Effective Ways to Fund Your business as An MSMEs

Effective Ways to Fund Your business as An MSMEs

One of the biggest challenges that has deterred merchants, entrepreneurs, and business owners from setting up their own Micro, Small, and medium enterprise in Nigeria is lack of funding. Given the grave economic situation of the country, finding the required capital to set up a business is difficult, as many are just earning enough to keep their heads above water.

According to a survey by SMEDAN and the National Bureau of Statistics (NBS) on MSME in Nigeria, the biggest area of need that most MSMEs in Nigeria sought are basically about. This fact was further supported in a research by PwC in 2020, which stated that getting funding for either startup or running capital is the biggest problem that MSMEs are challenged with. These research and survey results clearly outline the issue of funding which cuts across different kinds of MSMEs in the Nigerian industry today. It also establishes the need to educate more people on the numerous funding options available to their disposal, asides the other familiar ones.

For business owners, entrepreneurs, and merchants who are looking for capital to either set up a MSME or keep an already established one running, you should know that there are numerous means available to get funding. While seeking loans from financial institutions may be the order of the day for business owners whenever they need funds for their business, there are lots of other ways to secure funding to keep that business dream alive.

Through this article, we will enlighten you on the few funding sources you can always bank on to bail you out when in serious need for one.

Personal Finances

As expected from entrepreneurs, if you wish to startup a business or keep one running, you need to first input your personal finances through either your savings or funds earned from your investment portfolio before you can think of inviting external bodies to show support for your business with funds. Injecting your own cash at first establishes your commitment to the business, and your unwavering conviction and belief in your business to succeed. By being the first to act and invest in your business, you will be able to attract and convince others to join in on the project.

For entrepreneurs whose intentions are to start a MSME, saving from your current earnings is the most viable way of securing funds. For those with an already running business, it is also prudent to pay yourself like you would if you hired someone to run the business like you do. This helps you keep part of your earnings to save you when the need arises.

Friends and Family

The next easy way to seek and secure funds for your business is through your family and friends. With these sets of people, they are banking on the trust they have in you and the fact that they know you. As a result, there isn’t any required documents or interests on funds acquired from them. One of the things which may be required of you is to draw out a plan on how you intend to utilize the funds, what benefits it brings to you, your family, and in some cases, the community. Once all that is done, you can successfully receive the funds to do whatever you planned for it.

In a country like Nigeria where poverty and unemployment increases daily, friends and family that are capable will be willing to contribute to helping you set up a business so they can be part of your success story rather than continue to give you money for expenses that will not yield anything in return.

While some entrepreneurs have a thing against seeking funds from friends or family in a bid to separate business from pleasure, you should  consider how harder it would be to secure a loan from a financial institution before turning down the chance to seek out your family and friend. Funds received from family can be deemed as an investment also, which would yield profit at a certain, agreed time. This concept is much easier to handle when compared to loans from banks.


This option is for entrepreneurs who also work in government or federal institutions across Nigeria. This is one of the oldest ways of securing funds for MSMEs. These organizations within federal and government corporations are organized are run jointly by members of said corporations. These members contribute and benefit through profits earned from interests on loans and access to funds contributed by members at reduced interest rates.

As an MSME owner, cooperatives are one of the best options of funding that you can always trust on to secure credit to start or grow your business. Usually, the only requirement that you need to fulfill is establishing your consistency in contributing, and the evidence that funds acquired will be repaid.

Invoice Discounting

This is a type of finance that allows businesses receive cash on their invoices before the customers make payment. It is a form of financing that enables business owners improve their working capital and cashflow positions. This facility allows businesses get prompt payment while finance institutions discount their invoice. For most financial institutions, this option is referred to as the SME Invoice Discounting Finance (IDF) which is usually available for varying periods, some between 1-180days to contractors, manufacturers and traders.

Grants and Loans from Financial Institutions

This is one of the most popular and explored option by many entrepreneurs from time immemorial. Despite being the go to options for many business owners, it has proven to be one of the hardest, sometimes unfeasible option to acquire loans.

This is usually due to the long, drawn out processes of documentation, evidence of collateral, and all other requirements needed to be fulfilled. Additionally, most financial institutions offer loans with exorbitant interest rates which is not so favorable for many business owners. This makes it usually the last option to secure funding for MSME, usually when all other options like the ones outlined in this article fail to provide the needed funds.

MSMEs are of huge importance to the Nigerian economy, largely due to their capacity to create jobs especially in a developing country like ours. Statistics from the Nigerian Bureau of Statistics (NBS) states that “small and medium scale enterprises (SMEs) have contributed about 48% to the nation’s GDP in the last five years.” That outlines just how important they are and how much impact they can make on the economy if absent.

This is why it is equally important for government agencies, and financial institutions to allow for easy access to funds to help foster the growth of these MSMEs. This has led to the creation of agencies and funds like the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), the Bank of Industry (BoI), the Development Bank of Nigeria (DBN), SMEDAN, NERFUND, Microfinance Fund, amongst other financing opportunities and policies initiated to ensure businesses in the real sector are equipped with the funds required to ensure stability and growth for their business. As a business owner, do not underestimate the other sources of funds available to you beyond loans and grants from financial institutions.

Read More The challenges of Small and Medium Enterprises (SMEs) in Nigeria

About Christopher Ezeadichie 3409 Articles
Ezeadichie Onyeka Michael is the Co-Founder of Haelsoft, a Professional Services Company in Nigeria that provides Information and Technology Services for small and big size companies in Nigeria(Africa). He is an Entrepreneur and Venture Capitalist with Expertise in Web Technology and Digital Marketing. He has developed & Implemented Digital Marketing Strategies(Campaigns) for top brands across sectors in Finance, Telecommunication, Ecommerce who operate in the African market. His professional experience includes key roles at Google Business Group(Nigeria), Google Women on the Web (Nigeria), Edubridge Consultant and Wild Fusion where he has trained over 500 Entrepreneurs on how to use various Web Technology products to succeed online. Customer centricity, User Experience, Conversion optimization are 3 pronged framework he applies around the often-frenetic world of web analytics to ensure that clients stay competitive in the market. He believes that investing in talent is the key to long term success for brands across Nigeria (Africa).

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