It is said that small and medium sized enterprises mostly rely on internal finances or cash from friends and family to begin, and initially manage their businesses. According to a report by the World Bank, this is because they are less likely to be able to secure bank loans, compared to large companies.
The International Finance Corporation (IFC), in a recent report estimated that 65 million businesses, or 40% of MSMEs in developing countries, have an annual unmet financing need of $5.2 trillion, translating to 1.4 times the amount of global MSME lending at present.
In Nigeria, there is no doubt that existing and aspiring entrepreneurs are experiencing difficult times in starting or funding their businesses due to the prevailing economic downturn, compounded with other socio-political factors.
According to a 2022 Nigeria MSME report titled “Fuel for Africa’s next billion businesses”, 80% of businesses under the Micro, Small, and Medium Enterprises (MSME) in Africa fail within the first five years of their existence. And, despite having the highest entrepreneurship rate in the world, lack of finance has been identified as a major causative factor.
That said, there is still room for success for young entrepreneurs, who are zealous enough to run personal projects and appeal for seed fundings.
In a conversation with Business expert, Yuliy Shenfeld, Director of Operations at Jiji Africa, we got insights on three legit ways that you can raise funds to start that business.
1. Apply for grants
Different funding options may be available for your specific project or demographic. Follow these steps to identify and access them:
- Determine the type of grant you need, be it government, private sector or NGO grants like the Bill and Melinda Gates Foundation, CIPE Grant and other corporations.
- Research available opportunities by checking relevant government and private sector websites, reaching out to NGOs and searching for international grant opportunities.
- Ensure you meet relevant eligibility criteria before starting your application process.
- Prepare your grant proposal, and submit on time, through the appropriate channels.
- Follow up on your application with grant providers to ensure they received your submission, and inquire about the status of your application.
You may also get private investors who are willing to invest in your project for a fair return on investment.
2. Explore freelance work
Statistics have shown that over 1.5 billion people in the global workforce are freelancers. If you have a specific skill or talent, such as writing, graphic design, or programming, you can offer your services as a freelancer. There are many websites and platforms like Upwork and Freelancer.com, that connect freelancers with clients looking for their services globally. All you need to do is: create a portfolio that showcases your skills on your preferred platform and set your rates based on your skills, experience and market rates for your services. You also need to promote your services through your portfolio and social media channels, and start small by taking up low risk projects to build your portfolio and reputation. Keep in mind that you must be deliberate about maintaining good relationships with your clients by delivering quality work on time, communicating effectively and being professional at all times. With these tips, you are good to go on your first freelance project, to start earning. You would be able to raise sufficient funds overtime, to execute personal projects or kick start that business idea.
3. Sell unused items
A recent study by Statista.com showed that the value of the secondhand apparel market is set to double in coming years, up to 218 billion dollars by 2026. More interesting is the fact that the highest customers in this segment are Gen-Z and Millennials who see used items options as more affordable and environmentally friendly. So, take a look around your home and gather your unused, used or preloved items. You can sell them online through websites like Jiji.ng. This way, you can generate extra business funds through sales.
Whether you’re selling unwanted items, offering services, or applying for grants, these methods are sure to help you generate funds as seeding capital for that new business idea, or grow an existing business. Just be sure to choose the option that works best for you.