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SME Guide

A Guide to Small Business Funding in Nigeria: Grants, Loans, and More

Accessing capital is a major hurdle for many small businesses in Nigeria. However, there are more funding options available today than ever before.

This definitive guide explores over 25 financing schemes, including government small business grants and loans, private funding programmes, crowdfunding platforms, business competitions, investors, and alternative financing solutions.

Whether you need ₦100,000 or ₦100 million to turn your business idea into reality, this guide will connect you to the right funding opportunities in Nigeria.

Government and NGO Grants for Nigerian Small Businesses

Securing a business grant allows you to fund your startup or business expansion with no repayment needed. The Nigerian government, international donors, NGOs, and more are offering small business grants up to ₦50 million.

Although highly competitive, small business grants can give your business the financial leg-up it needs to scale, especially if you meet eligibility criteria.

Let’s explore some of the leading grant schemes for SMEs and startups in Nigeria.

YouWiN! Connect

The Youth Enterprise with Innovation in Nigeria (YouWiN!) Connect scheme by the Federal Ministry of Industry, Trade, and Investment is one of Nigeria’s largest business grant initiatives.

Over ₦2.4 billion in grants have been given to 4,450 businesses so far, with up to N10 million available per enterprise.

To qualify for the YouWiN grant, you must:

  • Be a youth aged 18–35 running an eligible new or existing business.
  • Have a minimum of 1 to 5 employees besides the owner or CEO.
  • Be registered with CAC and have a good business proposal or growth expansion plan.

DEC

The Development Exchange Centre (DEC) partners with several organisations to provide small business grants for women in Nigeria.

Some other initiatives like SheVentures offers grants and training to female-owned SMEs across Nigeria.

African Women’s Development Fund

The African Women’s Development Fund (AWDF) delivers grants to female entrepreneurs in Nigeria for capacity training, mentorship, improving market linkages, and more.

To qualify, you must be an African woman implementing projects benefiting other women and girls. AWDF also funds networks and partnerships between female entrepreneurs across Nigeria.

Shell LiveWIRE

Shell LiveWIRE Nigeria gives young entrepreneurs grants up to ₦5 million naira for business expansion and asset acquisition.

To qualify, you need to be a Nigerian youth aged 18–35, have an innovative business idea or existing business, and meet other requirements.

Tony Elumelu Foundation

While primarily an entrepreneurship programme, the Tony Elumelu Foundation provides seed capital of $5,000 to selected applicants with viable business ideas or early-stage enterprises.

The grant serves as a launching pad for creating bankable business plans and prototypes that help beneficiaries raise further funding.

Governmental and private business competitions

Beyond grants, participating in and excelling in federal or state government-funded small business pitch contests can help you win seed funding.

Some options worth exploring are:

You should also consider these private-sector business competitions:

Loans for small businesses in Nigeria

Business loans allow you to access capital for your operations without giving up any equity or ownership stake. Unlike grants, loans must be repaid over time. However, the capital injected can greatly spur enterprise growth when appropriately invested.

Here are some of the best small business loan options to consider in Nigeria:

CBN SME Loans

The Central Bank of Nigeria partners with approved participating financial institutions to give SME loans with favourable interest rates of 5% per annum. No collateral is required for loans up to ₦500,000.

Any business employing less than 300 people can apply for CBN MSME loans up to ₦25 million.

Bank of Industry SME Loans

The Bank of Industry partners with commercial banks to provide small business loans in Nigeria with 6-7% interest rates.

Any registered business can get BoI loans from ₦100,000 to over ₦1 billion for working capital acquisition, facility upgrades, etc., depending on the scheme.

State Government SME Schemes

Several Nigerian states, including Lagos, Kaduna, Delta, Cross River, etc., also offer small business loans, grants, and other support schemes in partnerships with banks.

For instance, the Lagos State Employment Trust Fund provides subsidised loans between ₦50k and ₦20 million at 5% interest rates.

Microfinance Banks

Nigerian microfinance banks focused on small businesses provide SME loans ranging from N50,000 to N5 million. Interest rates are capped at 25% by the CBN. No collateral is required for microloans.

Viable options include Accion MFB, CWG Plc, Advans Ltd., Infinity MFB, etc.

Online lenders and apps

With simplified loan application processes, online lending apps and fintech firms like PayHippo, Altara, Specta, Renmoney, etc. offer quick short-term loans for working capital needs.

However, interest rates tend to be considerably higher than those of traditional lenders. Analyse properly before taking expensive loans.

Corporate organisations supporting SME funding

Development Focus Banks (DFBs) and other corporate organisations also offer small business financing services and incubation funding to boost local enterprise development.

For example, Ecobank Nigeria runs the Ellevate Banking Programme for women-led SMEs, including specialised loan products.

While oil giant Shell Nigeria provides credit assistance, equity investments, and grants to its local contractors through the Shell Contractor Support Fund.

Alternative Financing Options for Nigerian Enterprises

Beyond conventional SME lending channels, various alternative funding schemes are emerging for companies seeking capital in unique or unconventional ways.

