How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page0 How to Easily Raise Capital in
Nigeria - With or Without Collateral. Iroegbu Ikechukwu P.N.
www.BusinessGuidesNigeria.com 2008 BusinessGuidesNigeria. How to
Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page1 Table of Contents Part 1: The Basics. 1. Capital
the life of your business. 2. The Importance of a sound Business
plan. 3. Getting the Money-Hunting Edge. Part 2: Ways of Raising
Capital. 4. Personal Savings. 5. Getting Your Hands Dirty. 6. Other
Peoples Money (OPM)/Trade Advance. 7. Bank Loans. 8. Small Personal
Loans. 9. Selling off Your Luxury Assets. 10.Group Collection
(Isusu). 11.Partnerships. 12.Private Equity Placement. 13.Economic
Opportunity Loans. 14.Angel Financing. 15.Cashing in Your Life
Insurance. 16.Bank Overdrafts. 17.Leasing. 18.Bartering. 19.J oint
Ventures. 20.Hire/Purchase. 21.Going Public. 22.Selling
Information. 23.Multinationals. 24.Minimize Your Start-up Costs.
25.Mistakes That Kill Startups. 26.Other BORIGCOMM Products that
will help you. 27.Appendix:List of Micro Finance Banks in Nigeria
(700+) [in CD]. How to Easily Raise Capital in Nigeria With or
Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page2 NAPEP Contact
Persons in Nigeria [in CD]. SMEEIS Guidelines [in CD]. Sectorial
Distribution of SMEISS investments [in CD]. Geographical
Distribution of SMEISS Investments [in CD]. BONUSES [in CD]. How to
Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page3 Part 1: The Basics How to Easily Raise Capital
in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page4 Chapter 1 Capital the life of your business On
the premise, very few business endeavors can be started without
capital. The only exceptions are some service based businesses
which only require the expenditure of physical effort. Capital is
unarguably the life-stream of your business. With it you can;
purchase equipment, employ and pay staff salaries, rent business
offices, run advertisements, etc. Most probably, it is capital that
is keeping those brilliant ideas of yours from taking form, or
holding back your business from its much needed expansion. However,
with the different means of raising capital which I am going to
teach you. Your nightmares, headaches and pains associated with
sourcing & acquiring capital for your business will be turned
into bliss. I am going to show you proven methods you can easily
use to raise capital for your business right here in Nigeria. Shall
we begin? How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page5 Chapter 2 The Importance of a sound
Business plan Since you are going to approach either individuals or
corporate establishments for capital, we cannot overstate the
importance of a sound business plan. The factors that make your
business plan sound include: a.Is it simple to (read through and)
understand? b.Is it feasible? Can it be achieved? c.What are the
risks involved? d.What are the potential returns (profits)? e.How
long will the returns take to come in? f.Who are you? What related
experiences do you posses? Which experienced people (in your area
of business) are behind you? Your business plan tells your
prospective partner/investor exactly what the money you need will
be used for. It also shows how soon they expect to get their money
back. Your income projection, target market, competition, etc.
Furthermore, a business plan strongly helps you keep track of your
targets, objectives and serves as a gauge to measure your progress
over time. How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page6 Chapter 3 Getting the Money-Hunting
Edge In your quest to access funding for your business or idea,
there are certain basic attributes that will make your work easier.
To qualifyfor other people to entrust theirhard earnedmoney to you
as capital, there are several qualities/attributes you must
possess.
Theseattributesandqualitiesmakeyourabilitytosecurecapitalmuch,mucheasier.Theywill
literarily guarantee your success. These golden
attributes/qualities include: 1.Expertise: How knowledgeable are
you in the area in question? Do you completely understand the
business/industry you are about going into; and its inherent
challenges? As a rule of thumb, your chances of raising capital for
a venture you are unfamiliar with is as much as nil if you do not
already understand what you are going into. The chances are that
you are going to waste the capital on costly mistakes.
2.Reputation: Do you have a reputation for integrity? Do you have a
record for keep your word? Will you repay the money you are given
when the time is due or will you wait until you are taken to court?
If you are honesty, reliable and constant your chances of raising
capital will be greatly enhanced. 3.Management: This is a very
important factor that will determine how easily you can get access
to capital. The person/persons providing you with funds will want
to know beforehand; who are the
brainsbehindyourbusiness?Whoarethepeopleinyourmanagementteam?Whatrelated
experience do they possess? Of course if your business is engaged
in football clothing, it might not do you much good having
someonefromthefood&beverageindustryonyour
team.Thepeoplethatwilladdthemost credibility to your business are
people engaged in or who have previously engaged in the same
business and have acquired some related experience. Furthermore,
you might not have enough cash to attract the right kind of people
into your team. However, this should in no way be a deterrent. How
to Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page7 Assuming you want to get someone like Pat. Utomi
on your team but you cannot spare any cash at that moment. What
options do you have besides say paying him upfront? Simple, you can
offer the person some equity in your business. As I always say its
better to own 2% of a business that is worth something, than 100%
in a business that is worth nothing. Finally, being a doctor or a
plumber does not guarantee your qualification to manage a hospital
or a plumbing business. Managing a business is entirely a different
science and art of its own. Hence, for your team, you will need to
have people who are just not basically plumbers or doctors, but
managers in that business area. How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page8 Part 2:
Ways of Raising Capital. How to Easily Raise Capital in Nigeria
With or Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page9 Chapter 4 Personal
Savings For the serious minded business person, the first source of
capital for your business is your personal savings. To show how
serious you are and then how much faith you have in your business
venture. You should be able to raise about 30% or more of the
needed money on your own.
