Small and Medium Enterprises (SMEs) occupies an important position in the economic development of any country. SMEs hold immense potential for generating employment opportunities, development of indigenous technology, diversification of economic base and forward-integration with established industries among others.
However, SMEs are having a hard time taking off in Nigeria and one of the bans to the success of most SMEs in Nigeria is inaccessibility of business funding. Nonetheless, the lack of funding for SMEs is a problem of inadequate funding and lack of information about the limited funding sources. This piece seeks to explore 5 easiest funding sources for Nigerian SMEs.
1. Personal Savings
As much as this seems commonsensical, one of the easiest, yet overlooked source of funding available to SMEs are personal savings. For one, you will not pay any cost in form of processing fees and interests when you invest your personal savings in your SME idea.
The second but more important point is that investing your personal savings into your SME idea shows that you are serious, committed and optimistic about the business; hence, other sources of funding will be encouraged to trust you with their money because your money is already on the line.
2. Friends & Family
The second easy source of funding for your SME idea is from family and friends. If you are passionate about your SME and your have committed your personal savings (from 1) you will find it relatively easy to obtain additional funding from family and friends. Your family & friends will naturally have a vested interest in the success of your business idea if you take the time to educate them about the risks and reward scenario of the business.
However, one the reasons people find it hard to obtain funding from family and friends is that they usually ask family and friends to "help/assist" them by giving them money for the business. Truth be told, not many people can afford to "give" you a reasonable amount of money; hence, you have better chances of obtaining funding from family and friends by asking them for loans or offering them equity in your business.
3. Government Grants
The third easiest source of funding for Nigerian SMEs is by taking advantage of government grants and low-interest loans. The government has a number of interventionist policies designed to make it easy for SMEs to obtain funding in the form of grants and loans. Such government initiatives include the YouWIn program and SMEDAN Loans among others.
YouWIn requires that you write a business plan indirectly by answering some questions related to your business. The facilitators then select the most promising businesses ideas/initiatives across different sectors of the economy from the 6 geopolitical zones. The winners are then given business training, mentoring and funding up to the tune of N10 million. The best part of the YouWIn initiative is that it is a grant and you will not be required to pay the money back to the government.