Are you a Student or Graduate in Nigeria looking for possible ways to finance your business in 2020? This article is for you. I will explain the sources of finance for Nigerian Students and Graduates in 2020.
Launching a new business in Nigeria is a huge challenge at the best of times, and can be an even greater challenge if finances are lacking.
After conceiving a business idea, an entrepreneur needs money to commence his or her business. Therefore, major forms of financing sources for new ventures are as follows:
Sources of Finance For Nigerian Students And Graduates to do Business in 2020
1. Personal Resources:
Personal Resources include your savings or inherited wealth. There is significant evidence globally that entrepreneur depend on personal savings to start their new venture. This is because the cash is readily available and can be mobilised easily and quickly.
Besides, entrepreneurs can also dispose their personal assets in order to raise funds for new ventures and this is usually considered by institutional investors (banks and venture capitalists) as the strongest indicator of the entrepreneur’s belief and commitment to the success of the business venture.
2. Loans From Family, Friends And Associate:
Some members and close associates are willing to provide financial assistance to you once they are convinced that you have the pre-requisite knowledge and skill to manage the new venture successfully.
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Personal character and trustworthiness are the major consideration before this loan is granted. If you don’t have friends who can help you out, then it is time to examine yourself and your association.
3. Partners And Entrepreneurial Team:
If you have partners and Entrepreneurial team, they can help you finance your business. Else, skip this step. now, two or more individuals with identical mindset and business ideas can also come together and combine resources (Finance, skill and knowledge) to start a new business venture.
4. Rotating Saving Schemes and Money Lenders:
These are informal institutions that provides small loans to owners of small and micro-enterprise. They are very popular in developing economies. A well organised rotating saving scheme can be a dependable and very useful means of raising capital funds.
They are popular and convenient sources as they do not demand collateral other than personal guarantors (in case of large amount). However, the beneficiary must be a member of the saving scheme.
5. Trade Credit and Accruals:
Trade credits are credited when the venture firm purchases raw materials, supplies or goods for production or resale on credit terms with or without signing any formal agreement for the liability. They are called purchases on account and they represent the largest source of short-term financing for most firms.
6. Bank Borrowing:
Bank borrowing usually takes two forms: Bank overdraft and Bank loans.
”¢Bank Overdraft is a situation where a bank allows its customers to withdraw over and above the credit balance on their accounts. The firm will be required to maintain current account with the bank before it can obtain this financing opportunity.
”¢Bank Loan is a formal agreement between a bank and the borrower that the bank will lend a specific amount of money for a specific period. Interest is payable on the whole of this sum for the duration of the loan.
7. Stock/Equity Financing:
Incorporated companies can raise capital through the sale of stock or equity to investors who are willing to invest on long-term basis and become part owners of the firm. This can be done in the capital market through the stock exchange, which makes it possible for investors who have surplus funds to channel to entrepreneurs who seek funds to invest in business undertakings.
CHALLENGES OF FINANCING A NEW VENTURE IN NIGERIA
1. Difficulty In Securing Loans From Financial Institutions:
The major challenges being faced by entrepreneurs in Nigeria is the issue of start-up capital. It is very difficult to secure loans from banks as an entrepreneur, because some of these banks see lending entrepreneur’s money as a huge risk. This is due to the level of uncertainty surrounding the Nigeria economy.
2. Poor State Of The Country’s Infrastructure:
The absence of good infrastructural facilities has been one of the major problems entrepreneurs are battling in Nigeria. The major one is the issue of ‘Epileptic power supply’ that has forced so many businesses to shut down due to the high cost of running them.
3. Difficulty In Getting Venture Capital:
Getting capital to finance entrepreneurial endeavors in Nigeria is extremely difficult to the lack of stability in the political and social economic system.
4. Inconsistency In The Policies Of Government:
The incessant change in the policies of government is one of the major challenges being faced by Nigerian entrepreneurs. In time past, we found out that there’s inconsistency in the policies of government, which is attributed to the constant change of government.
5. The Desire For Quick Returns:
The desire for quick returns is inimical to sustain entrepreneurship development. Overtime, a lot of businesses fold up due to greed and the urge for quick returns by business owners. A lot of business owners have fallen victims of fraudsters who pretend to be business associate and promise to either deliver goods at a very low rate compared to what is obtainable in the market.
OPPORTUNITIES OF FINANCING A NEW VENTURE
1. YouWin Connect provides a forum for young entrepreneurs to nurture their ideas and network with industry experts.
They educate young Nigerian entrepreneurs so as to spur business growth and enhance job creation thereby, promoting a viable career option for youths.
2. Diamond Bank BET programme: The Building Entrepreneurs Today (BET) is a programme designed to support budding entrepreneurs. Every year, 50 entrepreneurs are selected from the pool of the numerous applications received and these entrepreneurs undergo a six (6) months intensive entrepreneurial/business training.
At the end of the training period, the Top Five (5) Entrepreneurs are awarded financial grants as seed capital for taking their business to the next level.
3. The Tony Elumelu Foundation Entrepreneurship Programme is a programme based on the desire to empower a generation of successful for-profit entrepreneurs who drive Africa’s economic and social transformation.
It seeks to “institutionalize luck” and create an environment where entrepreneurship can flourish in a sustained manner. The programme selects entrepreneurs to identify and empower them, create a million jobs, and add revenues to Africa’s economy.
4. The Bank of Industry Limited (BOI) is Nigeria’s oldest, largest and most successful development financing institution. The bank’s emphasis is on prudent project selection and management; accordingly, it supports quality projects with potential developmental impact.
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