Withoutsomefinancialcommitmentfromyou,howwouldapotentialinvestorinyourbusiness
idea/venture gauge or access your seriousness? Furthermore, you can
kick-off your business from scratch with the savings youve
accumulated while you continue to seek additional capital. Besides,
it is much easier to secure capital for a business that is already
in motion, than one thats still on paper (at the ideas stage). As a
businessperson or as a potential businessperson, you have to form
this very useful habit of saving money for future use. As all
habits, it takes a little work at first, but then it gets much
easier with time. Avery easy way ofsavingis to regularly set 10% or
more ofyourincome aside as savings each month. When you start this,
you will discover that you are able to live on 90% of your income
just as comfortably as you did on 100%. Finally, if you have money
stashed away for a rainy day, starting your own business might just
be the wet weather youve been saving for. However, since more than
80% of all new businesses fail within their first year, you should
always be very careful when using your carefully accumulated
personal savings to finance your business venture. Plan carefully
and make sure you know what you are doing before you begin no guess
work. How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page10 Chapter 5 Getting Your Hands Dirty
If you are truly passionate about you dream and your idea, no work
might be too small or too menial. Do you know that Mike Adenuga
once drove a cab? Do you also know that former Governor Orji Kalu
of Abia State was once into furniture making? Do you also know that
Ibrahim J imoh (of NICON) raised his first significant capital by
organizing seminars? Now, I simply cannot stress the following
point enough: Pride is detrimental to your success. Do not ever let
it stand in your way.
Youreallyneedmoneyright?Whatphysicaljobshaveyoudonetoraisemoney?Canyouwash
dishes, can you transport people, can you do laundry, can you
engage in research for people, can you babysit, can you clean
houses, can you fix shoes? Can you paint, do plumbing or carpentry?
The list goes on. If you get your hands dirty today and then
achieve your dreams tomorrow; who will remember? Now, even if
people do, it will actually be a feather in your cap. Do not
despise the days of small beginnings
thedaysofsmallbeginningsaretheseedsofgreat,staggeringandmagnificentfuture
accomplishments. How to Easily Raise Capital in Nigeria With or
Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page11 Chapter 6 Trade
Advance/(OPM) The acronym OPM stands for Other Peoples Money. In a
more formal sense, its referred to as Trade Advance. This method is
another beautiful way of raising money for your business. However,
it does require before hand that you are a trust-worthy person or
that you have an established reputation of reliability. Lets say
you offer a service such as web-designing and hosting or that you
sell books. Now if you are out of cash, you can easily make your
customers or clients who trust you to pay in advance for the
product they want. Then with the funds collected, you then simply
order for the product or service. If you are a contractor or a
manufacturer, you are also not left out. As a contractor, you are
naturally entitled to a mobilization fee. And if you are a
manufacturer, you can simply approach your whole-sellers or dealers
with the request that they pay upfront for their next shipment.
Now, if youve had an established precedent of delivering on your
word, there are simply no reasons why your dealers will not happily
comply. Can you imagine MTN, UAC or MOBIL being rejected if they
asked their dealers to make an upfront payment two weeks before
being supplied? The response to the request should be obvious to
you as paying upfront to these companies poses very little risk of
loss to the dealer. Finally, you dont have to be MOBIL or MTN
before you can benefit from OPM. Lets assume you sell food
supplements like GNLD or FOREVER on a retail basis. Can you not
possibly collect money upfront from someone who has bought from you
in the past and was satisfied? Then use then use the money received
to order for the products? If you possess some imagination, you
will never fail to see how you can use OPM in any business you are
to engage in. How to Easily Raise Capital in Nigeria With or
Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page12 Chapter 7 Bank
Loans NOTE: No Bank will ever give you a loan without a reasonably
guaranteed expectation of getting the money back. The Banker who
should lend you money is your friend, yes, and he is also the
friend of the person who gave him the money to keep! The way banks
decide whether to lend money to your business is based on the SOLID
business plan
thatyoullbeexpectedtopresentandtheassetsyoupossessascollateral.Becauseofthis,its
important that you spend time making sure youve covered every
eventuality and have a plan in case things start to go wrong. The
more preparation you do upfront, the easier itll be to secure the
funds you need. If youre starting a business from scratch rather
than buying an existing business or franchise, then as there are no
assets to secure the debt against, you may be expected to secure
the loan on personal property, such as your house, your already
(developed) landed property and sometimes your Insurance or shares
certificates . This then becomes a personal loan for business
purposes rather than a business loan, but it still works in much
the same way. Traditionally, it is easier for an already
established business with physical assets, a customer base, a
goodmarketpositionandgoodfinancialrecordstoaccessloansfrombanks.UnlikeVenture
Capitalists and Angel Investors, banks are less likely to grant
loans to start-ups and micro-enterprises. However, thanks to
several programs initiated by the Federal Government to stimulate
activity in the Real Sector. Like the Small and Medium Enterprises
Equity Investment Scheme (SMEEIS). Under this initiative, banks are
expected to set aside 10% of their profits before tax for equity
investment in SMEs.
