I once took the time to study the leading companies in the business world today. From this study, I was able to detect a pattern among the different CEOs of these companies. This pattern is simply the fact that the various CEOs of these companies understood the intricate importance of raising capital and implemented it effectively.
So you see, whether your business is a startup or an existing business, it is important you know how to raise capital for your business in Nigeria. This is because raising funds is an important step that you must take to achieve your business goals.
This article is a comprehensive guide that will provide information on everything you need to know about how to raise capital for your business in Nigeria.
What are the ways to raise capital for your business in Nigeria?
There are several options available to business owners to raise capital. These options include using personal finance, obtaining business loans, selling equity, approaching angel investors or venture capitalists, and creating partnerships.
Now, let’s break down what all these terms mean:
Personal Financing
Simply, personal financing refers to investing your funds into your business. This option can raise capital to rent a space, purchase products and supplies, run effective marketing campaigns, pay employees, and cover the daily operational costs of the business.
Did you know that Apple, one of the leading technology companies in the world that is constantly driving change in the technology sector, was set up by using personal funds? This evidence shows that using personal funds can unleash significant potential in your business.
Not only does it create capital for your business, but it also attracts potential investors to your business. When you invest personal funds into your business, you are proving to angel investors in Nigeria that your business is worth taking a chance on.
However, to achieve this, intense care must be taken when you invest personal funds into your business to avoid experiencing failure.
Selling Equity
Another effective way to raise capital is by deciding to sell a part of your business to interested individuals who could be your friends, family members, or any other interested party. This is what is known in corporate finance parlance as Equity Financing.
Equity financing involves selling the shares of a company to other people who become shareholders in the company as soon as the transaction is complete.
It is one of the effective ways to raise capital to finance business goals that are capital-intensive.
One of the downsides of adopting this method is the fact that you would have to give up control of some parts of your business in exchange for capital. However you also need to know that there are a lot of precautions you can take to prevent this from going sour in your business.
This precaution involves using the law as a safeguard for your business interest when using this method to raise funds for your business.
For more information about this, ensure that you stick to the end of the article.
Pitching to Angel Investors in Nigeria or Venture Capitalists
Angel investors in Nigeria and venture capitalists are actively looking for Nigerian businesses to invest in that would generate impressive returns on investment. So, if you’re seeking capital, reaching out to angel investors and venture capitalists is a worthwhile option to explore.
The good news is that you can easily find these angel investors and venture capitalists easily. You can find them in your immediate community, at business-related events, or on the internet. But to convince them that your business is worth the investment, ensure that you have a reasonable and viable business idea with a high chance of succeeding in the market.
Business Partnerships
This involves the coming together of two or more persons who share a similar business idea or interest to build a solid business. These individuals pool their different resources and use them for the smooth running of the business. Forming a business partnership can unlock access to a huge amount of funds you can use to run and expand your business.
But this does not mean that when you want to enter into a business partnership, money is the only factor you should consider in choosing a business partner. The partnership you form must be strategic to the extent that you must take into consideration the skill sets and level of expertise of your potential business partners before you choose them.
Business Grants
Business grants come in the form of an award of money by either government or private individuals to facilitate the swift achievement of various business goals. These grants usually require one to fill out an application form before one is chosen as a beneficiary of the grant. The application process is highly competitive and for you to earn a spot amongst the beneficiaries, you must ensure that your application is mind-blowing.
Common examples of business grants available to Nigerian business owners today include SMEDAN, the Tony Elumelu Foundations program, and so on.
Business grants are highly effective in raising capital for businesses because these grants offer free financing up to millions of naira. Another advantage is that you have no obligation to repay the money received.
Conclusion
As an entrepreneur in Nigeria, you can use any of the above options to raise capital. But you must also ensure that when you use these options, you comply with the law in Nigeria. The law in Nigeria specifies legal requirements you must meet as a business owner before you can use any of these options. If you fail to comply with these requirements, your business is at risk of attracting legal consequences.
In addition, the law exposes pitfalls you must avoid when using any of the options discussed above and offers practical recommendations on how to avoid them.
If you would like to know what these legal requirements, pitfalls, and professional recommendations are, click here to continue reading part 2 of this article
