How to Raise Capital for Business in Nigeria
Many people have a particular business in mind; nevertheless, the capital to bring such a business to reality can often be a challenge.
It can be fun, having the opportunity to think about a particular business, and it can also give immense joy when you think about the future ahead of such a business.
However, once the thought of how you will raise the capital for such a business sets in, you will find yourself losing out on interest.
If you belong to such a category, worry no more. In this article, I will be introducing you to ways by which you raise money for capital in Nigeria.
How to Raise Capital for Business in Nigeria
1. Bootstrapping/Self-funding
You need to understand that wealth is a long-term achievement, and the earlier you begin to work towards such a goal, the better.
Bootstrapping refers to Self-funding. It’s a process whereby you fund your business via accumulated savings.
At this present time, when there is no one showing support for you, it is the Best time.
You can start saving gradually now, no matter how little it may be; within a year, you would have been able to raise a substantial amount that will be able to fund and kickstart your business.
You can use apps like cowrywise to start your savings; with such an app, you will be able to set up automatic savings for as long as you want, and you will only be able to withdraw your funds, only on the withdrawal date you set.
This means if you aren’t disciplined with spending, this app will be able to help you out.
2. Bank Loans
Once there seems to be no way for you to start your business, bank loans are the best option for you to get yourself out of the issue.
Nevertheless, bank loans aren’t advisable to start a new business or a business that you have no prior knowledge about.
Only take a bank loan to support a business or launch a company you have acquired so much knowledge.
Before you are granted a bank loan, you will be required to come with guarantors and collateral.
Nevertheless, you must pay back the loan at the agreed time between you and the bank.
You can get started with a bank loan by visiting your bank, explaining your business to them, and telling them how important the loan is. Your bank will explain other processes to you to get the loan.
3. Family And Friends
Remember the saying, blood is thicker than water? Yes, it is.
No matter what happens, the family will always be family, and friends will always be friends.
Your family and friends have always been there right from the start, and they should be the number one people you should consider when you are thinking about how you can raise funds for your business.
Regardless of the issue you may have with any of your friends or family members, you know they can be of help to your business; you have to look for a way to solve the issue.
Talk to them about your business, let them also know what they start to benefit by supporting you, and also the general impact the business will bring upon everyone.
They might not give you their listening ear the first time you approach them about such. But you have to keep reminding them about it.
Nevertheless, bear in mind that you need to have been able to show little effort; this is what will be able to showcase your seriousness and trigger their support towards your business.
Also, if you were able to get their trust and support you, do not betray their trust in you and work in agreement with what you both planned.
4. Angel Investors
How does the word angel investors sound to you when you hear of the word angel investors?
Angel Investors are those that will invest into the early stage of your business and expect a higher return of investment.
Angel investors are flexible to work with because they aren’t offering you a loan but are only giving you financial support because they believe in your dream business.
However, before you can convince angel investors to invest in your business, you must have a good business plan and let them know the amount they are likely to get back on their investment.
You may ask, how can you get angel investors in Nigeria? It’s pretty simple; you can reach out to organizations like (LAN) Lagos angels network, spark, lead path Nigeria, etc.
You can reach out to this organization and talk to them about your business. Once they find it Worthy of investing upon, you will agree with them on how much they will get back on their investment and the time frame; it will be convenient for you to do so.
5. Government Grants
There are a lot of government grants out there that are set up to assist small business owners that are battling with the issue of starting their business because they do not have enough capital to start.
You can teach out such government grants, check the requirements, and see if there is any you can apply for.
Also, there are a lot of grants that have been set up by the Nigerian government, and some of them Include.
- Agriculture,
- National Institutes of Health,
- Cyber Tipline Grant,
- Bank of Industry,
- Youwin Connect Nigeria,
- Federal Government Grant Application from World Bank,
- Social Intervention Fund of the federal government.
You can research more about the Nigerian government grants and see the one you can apply for.
Nevertheless, always check the requirements of the grant you are applying for before you start your application.
The requirements vary and check if you have the one you are applying for.
You may ask, what exactly is a grant. It’s a financial reward meant for a business startup that has performed excellently in a particular program and has been able to pass through a series of requirements successfully.
6. Peer To Peer Lending
In peer-to-peer lending, you are cutting out financial institutions and intermediaries away from an individual that wants to lend you money.
In this case, you interact with an individual to offer you a loan to borrow your money. The lender will have some percentage to get back on the money they lend you.
This can be done physically and as well on peer-to-peer websites. How much you stand to get depends on your creditworthiness and whether you’ve not got a previous loan in the past, which you’ve got to offset.
7. Strategic Partnership
If any other thing fails, kindly give strategic Partnership a trial.
Strategic Partnership refers to a way whereby you reach out to young investors and CEOs and let them know about your business.
You will also need to let them know their stake if they are to invest in your business.
8. Microfinance Bank.
There are times when conventional banks will refuse to offer you a loan; at such times, you can reach out to microfinance banks.
Conventional banks don’t like to risk their funds to small business startups because the outcome isn’t always predictable.
In such an instance, microfinance banks are always at your service to provide the best support needed.
9. Enter Into Online Business
There are times when all of the above options will fail, you won’t be able to get a loan from the bank, friends will shun you off, neither will there be any assistance from the government. This doesn’t mean you should give up or lose hope in the business; you can still give it all the strength it requires and get success from it.
Do you know online is the shortest route to becoming a millionaire? There are many businesses you can venture into online, and you will get a good return on investment.