YourCD(whichcamewiththismaterial)containstheSMEEISguidelinesforbeneficiariesand
participating banks. You will also find records of SMEEIS
Investments so far by Geography and by Sector all in your CD. How
to Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page13 Chapter 8 Small Personal Loans After exhausting
your option of personal savings, this is the next avenue to
exploit. It is often said that drops of water make an ocean and
believe me this is really true. Using the Small Personal Loans
angle, you can easily secure capital by approaching friends, family
and your acquaintances that is if you are passionate enough about
your intended venture, know the terrain and have some personal
credibility. Naturally,itis easier to get a loanfrom someone who
knowsyou well thanfrom atotal stranger. Additionally, it is quite
difficult, in our African setting, for a friend or relative who is
in a position to help to turn you down. By soliciting small amounts
from each of these people (depending on their different financial
abilities of course), you can easily obtain loans between N10,000
to N200,000 from 10 to 20 different persons. N10,000 in 20 places
is N200,000 in the same light N100,000 in just 10 places is 1
Million. Are you getting the idea? Obviously, you will find it very
difficult to secure loans on a personal level if you have a
reputation for dishonesty and inconsistency. People will only give
you loans only and only if you are reliable, honest and
trustworthy. If you are not simply spare yourself the ensuing chain
of rejections! Lists of most likely people to meet for this purpose
include your immediate relations; your parents, brothers &
sisters. Your extended family: your uncles, aunts, cousins,
grandparents and in applicable
instancesyourniecesandnephews.YourFriendsandacquaintances:yourschoolfriends,work
friends, gym friends, religious friends, neighbours etc. Do not
leave any potential capital source out.
Furthermore,Ineednottellyoutoswallowyourpride.Swallowingyourpridemeanshumbling
yourself enough to approach other people for help. You are not
asking for alms, you are gathering resources to exploit a great
idea. But bear in mind that you should not put other peoples money
to unnecessary risk. Also note that you might find yourself in some
serious financial mess if you misuse the money entrusted to you.
Entrusted - because these people believed in your fair sense of
judgment. The heightened sense of responsibility you should feel
because you borrowed money from people who are so close to you
should serve as extra stimulant to propel you to success. Finally,
to make things a bit easier on you, you could sell them a stake in
your business. However, you should ensure you draw up some legal
documentation for this. This move (of letting other people in) will
reduce some pressurefromyou and also addmore managementhands to
ensure the greater success ofyour venture. And as I alwayssay; 70%,
50% or even 10% of a business that is worth something is always
better than 100% of a business that is worth nothing. How to Easily
Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page14 Chapter 9 Selling off Your Luxury Assets
Howcouldyouhavetwocarsandstillbelookingforcapital?Howabout
thoseexpensivesuites, watches, shoes, and all the other items you
can live without? Have you thought of converting them into usable
cash? Actually, when most people think of capital, they think in
terms of heavy chunks of money from a single source; a huge bank
loan or a huge private placement from a single individual. They
never think of thelittle andnot so little amounts they can generate
from the sale of some of their possessions which they can do
without at least temporarily. Dont you realize you can easily buy
more and better cars, houses and lots more from the income
generated from your new business? [Note: it is a very dangerous and
irresponsible practice to spend
directlyfromyourbusinessprofits.Youshouldensureyouandyourbusinessoperatedifferent
accounts. I am telling you from personal experience avoid it its
something you will regret. Next time you think of generating
capital, Id suggest you think closer to home. And put into serious
consideration the conversion of those luxury assets you already
have into business capital. How to Easily Raise Capital in Nigeria
With or Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page15 Chapter 10 Group
Collection (Isusu) This is a very beautiful way of raising capital
for your business or in fact raising money for anything. However,
it requires that you and your participating peers already have a
steady source of income. In practice this is very simple to carry
out. The first step is to talk to a few persons (usually less than
30 so that everyone can cycle out within 2 years), people who would
be interested in either a savings scheme or who would need cash
immediately or within a few short months. The first set of people
who need cash immediately will be among the first to receive while
the later set who want prolonged saving tenure will cash out later.
After you have all decided on the amount each of you can
comfortably contribute monthly, weekly or
atwhateverintervalsyouallhavedecided.Thenextstepistowriteoutthenamesofeveryone
indicating when each person will receive their respective pay out.
