UNLOCKING BUSINESS FINANCING OPPORTUNITIES

What do we know

  • Most entrepreneurs feel they need financing.
  • Most entrepreneurs are very optimistic about their businesses
  • Most businesses require a clear strategy and rigorous business planning.

Nuggets to consider as you think about business financing

  1. WHAT IS YOUR BUSINESS CASE? : Are you selling investors the narrative of HIGH SOCIAL IMPACT or HIGH POTENTIAL MARGINS
  1. HOW SCALABLE IS THIS CASE? It is crucial that a business is able to achieve scale and exploit an opportunity in the market. This makes for a good business case for an investment
  2. HOW MUCH DO YOU NEED? WHEN? AND FOR WHAT USE?

Financial Clarity: Investors want to see how exactly their investments are meant to impact the business. It is important to be clear on the specific business needs an investment is to address.

  1. INVESTOR TYPE 

Some investors are INDUSTRY or BUSINESS CASE specific. Understand your business and focus your search.

  1. INVESTMENT TYPE 

Debt vs Equity

It is crucial to understand the differences between both options and the implications on your business. Understanding the current status of your business and choosing the right kind of funding.

Status/Track 

What have you done so far with what you have?

Traction Investors want to see that your product or service has started that “hockey-stick” adoption rate, which implies:- 

  • A large market 
  • A valid business model, 
  • Sustainable growth. 

How can you improve your current cashflows: 

  • Increase Revenue 
  • Reduce Cost

Red Flags for Investors

Regulatory Compliance: Compliance is an important issue for investors and failure to adhere to regulations could result in stiff penalties. 

Funding Options

Types of Funding Available for Businesses

  1. Family, Friends & Fools Funding 
  2. Grants & Challenge Funds 
  3. Government Enhanced Intervention Funds
  4. Non-Bank Financial Institutions 
  5. Private Equity Venture Capital
  6. Non-conventional sources

Availability of grants and challenge funds for businesses in Nigeria 

There are several Africa-focused challenge funds that aim to support innovative commercial businesses in certain sectors with the aim of reducing rural poverty, promoting resilient rural communities, and creating jobs through private sector development.  

The Africa Enterprise Challenge Fund (AECF) is a US$ 256 million private sector challenge fund that provides catalytic funding to enterprises in Sub-Saharan Africa. The fund also supports innovative commercial businesses in the agribusiness sector. AECF runs challenge windows at different times of the year along different themes which businesses can benefit from. Some companies that have benefited from AECF in Nigeria include AACE Foods and DADTCO (cassava processing).

Availability of Federal Government intervention funds for businesses in Nigeria

Bank of Industry/Bank of Agriculture Loans: 

These banks provide a number of Federal Government sponsored loans to SMEs across different sectors and value chains. The loans offer single-digit interest rates. The BOI YES program is one of such platforms for obtaining single-digit debt financing

CBN MSME Development Fund:

The MSME Development Fund launched by the CBN is targeted at SMEs and micro-enterprises. Eligible activities to be financed include agricultural value chain, services, etc. Loans are to be disbursed by microfinance banks at single-digit interest rates.

Anchor Borrowers Programme:

Although targeted at large commercial enterprises in the agriculture sector, the anchor borrowers program allows agribusinesses and small farmers who are involved in primary production and who make up the value chain of companies in agriculture to benefit from single-digit debt financing.

Support of Non-bank financial institutions

Non-Bank financial institutions is able to provide short-mid term debt financing for SMEs with good credit standing. To successfully receive funding from these institutions you will need a business plan and comprehensive financial records. Examples of companies in the space include GroFin.

Availability of non-conventional sources of funding for businesses

Crowd Funding: Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people. There are certain platforms in Nigeria that businesses can leverage to get crowdfunding from sponsors.

PE & VC Firms Fund Businesses in Nigeria

  • Sahel Capital is the fund manager for Fund for Agricultural Finance in Nigeria (“FAFIN” or the “Fund”), an agribusiness-focused SME private equity fund. 
  • FAFIN uses blended finance to fund SMEs in Nigeria, generating commercial returns and achieving social impact in the process.

The Fund also has a separate funded technical assistance facility from donors, with which to provide capacity building and technical support services to investee companies.

To get more insight on this topic, Visit these pages for more knowledge.

Youtube Channel – https://www.youtube.com/watch?v=RjOhUdjqofE

Powerpoint Presentation – 

POSTED BY EKO INNOVATION CENTRE

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