Finance: A familiar headache of entrepreneurs

FEMI  Asu

Is it true that banks are unwilling to give loans to small businesses because they consider many of them as not credit-worthy? Femi Asu takes a cursory look at what aspiring and start-up entrepreneurs can do to position themselves such that financial institutions and individuals would be more than willing to finance their business projects.

Lack of access to finance is, perhaps, the most popular refrain on the lips of many small and medium scale entrepreneurs, when asked what challenges they are facing. It is not only peculiar to aspiring entrepreneurs, those who are already in the terrain are grappling with the challenge, which has not only impeded the growth of many businesses, but has also sent some to early entrepreneurial graveyards.

Many business ideas have not translated into business concerns for lack of enough start-up capital. It is widely believed that anyone who wants to start a business in Nigeria must have a huge financial muscle to cope with the many challenges besetting the Nigerian business environment.

In 2011, the President Goodluck Jonathan administration launched the Youth Enterprise with Innovation in Nigeria (YouWiN!) programme. It was, among other objectives, to meet the funding needs of aspiring young entrepreneurs. Last year, 1200 awardees were provided with a one-time equity grant to start or expand their business concepts and mitigate start-up risks. It goes without saying that government cannot provide funds for every entrepreneur. It, therefore, behooves entrepreneurs to come up with creative ways to go about their quest for finance.

Not a few entrepreneurs have complained that banks have not been helping matters in this regard as they are unwilling to give credit facilities to small businesses. The procedures for accessing credits, they say, are often rigorous and dependent on the provision of collateral, which they can’t provide. Besides, they say banks charge high interest rates to scare them away.

Is it true that banks are unwilling to give loans to small businesses because they consider many of them as not credit-worthy? What can entrepreneurs do to position themselves such that financial institutions and individuals would be more than willing to finance their business projects?

Peter Bamkole, executive director, Enterprise Development Centre of the Pan-African University, said in a conference held recently: “Before people can agree to finance your business, they want to be sure they will get their money back with interest. Put yourself in the position of the banker or prospective financier; would you give money to someone when you are not sure of their ability to pay back?”

Bamkole stressed that having a good track record can make it easy to access finance. “The more you are able to put into your business, the more convincing you would be in the eyes of the banks or prospective financiers,” he said, adding that financial institutions and prospective financiers are looking to see the commitment of the individual in terms of personal investments already made into the business.

He opined that aspiring entrepreneurs and start-ups should first explore the “friends, family and fools” avenue for finance before approaching banks for loans, saying, “these are the people who can easily believe in them and bankroll their business ideas or projects.”

But just before you write off the idea of attempting to get loans from banks, according to a source from the Bank of Industry (BoI), the bank is supporting entrepreneurs in the area of micro-credits.

According to her, the BoI is giving low-interest micro-credits to entrepreneurs who can come up with business ideas or projects that will add value to the country’s raw materials. “They don’t need collateral before they can access funds. Let them form an alliance. All that is required is 10 percent of the amount they want and three guarantors.

“We have tons of funds to give out, but we must find credible Nigerians to utilise this fund if Nigeria must develop. What we preach in BoI is credibility. The money that we are giving out belongs to all of us. If you are sure that our money will come back, come to BoI,” she said.