Finally, from this point onwards, when it gets to the agreed
interval, you all contribute the specified amount and pay all of it
to the first person on the list - Hopefully you; because you
initiated it. The next month or week, the next person in line
receives too until you all do. Note that you should prepare some
legal documentation which will be signed by each participant. This
is to avoid any future problems or misunderstandings How to Easily
Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page16 Chapter 11 Business Partnerships A partnership
is a type of business entity in which partners (owners) share with
each other the profits or losses of the business undertaking in
which all have invested. The primary reason for forming a
partnership is to bring in people who possess strengths that will
compliment your own, or strengths that could replace your
weaknesses. It could be capital, managerial experience, access to
customers, etc. Greater rewards may result from forming a business
partnership as partnerships offer more freedom for business owners
and the potential to earn higher profits. Because it involves more
than one person, a partnership can either be a business disaster or
a very rewarding experience. Before you enter into a partnership
with anyone or any group of persons below are some factors you
should consider very seriously. Factors to consider before entering
a business partnership 1.Do you have thesame vision?: Do all the
parties involved in the business have the same vision for the
business? Are your goals the same? If you intend building an
international enterprise and your partner or partners are only
interested in dealing locally, your business is headed for some
trouble. 2.Avoid having equal ownership equity: It is clearly in
the best interest of quick decision making in your business for the
partners not to have an equal amount of holding. You should be
looking at things like 55 - 45%, 75 25%, 30 30 40% etc. The most
important thing is that it is structured in such a way as to tip
decisionmakingmorein the direction of one partner. Thisis to avoid
decision deadlocks. 3.CreateaPartnershipagreement: Since no legal
documentation is necessary for a partnership agreement, most people
tend to go without it. However, lots and lots of costly and
business-killing misunderstanding can be avoided by simply drawing
up a partnership agreement at the onset. A good Partnership
agreement should specify the following: (a.)Type of Business. (b.)
Amount of equity invested by each partner. (c.)Partners pay and
compensation. (d.) How losses and profits will be shared.
(e.)Dispute settlement clause. (f.)Duration of partnership. (g.)
Restrictions of authority and expenditure. How to Easily Raise
Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page17 (h.) Settlement in case of death or
incapacitation. (i.) Distribution of assets on dissolution. (j.)
Provision for dissolving the partnership.
4.Definebusinessroles:Asuccessfulbusiness partnership synergizes
the strengthsand skills of each partner. A business partnership
will stand its greatest chances for success if roles are divided
among the partners according to eachs strength. How to Easily Raise
Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page18 Chapter 12 Private Equity Placement Another
often neglected means of raising capital for your business is
through the private placement of your company shares. It involves
an offering of securities that are not registered with the
Securities and Exchange Commission (SEC). To carry this out, first
youll first have to ascertain the total value of your business and
get registered
withtheCorporateAffairsCommission.Naturally,youwouldwanttoemploytheservicesofa
competent consultant who will help you out.
Furthermore,notethatyouaresharingtheownershipofyourbusinessandconverselydecision
making.Becauseofthis,youmightwanttoretainagreaternumberofsharesthananysingle
individual in order to maintain control.
Additionally,dontexpecttobeginyourbusinesstodayandthenbeginseekingPrivateEquity
tomorrow. This avenue is usually for businesses that are a bit
established and have serious growth prospects.
Finally,themostlikelypeopleyoumightfirstwanttotargetareyourfriends,relatives,business
associates, etc, then the public in general. How to Easily Raise
Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page19 Chapter 13 Government Loan Assisted Programs
Different governments, both at the State and Federallevels,from
time to timeintroduce programs aimed at assisting small business
owners with capital and sometimes even training. Whether the
governments objectiveis to improveitsimage or to genuinelyhelp
doesnot matter. What is important is that theyve provided a lot of
aspiring entrepreneurs with business capital and that they still do
so. There are the various NAPEP (National Poverty Eradication
Program) that assist start-ups like The Capacity Acquisition
program for non-graduates, The NAPEP Revolving Micro-Credit Scheme,
The
VillageEconomicDevelopmentSolutionwherebeneficiariesareentitledtosumsofuptoN50
million,andthePromiseKeepersProgramwhichiscarriedoutincollaborationwithreligious
organizations. In the promise keepers program, the loans are
provided through churches or mosques for them to act as guarantors
so as to reduce delinquency and loan defaults. Finally, I hope you
take the NAPEP program seriously and make enquiries in your area
concerning their programs. If you are someone who reads and listens
to news, you must have been hearing of the hundreds of millions
that have been changing hands through these programs. Your CD
contains a list with the contact details of several NAPEP
representatives nationwide. You can call or send them an email with
your enquiries. How to Easily Raise Capital in Nigeria With or
Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page20 Chapter 14 Angel
Financing An Angel Investor or a Business Angel is a well-to-do
individual who provides capital for a promising business start-up
in exchange for equity i.e. in exchange for owning part of your
business. Angelfinancingis typically used to provide a second round
offinancingfor high-growth start-ups after the small personal loans
avenue has been exhausted. Business Angels know that they bear
extremely high risks so they expect their investment to multiply by
at least 10 times within a 5 year holding period. They plan to
achieve this through an Initial Public Offering (IPO) or through
the acquisition of the business by another body or individual.
