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  The significance of SMEs in Nigeria cannot be overemphasized, so it is safe to say that SMEs constitute greatly to the economic development of the country and as such, should be given utmost priority by the government.
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However, one of the top challenges faced by small and medium scale businesses in Nigeria today is access to funding as funding is the bloodline of any form of business, whether it is a startup, small or medium-sized business, or an established large firm. In fact, funding is important at all business stages, because sufficient capital has its way of dictating the pace of performance in any business.  In other words, capital is the energy source that all businesses need to operate, grow, thrive and nurture their businesses into a strong and relevant enterprise. On the other hand, this means that without funding or capital, it will be extremely difficult to get any enterprise off the ground. In Nigeria, most SMEs face innumerable problems ranging from unfriendly/unstable business environments to the lack of accessible funding or finance, Nigerian SMEs are constantly in need of governmental and non-governmental support to thrive sustainably in the Nigerian business environment. The Nigerian government and several private organizations have made efforts to reduce the financial burden that SMEs may be faced with, by establishing platforms that grant access to funds by SMEs Some of these opportunities include:

Loans From Banks

Banks (Commercial & Merchant banks) offer loans to Small & Medium Enterprises in Nigeria, however, before these loans are offered, the banks ensure that the SMEs are worthy of the loan. It is important to understand that each bank has its own goals, therefore, the SMEs have to conform to the laid down goals and interests of these banks. In addition, certain things are also considered before a bank issues a loan to an SME, things like a well-written business plan, accurate financial record, collateral, and a guarantor.
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Small And Medium Industries Equity Investment Scheme

This is another major source of funding for SMEs in Nigeria, this scheme was designed to financially support SMEs through venture capital, with the idea of converting the debt capital into equity in future. The aim of this scheme is to advance SMEs to drive industrialization, poverty alleviation, sustainable economic development, and the creation of employment. This funding can also be seen as an equity investment where investors expect significant capital gains in return for accepting the risk that they may lose all their equity.

Grants From Non-Governmental Organizations

Certain individuals and foundations offer business grants that can be accessed by individuals, firms/companies, businesses, or corporations to develop their businesses or scale up operations. Undoubtedly, a grant is far better than a loan as it gives you the peace of mind to build and grow your business or idea without thinking of how to pay it back with interest inclusive. It is like getting “free money.” There are many organizations that offer grants in Nigeria, some of them are:
  • Tony Elumelu Foundation
  • Bank of Industry
  • YouWIN
  • AYEEN financial grant
  • Graduate Employment Loan Scheme

Bootstrapping

This is very common in Nigeria, this is a situation where business owners fund their businesses with their personal savings over the years without the support of venture capitalists or bank loans. Apart from personal savings, most SMEs get financial support from relatives and friends, this is usually common especially at the start-up stage. Bootstrapping, otherwise known as Self-Funding, is the most accessible starting point for small businesses from context observation because small business owners can easily leverage their financial resources to support their business operations. In conclusion, SMEs constitute the driving force of industrial growth and development in the country, therefore, the government should focus on nurturing and developing these SMEs by making funds at low-interest rates more accessible to these small business owners. Featured Image Source: Business Post NG
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This article was first published on 10th January 2022

nnaemeka-emmanuel

Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.

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