Peer-to-Peer Lending

P2P lending networks like Mintos, Lendahand, etc. allow you to access loans from individual investors instead of banks. Often better terms than microlenders.

Supply Chain Finance

Unlock funding by raising capital against your enterprise inventory, warehouse receipts, or future sales. Allows you to sell at a discount to quickly access cash.

Crowdfunding

Online crowdfunding platforms provide venues to raise donations, rewards, equity investments, or debt financing from multiple individuals simultaneously.

Leading options like Sparkbooster or NGnGiving make capital raising easier for Nigerian SMEs.

Invoice Discounting/Factoring

Get upfront financing against your outstanding invoices. The lender, or “factor,” buys your invoices at a small discount and collects payment later from your customers.

It is useful for freeing up cash to grow your business.

Purchase Order Financing

Secure working capital financing based on outstanding purchase orders from large buyers. Funding is usually repaid once you fulfil the order and get paid by clients.

Enables businessmen to accept large orders despite thin cash reserves.

Mergers and Acquisitions

Seeking to rapidly grow your scale and operations? Partnering, merging with, or acquiring other SMEs can prove more cost-effective than organic expansion alone.

Attracting Investors for Your Small Business

Getting the right investors on board can rocket fuel your enterprise’s growth through injected capital and strategic support. Here are some viable options:

Venture Capitalists

VC firms like Microtraction, Ventures Platform, etc. provide equity funding from $100k up to $2 million to compelling early-stage Nigerian ventures in exchange for ownership stakes.

VCs also nurture startups via expert support and access to networks.

Angel Investor Networks

Wealthy angel investors provide both capital and mentorship to promising startups. Secure introductions via networks like Rising Tide Africa, Lagos Angel Network, etc.

Private equity firms

PE investors like Novastar Ventures provide later-stage funding of upwards of $2 million for more established small businesses seeking expansion capital.

Accelerators and incubators

Accelerators like Startup Bootcamp Afritech provides funding, training, and resources to early-stage companies. It is helpful for transforming business ideas into reality.

Incubators like CcHub offer workspaces, mentoring, and access to investors to develop Minimum Viable Products (MVPs).

Organised Private Sector Funding Schemes

Industry groups and private sector associations also provide funding assistance to their member micro, small, and medium enterprises (MSMEs).

For example, the Lagos Chamber of Commerce and Industry (LCCI) runs low-cost lending programmes for member SMEs.

While agriculture sector groups like the All Farmers Association of Nigeria (AFAN) facilitate access to loans, grants, and farming inputs for members,.

Diaspora Organisations

Nigerian diaspora groups are also investing in homeland private sector development through lending assistance and diaspora direct investments.

Some of the organisations like Friends of Nigeria helps connect Nigerian SMEs to funding and mentorship opportunities from diaspora sources.

Tips for Approaching Funding Channels and Securing Capital

With many funding options now accessible for Nigerian small businesses, positioning your enterprise or proposal to stand out and actually attract capital requires focus, creativity, and dedication.

Here are some tips that can help:

Perfect your pitch.

Develop a solid business plan that clearly communicates your value proposition to stand out. Refine your elevator pitch when engaging prospective investors or funders.

Be passionate and persistent.

Funding rarely comes easy, so persistence coupled with energy and dedication becomes key.

Keep following up and applying with patience and continued optimism. Review feedback and improve.

Grow Revenue and Traction

Invest in actually building, marketing, and growing your product if it is still in the early stages. Funders back viable ventures demonstrating real demand with some initial revenues and users already.

Highlight Scalability

Emphasise pathways for regional and global scaling beyond just the Nigerian marketplace. Investors seek out true growth potential.

Consider partnerships and collaborations.

Explore creative ways of connecting with complementary enterprises. Combined capabilities can help when targeting capital raises.

Also pursue channel, payment, or distribution partnerships with larger corporations.

Leverage technology for efficiency.

Deploy solutions like payroll software, online invoicing tools, payment systems, and more to strengthen credibility by demonstrating operational sophistication.

Technology adoption also gives funders confidence in your ability to scale successfully.

5 Strategies for Nigerian SMEs to Access Affordable Credit and Funding


Summing It All Up

With an increased recent focus on supporting local enterprise development, various innovative funding opportunities are emerging for Nigerian small businesses spanning diverse industries and development stages.

This guide has highlighted over 25 short- and long-term financing instruments to equip MSME leaders with more precise knowledge on how to fund their ambitions productively.

From government small business grants, low-cost loans, and private investors to alternative finance models leveraging supply chain mechanisms, Nigerian entrepreneurs now have an expanding menu of options to address working capital, asset acquisition, expansion projects, and more.

The key is thoroughly evaluating each scheme based on individual firm needs, capabilities, and priorities.

While the funding chase may seem tedious, becoming conversant with Nigeria’s expanding capital access landscape for SMEs will prove invaluable for entrepreneurs to transform promising business ideas into tangible enterprises well-positioned to drive socioeconomic growth.

You can also read – Business Grants in Nigeria: Maximizing Opportunities for Growth

1 thought on “A Guide to Small Business Funding in Nigeria: Grants, Loans, and More”

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