Start Your Business: How To Get Funding For Your Startup In Nigeria? One of the most important challenges when launching a new firm is funding. Due to the high level of risk and unclear returns connected with fledgling firms, the majority of money deposit banks do not readily grant loans to them.

So what should a business owner do to raise money for a startup? I’ll outline various ethical methods for you to obtain startup money for your company in this article. Both conventional and non-traditional sources are separated.

Start Your Business: How To Get Funding For Your Startup In Nigeria? Get funding from traditional sources

Traditional sources: Include debt financing, self-financing, family and friends soft loans.

1. Self-financing:

As a new business owner, the first investor in your business should be yourself. External investors will be enthusiastic to support you when they can see how far you’ve come by your own strength.

You should start small or even go micro based on how much (or little) you can afford to put into the business. Treat your business as an investment in this regard and take periodical interests on capital when due; doing this will help you stay focused on growing your business against the odds.

2. Family and friends

The next option for funding after your personal purse is your family and reliable friends. A popular saying is that ” if your family cannot value your idea enough to want to invest in you, then you’re most likely in the wrong business and may never get another sponsor anywhere.”

So you definitely want to consider what your family thinks of your new business by asking them to invest in you.

3. Microfinance banks

Microfinance banks are a major source of funds for startups in Nigeria. This is because they do not insist on a long list of requisitions to be met before they issue low-interest or short-term loans.

Technically, once registered, it takes about three (3) to four (4) weeks on average to get a loan from a microfinance bank. They usually have different loan types, most of which are scalable in size and rarely require collateral.

However, this is a very cheap source of capital for new ventures in the short-term only, they are unsuitable for long-term financing because of their compounded interest rates. Examples of microfinance banks in Nigeria are:

• LAPO: One of the leading institutions providing financial services to millions of entrepreneurs across Nigeria. It was established in the late 1980’s and it caters mostly to household businesses by granting micro credit for startups as well as established businesses. You can visit their website to be more informed.
• GROOMING CENTRE: This is another in Non governmental Organization that was instituted in 2006. Grooming centre renders financial services such as micro credit facilities, and low interest loans, to low income traders and business people who have little or no access to conventional funding in Nigeria. You can learn more about their services from their official website: www.groomingceentre.org

Get funding from non-traditional sources

1. Angel groups and startup incubators

Pitching to angel groups and startup incubators for funding such as:

•  The Lagos angel network(LAN): Lagos Angel Network is a ‘not for profit’ entity set up for the purpose of organizing seed funders (“business angels”) to invest in start-up businesses, according to their website. They basically provide early stage seed funding and mentoring for young entrepreneurs. Their website is lagosangelnetwork.net
•  FAST accelerator program
• Venture capitalist for Africa (Vc4A.com)

2. Direct investors

Pitching to investors directly on shows like:

• Lion’s den: Similar to Shark tank, Lion’s den is a business reality show that gives an opportunity to promising Nigerian entrepreneurs to pitch their business ideas to five potential investors called ‘Lion’s.

  The Lions are prominent business men and women who are willing to contribute to the growth of the Nigerian business sector by investing in exceptional startups in exchange for a portion of ownership in the venture. In addition to funding, the lions will also be partners and mentors to such businesses.

There are eight(8) rules of the den:

