Funding is an essential resource for any enterprise, a crucial aspect of building and sustaining a business for growth and maximum profitability. Luckily, there are several available sources of funds for small business owners in Nigeria.

Considering the high-interest rates charged by Nigerian banks, business owners – startups and small businesses, find it hard to raise the required funds to get their businesses off the ground, especially within Nigeria.

Sourcing for funding doesn’t have to be a daunting task. However, a large number of business owners seem to find themselves stuck because they believe they can’t access funds. It is imperative to understand the basics of raising capital as it might mean the difference between entrepreneurs that successfully raise capitals, and those that do not. In order words, it could be a critical key to the success of your business.

At this point, it would be safe to let you know that not all types of funds are healthy for your business. It is, therefore, imperative to understand the dynamics of the different forms and sources of funding available to you as a business owner in Nigeria; their likely effect on your business, expectations of the owners of the funds, etc.

When sourcing for funds, certain steps are needed to attract the type of fund you need and more importantly, to get it from the right source.

Related Article – How To Start A Business in Nigeria.

In this article, we have listed the various sources of funds, sections on applying for grants from about N1.5 million and up to tens of millions.

Here’s an overview of seven typical sources of finance for businesses

Having a single source for funding is not advisable regardless of the business strategy you intend to execute. This is especially true when it comes to financing your new business.

Listed below are generic sources of funds for businesses, especially startups.

Personal Investment

As an entrepreneur, one of the first ways to demonstrate confidence in your ideas is to invest your personal time and money into it. That is one of the first considerations other investors, friends and family give to your business to determine their likelihood of investing in you and your business. It typically signifies your level of commitment or lack of.

When considering self-financing your business, think of the following channels:

Personal Savings

Sourcing from your piggy bank is one of the easiest ways to finance a small business. Using your own cash is not only impressive but it also shows other potential investors your level of commitment to the venture. This can immensely help to gain additional funding from third parties.

Sell Personal Assets

Perhaps you may want to sell your stocks, real estate, bonds, and other assets in order to raise money to fund your business. Selling assets for cash is a time-tested way to raise money, but there can be tax implications linked to selling certain assets, especially real estate and stocks. Be certain to take that into account.

Family and Friends

Family and friends have proven over time to be a resourceful helpline for small business owners especially when you don’t have the track record to convince a bank to lend you money. Your family members and friends are easier to persuade compared to bank officials. Also, they are less likely to ask for stringent terms and high-interest rates or may not indicate any interest rates altogether.

2015 survey by Pepperdine University revealed that 68% of responding small businesses financed their business through support from friends and family. It is important to note that sourcing for funds from family and friends strings along with its own form of risks. Your relationships may suffer if the venture fails, or if it seems slower than anticipated to repay the loan.


Crowdfunding is another popular way of sourcing for funds; it depends on a system of generating small investments from a large number of sources. It is believed that it is easier to raise small amounts of money from many people than it is to raise huge sums of money from a few people.

There are different types of crowdfunding – Donation crowdfunding, Reward-based crowdfunding, Debt crowdfunding, and Equity Crowdfunding.

The donation crowdfunding includes sites such as GoFundMe, Indiegogo in which individuals donate without any guarantee of return on the money. Donors contribute based on the idea of supporting a good cause, a company they believe in or share values with.

Reward-based crowdfunding offers you something similar or a perk in exchange for the investment. A common example of this type of crowdfunding is Kickstarter.

To achieve optimum results from reward-based crowdfunding, it is important to set funding goals by determining how much you plan to source for with your fundraising campaign. Then create a reward strategy, an incentive you plan to reward the donors with for their contributions.

In Equity crowdfunding, investors give money to business owners in exchange for a percentage of ownership of the company; then after a window of time, the company repays the investors with interest in return. Most times the investors receive repayment or reward with interest within a designated period of time.

If you are a startup, equity crowdfunding is a smart way to go because it affords you the opportunity to raise larger sum of money from different investors than you would with the other funding opportunities.

Angel Investing

Angel investing involves sourcing for funds from a high-net-worth individual who is interested in supporting the business to grow and expand. These investors offer startups with seed money, and the company gives them an equity stake in return.

It is believed that when the company becomes profitable, the investors can sell their shares for a profit. Also, many angel investors tend to provide more than just money. A high number of them are business owners; in addition to the funding, they often share their expertise, which can go a long way in defining the long-term success of the business.

Venture Capital

Venture capital firms invest directly in budding companies in exchange for equity stakes in the business. Most VC firms are partnerships investing firm money, and they tend to be greatly selective and often invest in businesses that are established and have the track record to generate profits. VC firms invest in a business with the aim of cashing out their equity stake if the business eventually holds an initial public offering (IPO) or is sold to a larger existing business. To secure venture capital, the first step is to submit a business plan to either a venture capital firm or to an angel investor. If interested in the proposal, the firm or the investor will perform a thorough investigation of the company’s business model, products, management, among other critical factors.

