Funding: How Microloans Help Small Businesses Scale.
As we discussed previously, more than just positive vibes your small business needs positive cashflow and funding in order to not only survive but be sustainable. It would have been bearable if it were Mr. Uche’s village people that caused the closure of his startup fabric business. “If only the bank had had mercy on me or I had heard about microloans 8 months ago, I probably would have saved my business from dying a premature death,’’ said Mr Uche as he narrated how the bank denied him a loan because he did not have any collateral to offer and couldn’t afford the down payment they had requested.
He angrily walked out of the bank and borrowed more money from his wife and other family members thinking a miracle would happen and things will get better. Apparently, he was wrong and doomsday was right at the corner. 8 months later, Mr Uche is still trying to pay his debt and heal from the crash land of his business.
You should read: 3 Driving Proponents of Entrepreneurial Growth in Africa.
Dear small business owner, it is important to know that there are several sources of funding for your business; one of which is discussed extensively in this post. However, before you get too excited or grab whichever one comes your way, be sure to understand all it entails by reading between the lines in order to avoid stories that touch.
Microloans are working capital or funds issued by an individual or group of people rather than banks, to set up the initial stage of a business. It is often used by startup businesses to fulfill operational expenses due to short-term cash flow problems. While some businesses are able to flourish with the help of microloans, some still run into debt which leads to factors lenders consider before giving out loans to businesses. Some of those factors include: the financial records of the business, type of business, amount requested, number of years in business, time frame to repay loan, and more. All these questions must be satisfactorily responded to before a loan can be granted. It’s a lot easier than you think.
Before we go ahead, it is necessary to take note of the following statistics and think about them.
- In Nigeria, 37 million Small and Micro Enterprises provide jobs for about 60 million people which account for 48% of the country’s GDP.
- SMEs provide up to 85% of manufacturing jobs in Ghana which represents 92% of local businesses and contributes about 70% to the nation’s GDP.
- 82% of businesses that fail do so because of cash flow problems and one of the top 10 leading causes of business failure is inadequate funds.
According to the United Nations, a majority of African SMEs especially those in the informal sector rely solely on personal savings or funds from family and friends because it’s a tough task trying to access bank loans. They took a step further to let us know that access to finance is the most critical challenge facing MSMEs in Africa.
Here at Triift Africa, we understand businesses, their fears and worries which gives us the responsibility to position as many businesses as we can by providing low interest loans that are easy to assess with zero pressure.
Check out: Volume Vs Value: Why More Isn’t Always Better for Growing Businesses.
In the past one year we have provided NGN 8.3 million collateral free microloans to small and micro business owners. These loans have ranged from #30,000 to #400,000 and we are set to do more. Furthermore, we have been able to identify a major reason why businesses are denied access to these kinds of loans. Without mincing words, some business owners are of questionable character in the sense that they have previous debts and a dented public image. Always remember that trust is a currency and you must keep investing in it.
To make loans repayment an easier exercise, you should create a plan or strategy that works for you; it could be by setting out a fraction of your profit on either a monthly or quarterly basis, whichever you find convenient.
Mr Uche was a small business owner who didn’t seek help in the right places. He was ignorant about things he should have been open minded to. You are also a small business owner but don’t be like Mr. Uche.
We always want to help you transform your amazing ideas from hustle to portfolio. Have a conversation with us via Facebook, Twitter or Instagram. Get a copy of our Profitability Checklist for Entrepreneurs here or sign up for our next business finance class. Need a microloan critical to help grow your business or you have questions? reach out to us at hello@triift.com and we’ll be there to answer them or make one available to you.
We would love to provide solutions to your business related issues and also hear your thoughts. If you’ve found this article helpful, give it a clap because it deserves all 50 of them, don’t hold back!
