How to finance your local business in Nigeria

How to finance your local business in Nigeria

For business builders in Nigeria, access to business finance options can be very limited.

According to our survey, access to finance is a top challenge faced by a lot of business owners in Nigeria.

The high-interest rates and collateral requirements from banks can make it close to impossible for new business owners to access capital to grow their business.

It takes money to make money, so securing capital is very important to scale your business.

If it’s difficult to secure capital, what options do business owners in Nigeria have for financing their business?

Here are a few options that we are familiar with

Friends and family

When you’re trying to raise money for your business, a good place to start is to go through your personal network to tap into the finances available from friends and your family.

Although you are securing business finance from people you know, make sure it’s emphasized that what you’re doing is business and you want to present yourself in the most professional manner.

Start with a good business case as to why you want to start the business. Be sure to be able to explain the opportunity you see and provide some credible business information and data to back up your findings.

This will give them the confidence to give you money that they would have otherwise used for something else to invest in your business.

A good tip is to be clear on how much money you would need in a year or two and try and get a commitment upfront with a remittance of the investment all at once.

It’s hard with family and friends to collect money on a recurring basis because there might be a lot of friction in the collection process.

Make sure you try and request the appropriate financing needed to hit tangible milestones all at once. 

It is also very important for you to have a written agreement, signed by both parties.

This is to ensure that there is clarity in the amount of investment made and the expected returns. Make sure everything is clear and written down.



High Net-worth Individuals

The next step from friends and families is to secure finance from high net worth individuals (HNIs).


As you start your business, networking and meeting people is very crucial to your success.

You want to strive to meet people that are in your industry, people that could be potential customers, and people that could become investors.

You have to share your ideas and the vision of your company, so that the right people, so that the right people can back up your mission.

Knowing that your access and time with the HNIs are limited, approach them with a good value proposition and a well-planned business case to gauge their interest.

Similar to getting business finance from your family and friends, be sure there’s a signed agreement on the expectations with each investment.

Development Finance Institutions 

Another source of finance is from development financing institutions such as Bank of Industry or the Bank of Agriculture.


Bank of industry interest rate on term loans ranges between 5% and 10% per annum. These are more favorable terms than the interest rates on loans from commercial banks that can go as high as 30%.

However, to qualify for finance from these institutions, there are certain requirements and numerous documentation required.

Make sure your line of business is aligned with these requirements.

Are you a manufacturer that can tap into the back of industry loans? Or are you a solar energy provider that can utilize into the N6 Billion solar energy financing from BOI.

Take advantage of these financing opportunities but keep in mind that you may still need non-moveable collateral or landed property to secure some of these loans.

This could be a huge deterrent for newly-minted entrepreneurs and first-time business owners.

Revenue from your customers (Bootstrap)

The next way to finance your business is through paying customers – bootstrapping.



To achieve this from the start, you have to really identify paying customers early enough in your business and also have a product or solution that’s ready to be sold.

This could be a challenge for product-based businesses, where there is usually a financial commitment to develop a product before it’s ready for sale.

Starting by solving a problem that your identified customer is willing to pay you for. Then go and offer that service in the form of a legitimate business.

The money that you make from serving your customers, can then be reinvested in your business for future growth.

This requires a rigid money management mindset with a good grasp of managing cash flow – the air that a business breathes in the form of how money enters and leaves your business. 

Build credibility and loyalty with your customers, and retain a steady stream of satisfied customers.

that would continue to put more money towards the solutions that your business provides.

Reinvest that money back into your business.

Double Up

Institutional Investors

Now Nigeria is still a developing market for investments from institutional investors.

There is a growing class of these investors – venture capital and private equity firms – looking to tap into the growth opportunities in Nigeria.

These firms are looking for a certain class of investment and returns.

You should approach these investors only when you are convinced that the business you are trying to build is in line with the returns that these investors expect.

If the expectations are not aligned, there could be a lot of friction in growing your business, especially since you could be giving up a piece of your company, in the form of equity, and losing some amount of control of your business.

Confirm that the investment firm you choose to work with has the same vision that you have for your company and be aware of their expected financial returns.

Besides private equity and venture capital, there are other investors such as NGOs and foundations that are looking to invest in businesses that are aligned with certain social, human, economic and environmental initiatives.

The key is to identify a partner. Someone or a group of people that are aligned with your vision.

The best investors bring their expertise and access to their network, along with the capital that they invest.

Find the right finance partners and manage expectations

It is very important to find the capital necessary to build your business.

To do this, you need to be clear about how you want to grow your business and what your financing requirements are. Once you are clear on that, make sure you do your due diligence.

Whether you’re taking money from friends, family, high net-worth individuals, the bank of industry, or an investment firm, make sure that in each of these situations there is a legal document that binds the agreement between the two parties – your company and the investor. 

It is important for both parties to be very clear on the expectations. It should be clear what the investor expects in financial returns along with a clear timeline for when the investment is expected to yield.

Making sure this is aligned right from the beginning would make it easier for you to grow your business by getting the support, not only financially, but also through the support of business partners that want your business to succeed.

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About The Author

Nifemi Aluko

Connecting global organizations with quality information and insights to help them succeed in the Nigerian market… Passionate about business, technology, and music.

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