Best Sources of Funding for MSMEs.

No matter how small a business wants to be, one thing is certain. The business will need funds to run.

And more often than not, businesses need external sources of funding, as well as internal sources.

Getting an adequate source of funds to start or grow a business is usually a herculean task for most businesses.

It is however important to first of all, know the available sources of funds for MSMEs, especially in Nigeria. It is on the premise of this knowledge that a business can now decide on the best source of funds for their business, based on the structure and stage.

Here are some of the most popular external sources of funds for businesses.

Angel investors: They are wealthy individuals who seek for businesses to invest in. Angel investors aid MSMEs with funding, advice, guidance and network. They are able to provide advice because they invest in industries that they have experience. They are focused on return on investment(ROI).

Venture capitalists: Venture capitalists are equity investors that provide capital to companies who show high growth potential in exchange for a portion of the firm’s ownership. If you don’t mind reducing your ownership stake in your business, VC funding is a great option.

Crowdfunding: Since 2013, crowdfunding campaigns have become very popular sources of financing for individuals and businesses alike. MSMEs have also taken advantage of this platform to source for business finance. It involves raising finance from a large number of people over the internet.

Grants: The government, organizations, individuals can offer grants to MSMEs. Grants are non-refundable sums of money given to an individual, organization or business by the government, an organization or individual. They are like free money given to a business. Most grants come along with mentorship and training on how to manage a business properly.

Loans: Loans are usually gotten from banks, other financial institutions or the government. They are usually given to business owners who will later return it with a particular interest.

Armed with this knowledge, a business can now make better decisions when seeking for funds from external sources to start, run or expand.