Finding cheap funds to finance your business

Small and medium-sized enterprises (SMEs) remain the engine of any economy, as they play a central role in driving equitable economic development in any emerging economy.

In Nigeria, although SMEs account for 50 percent of gross domestic product (GDP), they face different issues such as; lack of infrastructure, multiple taxes, unfavorable trade policies, electricity, among others. But the ultimate of all problems is how to find cheap funds.

Funding plays a crucial role in the sustainability of any business. A business can be financed with equity or loans.

Get cheap funds

With a good business plan, a good structure and the ability to repay loans, commercial banks offer different types of small business loans. But as a small business owner, the easiest and cheapest way to get funds is your personal finances.

Personal funding

Personal finance is about using your own savings to support your business. These savings can be achieved through the sale of personal assets, friends and family members.

Capital risk

Another source of cheap funds is to get loans from a venture capital firm. Venture capital firms invest in small businesses in exchange for an equity stake in the business. However, venture capitalists only look for companies with growth potential.

Grants and government interventions

The Nigerian government has launched a number of interventions to support credit to SMEs. One of them is the CBN SME loan.

As a fundraising SME, the 50 billion naira stimulus package recently introduced by CBN to cushion the effects of the COVID-19 pandemic is a safe fund to seek. The intervention is expected to end by December 31, 2024. CBN Governor Godwin Emefiele said at the latest Monetary Policy Meeting (MPC) that the bank’s massive interventions in various sectors of the economy aim to stimulate aggregate demand and stimulate production, especially for small and medium-sized enterprises.

Likewise, the Central Bank of Nigeria (CBN) in collaboration with the Bankers Committee created the Agric-Business / Small and Medium Enterprise Investment Scheme (AGSMEIS) loan. The loan disbursed by NIRSAL Microfinance Bank and other banks, provides up to N10 million to agricultural SMEs at a single-digit interest rate of 9 percent per annum.

The CBN’s MSMEDF initiative to provide SMEs with access to loans of between 500,000 and 50 million naira is also a means of financing its businesses.

The Bank of Industry (BoI), a federal government financial institution, offers a variety of loans to MSMEs at a single-digit annual interest rate.

BoI President Aliyu Dikko recently said that the bank has reduced interest rates on all BOI-financed projects from 10% to 8% for a period of one year and extended the repayment period of the three-month principal.


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