Besides providing long-term finance, Business Angels also provide
their management experience and business knowledge acquired from
helping other companies with similar growth challenges. They can
also be a source to connect you to very important business
contacts. Since Business Angels are usually retired entrepreneurs,
they completely understand the needs of an
entrepreneurandhisstart-upbusinessincludingthepitfallsalongtheway.Andsincemost
entrepreneurs are by nature overtly exuberant, Angels provide a
sense of balance which prevents the entrepreneur from making wrong
decisions out of unbridled enthusiasm. Decisions which if carried
out can be very costly in the short or long term. In economies with
very developed private sectors like the US, UK, Australia etc. An
increasing trend is emerging where Angel Investors pool their
resources and investment capital together to form Angel
Groups/Angel Networks. However, in Nigeria where we do not
presently have such groups formally, you will have to take the
directrootofaskingaroundandapproachingindividualswhoseprofilesuggestsAngelic
inclinations.Peopletolook
outforincluderetiredorretiring:entrepreneurs,corporateexecutives,
senior government officials etc. Finally and most importantly, you
must have a hard-to-resist idea that is easy to understand,
workable and that is potentially very rewarding. If not, dont even
waste your time seeking an Angel investor. How to Easily Raise
Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page21 Chapter 15 Cashing in Your Life Insurance (Life
Settlement) A life settlement is a financial instrument that allows
a consumer to receive the maximum current cash value of their life
insurance policy. This is designed for people who no longer want
their life insurance benefits. If your Life Insurance has a cash
surrender value, you simply cash it in with your insurer at any
time
andreceivethecashamountaccumulated.Insomecasestoo,abankmightacceptyouinsurance
policy as collateral before granting you a loan. Finally, if you do
have a life insurance policy, just know that it could be the source
of business capital that you need. How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page22 Chapter
16 Bank Overdrafts
Abankoverdraftsimplymeanswhenyouwithdrawmoremoneythanyouractualbalance.This
facility is usually provided for current account holders with
active accounts. If your account shows a reasonable level of
activity, you can be able to receive an overdraft. Your cash-flow
needs to be in such as state as to convince your bank manager or
account officer to approve your overdraft. A good habit you should
form as a business person is to carry out most of your transactions
through your bank account. You can make all or most of your
payments through checks and try to receive cash through your bank
too. In addition, if you have a steady monthly income, some
Nigerian banks like bank PHB allows you to easily walk into any of
their branches and cash up to 50% of your total monthly salary in
advance with no hassles. However, this requires that you domicile
your salary account with them. On further
arrangementsyoucaneasilytakeoutupto250%ofyoumonthlysalaryandthenpayback
conveniently over a period of 12 months. Furthermore, other banks
can even give you more. Zenith bank for example can provide you
with a loan of up to 500% of your monthly salary and allow you a
repayment tenure of 12 to 24 months. Nevertheless, you should note
that this could be a very risky undertaking if you take out a
sizable chunk of your living income as loan and then fail to raise
money from the business you are engaging in. To be on the very safe
side, avoid playing with more than you can afford to do without.
You must be absolutely sure of what you are doing before you stake
a substantial part of your salary on it. Finally, do note that the
banks charge you interest rates that are applicable to other loans
its what they are in business to do. Its how they make their money.
How to Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page23 Chapter 17 Leasing A lease is an agreement
between you (the lessee) and a lessor, whereby the lessor allows
you the use of an asset which he owns. In return, you pay rental at
intervals agreed upon by both of you. The option of leasing can be
very helpful in conserving much needed cash in your small business
as
youwillnothavetocommithugeamountsofmoneyforanoutrightpurchaseofequipmentor
property. Additionally, banks now offer leasing services. To this
effect, you can simply walk into your bank and make enquiries if
the items which you intend spending can be acquired through a lease
agreement with your bank.
Furthermore,byleasinganequipmentorasset,youcanmosteasilyupgradetolaterandmore
improvedmodels without having to spend hugefunds. You can
easilyinformyourlessor that you
wantthelatestmodeloryoucanlookforsomeoneelsewhodoes.Haditbeenyouownedthe
equipment, you might first have to wait till you sell it in order
to raise money for the newer one. Finally, below are some
advantages of leasing over an outright purchase: It is convenient.
It conserves working capital. It increases your purchasing power.
Long payment terms. 100% financing in some cases. Tax advantaged.
Possible free maintenance and repairs (if agreed upon).Helps avoid
obsolence. How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page24 Chapter 18 Bartering
Thissimplyinvolvestheexchangeofgoodsorservicesforothergoodsorservicesbetweenone
business and another. It is a transaction in which no money changes
hands. Barter allows you, as a business owner, to pay for what you
need with your own goods or services, allowing you to preserve
working capital for other expenses The practice of bartering can
seriously aid in preserving cash to help get your venture launched
or expanded. In fact, bartering is a must have success tactic for
operating your small business. Lets assume you are starting a
magazine publishing business and you are in need of computers. You
couldlinkupwithacomputerdealerandnegotiateforcomputersagainstadvertizinginyour
magazine.Inthesamelightyoucouldmakethesamekindofarrangementwithofficefurniture
dealers, printing presses, car dealers, etc. the list just goes on.
Simply look for people who have what you need and need what you
have. However, itisimportant to note that the goods or servicesyou
are to providemust have an equal market value to the one you need
at least in the eye of your negotiation party. Furthermore, you
must ascertain the market value of the barter from both parties. To
ensure a win-win situation a money and time value must be attached.
