1.Accessing finance
2.Uncertain Regulatory environment
3.Difficulty in scaling organically
4.The Economy
5.Tax Compliance
7. Not Diversifying Client Base
8. The battle between Growth vs. Quality
9.Founder Dependence
10.Staying Passionate in difficulty
This discussion will thus focus on the issue of financing MSMEs in Nigeria
Finance apart from being a key factor of production is also the elixir or glue that enables the business to scale, grow and flourish.
Conventional sources of SME financing are financing schemes that are offered by recognised financial institutions or banks and which are not guaranteed by governments.
In Nigeria, the Development Finance Project supports the establishment of the Development Bank of Nigeria (DBN), a wholesale development finance institution.
1.FGN SPECIAL INTERVENTION FUND FOR MSMEs (National Enterprise Development Programme) through the Bank of Industry. Amongst other things provides subsidized loans to MSMEs at single digit (9% per annum) all-inclusive interest rate.
3.Lagos State Intervention NGN25 Billion Fund for SMEs.
Because it has been so difficult to access finance conventionally, many SMEs have taken to finding new ways to obtain finance. They include-
As a result of the difficulty accessing financing conventionally through banks, we now have SMEs obtaining funding through consumer lending platforms.
It was long the position that crowdfunding was prohibited as only public companies under the extant laws could raise capital from the public.
This shuts the door on this alternative means of lending to SME’s as the high paid up capital will exceed the ability of most SME’s.
1. Discrimination from financial institutions that are averse to the risk of lending SMEs especially start-ups.
2. SME’s lack of knowledge on how to package appropriate bankable business proposals.
4. The multiplicity of regulating agencies, taxes and levies that result in the high cost of doing business and discourage entrepreneurship due to the absence of a harmonised tax regime.
6. High-interest rates charged by banks and other financial institutions on loans