Wednesday, October 14, 2020 / 12:00PM /
By FCMB Business Zone / Header Image Credit: FCMB Business Zone
The need for financing has been one of the recurring challenges faced by micro, small and medium scale enterprises in developing countries like Nigeria. In a 2013 MSME Survey by SMEDAN and the National Bureau of Statistics (NBS), the top area of assistance that most micro enterprises sort for was with respect to finance. This was further corroborated in a June 2020 survey by PwC, which revealed that obtaining finance is the most pressing problem that MSMEs currently face. This reflects how the problem of finance continues to persist and the need for further enlightenment on the various options available beyond the ones publicised.
As small business owner, it is important to note that funding can be sourced through diverse means. Though most small business owners are quick to seek loans from financial institutions, it is important to know that these are not the only sources of finance. Thus, it is shrewd as a business owner to look inwards and seek financial incentives that are not burdensome as explained in our article titled "Top 10 Financial Strategies to Help Grow Your Business". Some of these sources are explained below. To read seven more effective ways of funding discussed on the Business Zone Click HERE
1. Personal Finances
As an entrepreneur you need to first inject your personal finances (savings or cash earned from an investments or asset either on a continuous basis or after sale) into your business before requesting that others support same. This shows your level of commitment and confidence in your enterprise. By being the first investor, shareholder or director of your business, you are able to attract others to invest in same.
If you are just planning to start the business, it is advisable to save from your current earnings before venturing into the business. As an existing business owner, it is also prudent to pay yourself like you would if you hired someone to run the business like you do. This would enable you save from your income ahead of rainy days.
It is important to know that you are your own cheer leader and first financial aid; so, when the days are blooming, plan for the gloomy days.
2. Friends and Family
Friends, family and well-wishers are one of the easiest sources of funds. With them, you sometimes do not have to show any major documents or pay interest. All you have to do is properly articulate how you intend to use the funds, the importance and impact on you and the community as a whole, and they will be open to supporting your business.
In a country like Nigeria where poverty and unemployment increases daily, friends and family that are capable will be willing to contribute to helping you set up a business so they can be part of your success story rather than continue to give you money for expenses that will not yield anything in return.
Though some persons find it difficult to seek support from family and friends because of the notion that business must be separated from family and friends, it is important to note that friends and family are quite easy to convince than a bank official, and should not be ignored as a source of finance. In addition, you can consider their financial support as payments in advance for your products and service or investments in same for which you can give them a percentage of your shareholding. Also, by investing in your business you can easily cultivate them to becoming loyal customers and brand ambassadors.
Kindly click HERE to read more.