This ensures that your products are exchanged for products of the
other party which are of equal worth. Other advantages of bartering
Helps to sell off seasonal products: If your products or services
are seasonal in nature, the bartering approach can be used during
slow or off-season periods. Frees excess inventory: If your
business has an excess of goods you do not foresee selling off in
the nearest future, you can use bartering to convert those excess
products in your
warehouseintoothergoodsorservicesyouneedimmediatelyinsteadofspendingthe
limited cash in your possession. How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page25 Chapter
19 Joint Ventures
AJointVenture(JV)isastrategicalliancebetweentwoormorebusinessestosharemarkets,
intellectualproperty,assets,knowledge,risksandprofits.Jointventuresareusuallyone-off
transactions but in some cases they can be quite prolonged
depending on the arrangement between the contracting parties. As
someone who intends to start a small business or as a present small
business owner, it is your duty to seek out and search for
companies, establishments and individuals who it is both in your
interest and theirs to pool your resources together. Furthermore,
it is very important that you also draw up an agreement to protect
your interest and of course
theirs.Jointventuringwithalargecompanycanbesuicideifyouarenotprotectedbyan
agreement as they could swallow you whole. Finally,itisimportant
that you put a number of thingsinto considerationbefore choosinga
Joint Venture partner.These include: Screening your prospective JV
partners. An exit strategy and terms of dissolution of the Joint
Venture. Special allocations of income, gain, loss or deduction to
be made among the partners. And for the most, all the factors we
listed in the chapter on Partnerships. How to Easily Raise Capital
in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page26 Chapter 20 Hire/Purchase This is an arrangement
related to Leasing (which we treated earlier). The difference here
is that as you are paying termly rental for the equipment or asset
in question you also have the option of keeping it after youve paid
up to a certain predetermined amount as stated in your agreement.
The most beautiful part about this is that you can actually be
paying for a given item from the money you realize from using it.
Most owners of high value equipment or equipment with high
obsolence rates tend to place them on hire purchase. However, you
can also talk people who are not previously disposed to
hire/purchase
arrangementstoconsideritifyoucanconvincethemofthebenefitstheywillderivefromthe
relationship.
Finally,donotforgetthatyouwillhavetofacesevererepercussionsshouldyoudefaultinyour
payment. How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page27 Chapter 21 Going Public (IPOs)
Initial Public Offerings (IPOs) are exclusively for companies that
have been operational for a while. Among other things, the NSE
(Nigerian Stock Exchange) requires that a company wishing to offer
its shares to the public must have a record of their audited
accounts for at least the past 3 years. And that they should have a
team of professionals competent in the companys area of business. A
public offer is the issuing of the shares of a given company to the
public for the purpose of raising capital to expand its existing
operations or to for diversification into an entirely new line of
business.
Wheneverthisisdonetoraisemoney,theexistingownershipstructureofthecompanybecomes
diluted.Thisisnotinitselfabadthingasitisoffsetbyanincreaseinthevalueofinvestors
shareholding in absolute terms. A public offer is termed public in
the sense that documents regarding the issue of new shares are made
available to everyone in the public for subscription. The company
going public must possess a share capital of the quantity that will
accommodate the shares to be issued for subscription together with
its already existing shares. There are two types of public offers;
the first is the Offer for Subscription which means the issuing of
shares to fresh shareholders while the other is Rights Issue which
involves the issuing of shares to existing shareholders of the
company. When a company lists its shares on the stock market, it
will almost invariably look to issue additional new shares in order
to raise extra capital at the same time. The money paid by
investors for the newly-issuedsharesgoesdirectlyto
thecompany(incontrast toalater trade ofsharesontheexchange
(secondary market), where the money passes between investors). An
IPO, therefore, allows a company to tap a wide pool of stock
marketinvestors to provideit withlargevolumes of capitalfor future
growth. Maybe, your business is not qualified to be listed in the
stock market at the moment. However, that doesnt mean you will
never grow to such a size. Additionally, the NSE is toying with the
idea of a third-tier securities market where smaller companies who
possess a lot of growth potential but are unable to meet up with
the first and second tier listing requirements will be able to
float an IPO. The maximum amount to be raised through this is
placed at N100 million. Chapter 22 How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page28 Selling
Information One of the most lucrative businesses which someone with
very limited finances can engage in to raise capital is selling
information. What do I mean by selling information? Well, a good
example is this material which you are reading right now. The paper
on which the information it contains is printed and the ink with
which it has been printed are obviously not worth N5,000. But you
paid that much because of the premium information which the
material contains. Of course everyone cannot write a book (or
rather will not). The simple reason being that most people are not
confident enough to attempt writing. You do not have to be a Wole
Soyinka to write. All you have to do is look for an area where
there is a demand for further information. You do not already have
to be an expert in that area you can become an expert by
researching that subject or area. Then with the information you
have gathered you can package it as a short report. The report
could be an eBook, a book, a CD or a DVD. On the other hand, you
can organize seminars on that area. Do not let the idea of
organizing a seminar scare you; you can invite other people who are
also informed in that area to serve as guest speakers. I assume you
must know the famous Ibrahim J imoh; the owner of Global Fleet and
NICON. Recently,Ireadapaperwherehe(IbrahimJ
imoh)wasinterviewed.Intheinterviewhesaid,I represent the children
of the poor among the rich, my father was a bricklayer and my
mother sold fish! Then later on when he was asked how he raised his
initial capital since he came from a very
poorbackground.HeansweredthathestartedbyorganizingseminarsforLocalGovernments
employees during the Abacha administration. From these series of
nationwide seminars he raised a whooping sum N46 million.