• Rule 1: The pitch: Each entrepreneur starts by telling their name, name of the business they are pitching, how much they need and the percentage of equity they are willing to give in exchange. After this, they have three minutes to pitch in details. If it exceeds three minutes, the Dragons have a right to interrupt an entrepreneur’s pitch.
• Rule 2: The Q&A: After the Pitch, the lions will ask any questions they have about the business and an entrepreneur may choose not to give revealing answers. Although, this might affect the Lion’s overall decision. Entrepreneurs may also ask questions to determine if a Lion is a good fit for their company.
• Rule 3: Opting ‘out’: Lions opt out of a deal by declaring themselves ‘our’ and once that is done, a lion cannot re-emter into a negotiation. Once all the five Lions are out, an entrepreneur has no choice but to leave the den.
• Rule 4: Investment: An entrepreneur must secure at least the full amount of funding he requested for at the beginning, either that or he leaves the den empty handed. If a lion has offered a less amount, he can try to convince the other lions to co-invest in his business. Notwithstanding, securing a higher investment than he originally pitched for is allowed.
• Rule:5 Multi Lion investment: Each individual lion can invest as much (or little) as they want in a business, the entrepreneur has the responsibility to sway the remaining Lions to make an investment offer in his venture.
• Rule 6: Refusing investment: An entrepreneur may refuse an offer if they are not convinced either a Lion is the right choice for their business or the deal is not favorable.
• Rule 7: The deal: Both parties involved are to see that a deal goes through based on their integrity. However, if they cannot reach a mutual agreement after subsequent meetings then, neither party is obligated to carry it on.
• Rule 8: The advocate: Each entrepreneur is allowed to have an advocate who must be duly informed about the business and preferably, directly involved in the business, with him in the den. An advocate will help in answering some questions from the Lions. They must be pre-approved, screened and must go through some personal checks as the entrepreneur.

You can check the official website at .ultima.ng

3. Business grant

Applying for a business grant:

• Tony Elumelu Foundation (TEF) entrepreneurship program: This is the leading philanthropic institution that seeks to train and empower African entrepreneurs with Business ideas and young owners of businesses under 5 years. Aside granting seed funding, the programme also provides mentoring and business management training. Visit www.TEFconnect.net to apply.
• YouWin Connect Nigeria: Youwin stands for Youth enterprise with innovation in Nigeria. It is a federal government of NiNigeria’s initiative to help youths with viable business ideas and plans grow their startups and to provide funding opportunities for those who already have established businesses.

YouWin application requirements

• Age: Applicant must be within 20 and 45 years of age.
• Nationality: Must be a Nigerian by birth.
• Business location: Business must be located in Nigeria.
• Business plan: Viable business plan that is capable of providing jobs to Nigerians.
• Applicants must have a valid means of identification.

Check out their official portal at youwin.org.ng for more information on how to apply.

• Bank of Industry: The bank of industry provides funding to different categories of startups, SMEs and even large businesses. Depending on the business idea, an entrepreneur could get between N500,000-N2 million in funding. For example, there is the federal government special intervention fund for MSMES. This fund was created to provide subsidized loans for micro, small and Medium enterprises at single digit per annum, interest rate inclusive. Official website is www.boi.ng
• AYEEN grant: African youth Entrepreneurship organization is aimed at building a community of empowered entrepreneurs. One of their objective is to train and support millions of young business owners across Africa by giving them business grants. To apply for a grant right now, visit their official website at www.ayeorganization.com and join their membership program.
• African development fund for women: This is another source of funding for women-owned startups. According their website, the African women development fund ‘is a grant making organization that supports the realization and fulfilment of African women’s rights through autonomous Women’s organization on the planet’. You can apply for a grant at their official website at Www.awdf.org
• CBN creative industry financing initiative: The CBN in collaboration with banker’s committee, have developed a funding platform for those in the ‘creative industry’. To be a beneficiary your business has to be among any of the four pillars namely: Fashion, Information technology, movie and music production. Interested Applicants are to submit their application to their bank for approval and disbursement. There will be an annual interest of 9%(all charges inclusive) and a specific maximum of years for loan repayment. Visit www.cbn.gov.ng for more details.

4. The next titan show

The next titan show: An entrepreneurial reality show that gives an opportunity to young Nigerians with creative and innovative business ideas.

As part of the show, the Contestants will compete against each other by completing some entrepreneurial tasks to win. The winner goes home with a grand prize of fifteen million naira in seed funding or business support for an existing business.

To apply, visit the official website at thenexttitan.com.

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