The soul of any business whether a large, medium, or small scale is funding. Capital becomes a crucial oxygen upon which a business thrives. For most successful businesses around the globe, a major landmark in terms of growth comes as a result of funding from investors, capital loans, grants, and many more.
If money is what you need you need to grow your business as a small business owner, how can you access loans to help you grow your business?
The reality is that it is very convenient for any financial institution in Nigeria to offer loans to big corporations. And this is because of their credit rating and business capacity which can be traced down the years.
For a brooding SME business, it can be a narrow journey seeking loans from popular loan-giving companies. There are several criteria a financial institution checks before granting capital aid to business owners. That is why most big corporations find it easy to scale through this stage. And relatively difficult for small business owners to pass.
The gist however is that the big businesses began from a small place like yours. In this post, we would explore other sources of funds a small business owner can access to grow their business.
Before then, let’s see the common challenges an SME is likely to face when sourcing funds for their business.
Sources Of Fund For Small Businesses
SMEs can be funded internally and externally. Internally can be from profits generated, sales of assets, retained earnings, and investments. Externally can be from investors, bootstrap from family and friends, loans, and grants from financial institutions.
1. Business Owner’s Close Relatives
For a small business looking to thrive in Nigeria or Africa, when looking for funds for the business, the first option is usually interest-free loans. That is why most SME owners look to borrow from friends and close relatives to fund their businesses.
The plus about this type of fund is that you can pay back at your own pace without necessarily working with a payback deadline depending on the agreement between both parties. The repayment plan is also usually soft and gives the business owner time to brood the capital injection.
With this source of funding, you can skip unnecessary and complex funding procedures from financial institutions. This source of funds also comes with a very low or no-interest agreement.
Different Ways To Fund Your GT Domiciliary Account
2. Investor
This can come in two forms. An investment from an external entity or a close relative posing as an investor. This kind of funding requires that the business pays an agreed sum as an interest to the investor on a periodical basis.
Investment into SMEs became popular in recent years when small businesses get angel investors who buy into their idea and wants to fund them. The clause about angel investors is that they usually require a certain percentage of business shares before funding.
This can be a stepping stone or a drawback depending on the percentage of shares required by an angel investor. However, it has become a popular source of funds for small businesses.
3. Crowdfunding
Crowdfunding is an external funding source for SMEs. It happens by raising a sum from a group of persons. This funding allows people to bring their money irrespective of the amount to support a business.
To use this method, you can make an open call on the internet sharing your business idea with folks and request that they donate to your course usually with no intention to reward them, that is no interest or company stake will be given, unlike angel investors.
This kind of fund for SMEs gives them the chance to share their ideas and reach people of interest to get their support. The joy that this brings is that there is no repayment. However, this funding is quite difficult to attain because people see they will get nothing in return.
4. Capital grants
In Nigeria, there are a number of private individuals and international organizations who support business owners through grant schemes like the Tony Elumelu Foundation (TEF), Bank Of Industry (BOI), Bill and Melinda Gates Foundation, Ford Foundation, etc.
Grants given to businesses from these foundations are equity free and non-repayable. The goal is to support and help small businesses grow across the globe. Unlike other sources of funds with conditions, capital grants from organizations like these are interest-free.
Last Line Of Words
If you are looking to explore other funding options outside bank loans, some of the shred sources of funds are your go-to board to grow your small business without bothering about the rigorous financial institution loans.