Venture capitalists tend to invest a large sum of money in just a couple of businesses. Most often venture capital experts also tend to focus on a particular industry. A venture capitalist that specializes in agriculture, for example, may have prior experience as an agriculture industry analyst.

Business Incubators

Incubators support startups that are still in the early stages of building their company. Most startups have an idea that can change the marketplace, but no business model to transition from innovative idea to reality. Incubators are exactly what the name implies, and they are managed by venture capital firms, government agencies, with the vision of building new businesses through their earliest stages by providing marketing, networking, infrastructure, and financing assistance. Incubators function on an open-ended timeline.

They focus more on the longevity of the business than how fast the company grows. Incubators do not provide capital to startups and are usually funded by economic development organizations. They also don’t often have an equity stake in the companies they support.

Co-Creation Hub is a brilliant example of an incubator. Incubators invest time and resources into advancing local startups; they are generally tasked with creating jobs or finding ways to grow the business.

But they have less pressure to deliver startups that can grow fast, as fostering and supporting local startups is part of their mandate. Therefore, even a slow growing or less scalable business still attracts a good incubator.

To become part of an incubator program, a prospective business owner has to complete a lengthy application process. Requirements differ among various incubators, but the entrepreneur must demonstrate a strong potential for success.

Available Sources of Funding for Startups in Nigeria

Here are leading players in the Nigerian business space who have records of aiding a large number of startups in recent years:

1.     Tony Elumelu Foundation (TEF)

This is entrepreneurship program is funded by a $100million commitment by the Tony Elumelu Foundation to empower 10,000 African entrepreneurs over a 10-year period. The goal is to create at least 1million jobs and contribute over $10billion in revenue to the African economy.

Through its flagship Entrepreneurship Program, the Foundation empowers African entrepreneurs and the entrepreneurship ecosystem across 54 African countries. The Foundation has empowered 7,531 entrepreneurs thus far, through the provision of small business grants to qualifies persons and businesses.

It is arguably the largest source for small business grants in Nigeria.

2.    African Development Bank

The Nigeria Trust Fund (NTF) was created in 1976 by an agreement between the Bank Group and the Nigerian government. The NTF is a self-sustaining revolving fund. Its objective is to assist the development efforts of the Bank’s low-income regional member countries whose economic and social conditions and prospects require concessional financing. Its initial capital of $80 million was replenished in 1981 with $71 million. In 2008, the Federal Republic of Nigeria and the Bank Group agreed to a ten-year extension of the NTF. NTF resources can co-finance operations with the ADB and the ADF, as well as fund stand-alone operations, in both the public and the private sector. Supplementary loans for Bank Group financed projects can also be considered.

3.    Bank of Industry (BOI)

Bank of Industry (BOI) is one of Nigeria’s principal financing institutions and it provides long-term support to different industries and various sectors of the economy. With the vision of providing financial support for the development of micro, small, medium and large businesses, BOI focuses on businesses that engage in manufacturing, processing, Oil and Gas, information technology amongst others. It is the largest and oldest financial institution in the nation.

4.    The African Women’s Development Fund (AWDF)

This is a grant offering foundation that supports local, national, and regional women organizations, working towards the empowerment of African women and the promotion and actualization of their rights.

Their aim is to strengthen and support the work of African women organizations. By amplifying African women’s voices and achievements, AWDF supports efforts that fight hurtful stereotypes, and promote African women as active agents of change.

5.    Lagos State Employment Trust Fund (LSETF)

This trust supports Small and Medium Enterprises (SMEs) with ₦25 billion. The fund is divided into two categories: micro and small businesses or the micro category. Businesses in this category can access up to ₦500, 000 loans with an interest rate of five percent and a tenure of one year – this is mainly geared towards youth entrepreneurship support.

The small business category businesses can get up to ₦5 million for a tenure of three years. The criteria for accessing the funds include: membership of a business organisation that will recommend the business for the loan, Lagos State tax receipt for at least six months, and Lagos state residency card. Till date, up to 8,000 businesses have received over ₦6 billion from LSETF.

6. Development Bank of Nigeria

Development Bank of Nigeria (DBN) is a bank owned by the federal government of Nigeria and assigned with the task of catering to the financial challenges faced by Micro, Small and Medium Scale Enterprises (MSMEs). DBN was launched on the 23rd of March, 2015. 

The federal government launched the DBN to see to it that Nigerians put their creativity to full use. While youths have complained (time after time) about the unemployment rate and the lack of opportunities, the Federal Government listened to these pleas by creating this avenue for creativity. The plan was to allow financial inclusion for youths and older adults who have limited opportunities in terms of converting their dreams to reality.

Basically, “you got a dream—get it across to DBN”

The loan repayment plan of the DBN is quite flexible. The tenure lasts up to 10 years, coupled with a period of a moratorium of up to 18 months. Also, the interest rates are on a fully sustainable and market-conforming basis. Hence, this makes taking a loan from DBN about the best loan-taking option for Nigerian entrepreneurs. 



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