Furthermore, I hopeyou do not consider the above rare or
impossible.Myself, thefirstmaterial I produced sold about 3,000
copiesin 9months and the average cost was N4,000. Interestingly,
the material was just an ebook. When you pay I just send you an
email with the material as downloadable
attachments.AreyougettingwhatIamsaying?(Justmultiply3,000copiesbyN4,000,youget
N12,000,000). Finally, if you want to learn how to create your own
cash pumping Information Products Empire. Ive created a
step-by-step report for you. It leads you by the hand through the
entire process. To get your copy visit:
www.BusinessGuidesNigeria.com/infoproducts
How to Easily Raise Capital in Nigeria With or Without
Collateral. www.BusinessGuidesNigeria.com Providing Nigerians with
money making information. Page29 Chapter 23 Established Companies
Big,establishedcompaniesout ofcorporate
responsibilityalsohaveprogramsthroughwhichthey provide micro-credit
to Nigerian entrepreneurs. Last Year Shell Petroleum Development
Company, Bank PHB and Grofin (a South African company specializing
in finance) partnered to create the Aspire Nigeria Project.
Theprojectwhichrunsona$31million(N3.596billion)fundisentirelytargetedatSMEs.The
volume of funds a single SME entrepreneur can access ranges between
N6 million and N125 million.
Theirprojectpreferenceisforenterprisesthathavealimitedcapabilityformeetingcollateral
requirements, employfewer than 50 people with an annual turnover
ofless than N600million. Or establishments who their net assets do
not exceed N400 million.
ThemostbeautifulcomponentoftheAspireNigeriaProjectisthattheyalsoprovidetheir
beneficiaries with guidance to enable them scale through the
various hurdles encountered during the
growthonanenterprise.Youcansubmityourapplicationforaloanontheirwebsite:
www.grofin.com/home.asp?pid=278 Additionally, other Nigerian
companies are also providing micro-credit support for
entrepreneurs. The list includes Nigeria LNG, Chevron, Exxon Mobil,
etc. You can visit their respective websites to get updated.
Chapter 24 How to Easily Raise Capital in Nigeria With or
Without Collateral. www.BusinessGuidesNigeria.com Providing
Nigerians with money making information. Page30 Minimize Your
Start-up Costs. If the amount of capital required to start a
particular new business is estimated at N25 million and then
byeliminatingsomeunnecessaryexpenditures,youreducethetotalcost
toN19million.Youcan actually consider it to be that you have raised
yourself N11 million! Now, if you look very closely at your
proposed expenditures, you will see that there are several items
which you can comfortable eliminate without endangering
productivity. Do you need such a big office now that you are just
starting? Do you need that number of cars? How about those
inventories do you need that quantity to begin? Do you need that
size of equipment? Must it be brand new? Do yourself a favor right
now by eliminating all the items which are not critical to your
kick-off. If your business plan is sound enough and you know what
you are doing. You will be able to afford all those luxuries in due
time. But for now when cash is dearly needed do not waste it on
unnecessary items. Chapter 25 How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page31 17
Mistakes Start-ups Make BY JOHN OSHER Mistake 1: Failing to spend
enough time researching the business idea to see if it's viable.
"This is really the most important mistake of all. They say 9 [out]
of 10 entrepreneurs fail because they're undercapitalized or have
the wrong people. I say 9 [out] of 10 people fail because their
original concept is not viable. They want to be in business so much
that they often don't do the work they need to do ahead of time, so
everything they do is doomed. They can be very talented, do
everything else right, and fail because they have ideas that are
flawed." Mistake 2: Miscalculating market size, timing, ease of
entry and potential market share. "Most new entrepreneurs get very
excited over an idea and don't look for the truth about how many
people will want to buy it. They put together financial projections
as part of a presentation to pump up their investors. They say,
'The market size is 50 million people that could use this product,
and if I could only sell to 2 percent of them, I'd be selling a
million pieces.' But 2 percent of a market is a lot. Most products
sell way less than 1 percent." Mistake 3: Underestimating financial
requirements and timing. "They set their financial requirements
based on Mistake 1, and they go ahead and make a commitment to this
much office space and this many computers, and hire a vice
president of sales, and so on. Before they know it, based on sales
projections that were wrong to start with, they have created costs
that require those projections to be met. So they run out of
money." Mistake 4: Overprojecting sales volume and timing. "They
have already miscalculated the size of the market. Now they
overproject their portion of it. They often say 'There are 200
million homes, and I need to sell [to] x number of them.' When you
break it down, though, a much smaller number of those are really
sales prospects. That makes it impossible to make their sales
projections." Mistake 5: Making cost projections that are too low.
"Their cost projections are always too low. Part of the reason is
that they project much higher sales. There are also unknown reasons
that always come out that usually make costs higher than planned.
So on top of everything, their margins are now lower." Mistake 6:
Hiring too many people and spending too much on offices and
facilities. "Now you have lower sales, higher costs and too much
overhead. These are the things that you see every day in companies
that fail. And they all grow out of that first mistake: failing to
research the size and viability of the opportunity." Mistake 7:
Lacking a contingency plan for a shortfall in expectations. "Even
if you're realistic in your estimates to start, there are things
that happen when you start a new How to Easily Raise Capital in
Nigeria With or Without Collateral. www.BusinessGuidesNigeria.com
Providing Nigerians with money making information. Page32 business.
