first month). This means cutting down on excesses and delaying capital purchases.
You might have to share office space or use your home, use your old computers, hire on contract (instead of employing permanent staff). It is indeed a tough road, but not one you can’t survive in the beginning.
5) Call A Friend: If you want to keep things ultra-simple, approach a supportive friend or family member, who might be willing to provide a loan. Funding from friends and family is a very popular and effective way to round up some initial capital for a business.
Make sure that you are not borrowing money that they can’t afford to lose. Put any lending agreement in writing with the terms clearly laid out even if it is a “friendly” loan.
6) Crowd Funding: Cooperative societies are the most popular source of crowd funding in Nigeria. In a cooperative society, members of the society contribute the funds. When adequate funds have been pooled, the members of the society then take turns in borrowing the money. If you belong to any cooperative society in Nigeria, you can leverage that platform to raise some fund for your business.
7) Angel Investing: After entrepreneurs have made their fortune in their own businesses, many of them look to support and invest their funds back into other startup businesses. These are known as angel investors. They are not always some extremely rich people. They could also be friends or friends of friends.
Attracting angel investors is a tricky business, and no matter how exciting and positive the initial conversations may be, the devil is always in the details.
That’s why you need a good business plan. Also, ensure that you back up your valuation with real projections from your feasibility studies.
If you manage to impress an angel investor, they may provide investment in return for an equity stake.
Be warned. The benefits of receiving angel investments go beyond the purely financial. The advice and connections that a good angel investor can offer can be equally valuable. So, keep your mind open.