If you have a budget of 100k, you can venture into blogging. For someone who does not have prior knowledge of what blogging is about. You can watch YouTube videos on it, or you reach out to your friends, who might have been into the business.
Getting started with blogging only requires getting a host and domain and posting quality content on the blog.
If you don’t know how to write content, you can hire writers to do this for you, and you pay them based on the revenue you generate from their content.
Another online business that you can also do is affiliate marketing. With affiliate marketing, the sky is your limit regarding how much you can earn.
10. Ask For Donations
If you are confident of what you are doing and if the outcome of the business, you can seek donations from people.
You can post it on your social media pages, explain in detail about your business, and ask people to donate for you.
Alternatively, you can reach out to prominent people in your society, explain to them about your business, and ask for their donations.
Little by little, you would have been able to get a substantial amount, which will be enough to get your business running.
11. Start with what you have
At the beginning of your journey, it’s very likely nobody will believe in your business ideas as much as you do.
That’s why you will have to put your money where your mouth is and start with what you have.
After several attempts to raise money for her unique business idea of body-slimming pants, most people she approached either thought her business idea was stupid or the products would never sell.
Without any possibility of outside help, she reached into her savings and used the entire $5,000 in her account to start Spanx in 1998.
Today, Spanx, the same business people thought would never work, is currently valued at over $1 billion. And Sara has never raised a single dollar from outside investors since she launched the business.
Sometimes, if your business idea is as brilliant as you say it is, you have to stand for yourself and make personal sacrifices.
Investing your own money in your business is often seen by banks and investors as a sign of confidence and a strong show of faith in the business’s potential.
After all, if you can’t invest some of your own money in your business, why should anybody invest theirs?
However, using your own money to start a business can come with considerable risks.
12. Convert your social capital into financial capital
After you have exhausted your finances, it’s time to start converting some of your business’s social capital and financial capital.
Social capital is the value of the close relationships you have in your life.
It comes from family and relatives, close friends, current and former work colleagues, old classmates, neighbors, etc.
These are people who are socially and emotionally connected to you.
Because of this connection, they are more likely than total strangers to listen to your ideas. And they will often be your first set of true fans and supporters.
This is the exact strategy that Chinese billionaire, Jack Ma, used to kickstart Alibaba, the global e-commerce giant.
When Alibaba became a public company in 2014, it was valued at $21.8 billion on the New York Stock Exchange. It became the most prominent US IPO in history — bigger than Google, Facebook, and Twitter combined.
But raising money from friends and family can be tricky. You don’t want to lose the trust and friendship of people close to you.
That’s why you need to execute this strategy the right way.
In our fundraising program, you will learn how to raise money for a business by pitching your business in a way that compels people close to you to want to invest and how to avoid the expensive mistakes people make when they take money from people in their social circle.
13. Find a partner who’s got the cash
Some people have the cash but may not have the time, ideas, knowledge, or skills that are required to start or build a good business.
These people may have another full-time commitment (like a job) or may not have the risk appetite or entrepreneurial flair to build a business actively.
This creates an opportunity for a win-win partnership.
And that’s where you come in.
As the saying goes, two (or more) good heads are better than one.
It’s no surprise that some of the most successful companies in the world like Google, Microsoft, Apple, and co. have at least two co-founders.
This was the fundraising strategy that Jason Njoku followed to fund his business idea, Iroko TV, which has now become one of the biggest creators and distributors of African movies, series, and TV shows.
Jason met his business partner and co-founder, Sebastian Gotter, at the University of Manchester, where they both studied.
In 2010, Sebastian, who is German, contributed $150,000 for a 50% stake in the business. While Jason, who is Nigerian and fully understands the local market, was responsible for executing the business plan.
Since then, Iroko TV has grown into an industry giant, raising over $40 million from international investors to date.
However, business partnerships can be a double-edged sword.
When they work, the synergy from a business partnership can be powerful. But when it’s not done right, a bad business partnership can lead to conflicts that could crash or crumble a good and healthy business.
14. Pitch and win a business competition
In 2016, a small South African startup business called “Giraffe” won $500,000 in investment at a pitching competition in Geneva, Switzerland.
This annual competition, known as the Seedstars World Summit, features entrepreneurs and businesses from across the world who pitch to an audience of investors, international media, and other stakeholders.
That year, Giraffe beat 54 other finalists – including 13 from Africa – to win the $500K grand prize.
At the time, Giraffe was still a small company with a simple online and phone-based platform that helps skilled people find jobs in South Africa.
Every year, there are dozens of competitions just like Seedstars that provide strategic opportunities for entrepreneurs and business owners to raise funding to support and grow their businesses.
Entering most of these competitions is free. You don’t have to pay anything.
All you need is an innovative or impactful business and the ability to confidently and convincingly pitch your business on stage to investors.
Unfortunately, many entrepreneurs don’t know how to find these competitions or how to pitch their business in a way that increases their chances of raising funding.
15. Use your spare assets
An asset is any property or thing of value that you own.
High-value assets include houses, land, vehicles, jewelry, stocks, bonds, and other short/long-term investments.
Assets can be a good source of capital because you could convert them into cash to fund your business or use them as collateral (security) for a bank loan.
Very often, deciding to convert an asset can be difficult, especially when we have emotional attachments to them. Some assets may be connected to strong memories or speak to our fashion and social class taste.
Whatever the case, you will be the person to decide if selling that inherited house or Rolex watch your grandfather gave you is a worthy sacrifice for realizing your business dream.
However, some people have regretted similar decisions. This often happens when you underestimate or ignore the critical risks that are often involved in the kind of business you want to start.