Your sales ideas may be no good; bank rates may go up; there may be
a shipping strike. These aren't the result of poor planning, but
they happen. More often than not, entrepreneurs just feel that
something will come along when they need it. They don't have
contingency plans for it not working out at the size and time they
want." Mistake 8: Bringing in unnecessary partners. "There are
certain partners you need. For instance, you often need money, so
you're going to need money partners. But too many times, the guy
with the idea takes on all his friends as partners. Many people
don't provide strategic advantages and don't warrant ownership. But
they're all going to get 25 percent of the company. It's totally
unnecessary, and it's a mistake. Before people are made partners,
they have to earn it." Mistake 9: Hiring for convenience rather
than skill requirements. "In my first business or two, I hired
relatives. It was easy to do, but in many cases, they were the
wrong people [for the job]. And it's hard to fire people,
especially if they're relatives or friends. More time needs to be
spent handpicking people based on skill requirements. You really
need super-skilled people who can wear more than one hat. It just
bogs you down when you hire people who can't do the job." Mistake
10: Neglecting to manage the entire company as a whole. "You see
this happen all the time. They'll spend half their time doing
something that represents 5 percent of their business. You have to
have a view of your whole company. But too often, the person
running it loses that view. They get involved in a part, and they
don't manage the whole. Whether I do this product or that product,
whether I hire somebody, [I consider] how they [will] fit long term
and short term in the big picture. Constantly try to see your big
picture." Mistake 11: Accepting that it's "not possible" too easily
rather than finding a way. "I had an engineer who was a very good
engineer, but with every toy we developed, he would say, 'You can't
do it that way.' I had to be careful not to accept this too easily.
I had to look further. If you're an entrepreneur, you're going to
break new ground. A lot of people are going to say it's not
possible. You can't accept that too easily. A good entrepreneur is
going to find a way." Mistake 12: Focusing too much on sales volume
and company size rather than profit. "Too much of your management
is often based on volume and size. So many entrepreneurs want to
say 'I have a company that's this big, with this many people, this
many square feet of space, and this much sales.' It's too much
[emphasis] on how fast and big you can build a business rather than
how much profit it can make. Bankers and investors don't like this.
Entrepreneurs are so into creating and building, but they also have
to learn to become good [businesspeople]." Mistake 13: Seeking
confirmation of your actions rather than seeking the truth. "This
often happens: You want to do something, so you talk about it with
people who work for you. You talk to [your] family and friends. But
you're only looking for confirmation; you're not looking for the
truth. You're looking for somebody to tell you you're right. But
How to Easily Raise Capital in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page33 the truth always comes out. So we [test] our
products, and we listen to what [the testers] say. We give much
more value to the truth than to people saying what we're doing is
great." Mistake 14: Lacking simplicity in your vision. "Many
entrepreneurs go in too many directions at once and do not execute
anything well. Rather than focusing on doing everything right to
sell to their biggest markets, they divide the attention of their
people and their time, trying to do too many things at [one time].
Then their main product isn't done properly because they're doing
so many different things. They have an idea and say they're going
to sell it to Wal-Mart. Then they say they're going to sell to
[the] Home Shopping Network. And then the gift market looks good.
And so on." Mistake 15: Lacking clarity of your long-term aim and
business purpose. "You should have an idea of what your long-term
aim is. It doesn't mean that won't change, but when you aim an
arrow, you have to be aiming at a target. This [concept will] often
come up when people ask 'How do I pick a product?' The answer
depends on what you're trying to do. If you're trying to [create] a
billion-dollar company with this product, it may not have a chance.
But if you're trying to make a $5 million company, it can work. Or
if you're trying to create a company [in which] family members can
be employed, it can work. Clarity of your business purpose is very
important [but] is often not really part of the thought process."
Mistake 16: Lacking focus and identity. "This was written from the
viewpoint of building the company as a valuable entity. The company
itself is also a product. Too many companies try to go after too
many targets at once and end up with a potpourri rather than a
focused business entity with an identity. When you try to make a
business, it's very important to maintain a focus and an identity.
Don't let it become a potpourri, or it loses its power. For
instance, you say, 'We're already selling to Kmart, so we might as
well make a toy because Kmart buys toys.' If you do that, the
company becomes weaker. A company needs to be focused on what it
is. Then its power builds from that." Mistake 17: Lacking an exit
strategy. "Have an exit plan, and create your business to satisfy
that plan. For instance, I am thinking I might run my new business
for two years and then get out of it. I think it's an opportunity
to make a tremendous amount of money for two years, but I'm not
sure [whether] it's proprietary enough to stop the competition from
getting in. So I'm in with an exit strategy of doing it for two
years and then winding down. I won't commit to long-term leases,
and after the first year, we'll start watching the marketplace very
closely and start watching inventories. Simultaneously, I will keep
the option open to sell it in case I can't get something more
proprietary. That means I won't sign international agreements that
would kill any opportunity to sell it to a multinational. I will
make sure that the patent work is done properly. And I'll try to
make sure manufacturing is up to the standards of any multinational
company that I might try to sell it to. How to Easily Raise Capital
in Nigeria With or Without Collateral.
www.BusinessGuidesNigeria.com Providing Nigerians with money making
information. Page34 Another exit strategy can be to hand the
company to [your] kids someday. The most important thing to do is
to build a company with value and profits so you have all the
options: Keep the company, sell the company, go public, raise
private money [and so on]. A business can be a product, too."