The Small and Medium Enterprises (SMEs) remain the powerhouse of any economy, as they play a pivotal role in driving equitable economic development in any emerging economy.
In Nigeria although, SMEs account for 50 per cent of the Gross Domestic Product (GDP), they are faced with different problems such as; lack of infrastructure, multiple taxations, unfavourable business policies, electricity, among others. But the ultimate of all problems is how to source cheap funds.
Funding plays a crucial part in the sustainability of any business. A business can either be funded through equities or loans.
Getting Cheap Funds
With a good business plan, structure, and the ability to service loans, commercial banks offer different loan packages to small businesses. But as a small business owner, the easiest and cheapest means to get funds still remains your personal finances.
Personal finance involves using your own savings to support your business. Such savings can be gotten from sales of personal assets, from friends and family members.
Another cheap source of funds is sourcing loans from a venture capital firm. Venture capital firms invest in small businesses in exchange for an equity stake in the company. However, venture capitalists only look out for businesses with growth potential.
Grants And Government Interventions
The Nigerian government has launched a number of interventions to support credit to SMEs. One of such is the CBN loans to SMEs.
As an SME seeking funds, the recently introduced N50 billion stimulus pack by CBN to cushion the effect of the COVID-19 pandemic, is a sure fund to go for. The intervention is slated to close by December 31, 2024. CBN governor, Godwin Emefiele, at the last monetary policy meeting(MPC) said the bank’s massive interventions in various sectors of the economy, is to stimulate aggregate demand and boost production, particularly for Small and Medium Scale Enterprises.
Similarly, the Central Bank of Nigeria (CBN) in collaboration with the Bankers committee created the Agric-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) loan. The loan disbursed by NIRSAL Microfinance Bank and other banks, offer up to N10 million to agric SMEs at a single-digit interest rate of 9 per cent per annum.
The MSMEDF initiative of CBN meant to provide SMEs access to loans from N500, 000 to N50 million is also an avenue to fund one’s businesses.
The Bank of Industry (BoI), a federal government financing institution offers different loan packages to MSMEs at a single-digit interest rate per annum.
The chairman, BoI, Mr. Aliyu Dikko, recently said the bank has reduced interest rates on all BOI-funded projects from 10 per cent to eight per cent for a one-year period and extended the principal repayment period by three months.