Top 6 Funding Options To Raise Startup Capital For A New SME In Africa

Top 6 Funding Options To Raise Startup Capital For A New SME In Africa

April 22, 2021 0

When it comes to starting a business in Africa, finance is one key aspect. Without adequate startup capital, kickstarting your business would be next to an impossible task. This begs the question of how to raise startup capital for SMEs in Africa.

The first option that comes to mind in this situation will most likely be loans. However, that’s not the only option there is out there. Let’s take a look at a couple of other funding options startup businesses can take advantage of.

Family and Friends

One of the safest ways out there to finance your small business is through the collective effort of family and friends. This way, you have more flexibility when it comes to loan repayment and interest rates. Although taking this route seems safe, it also comes with its associated risks. 

When taking this route, care must be taken not to jeopardize your relationship with those you hold dear to you. Before getting them to invest in your business, take some time to explain the possible risks involved. This warning will prepare them for whatever comes up along the line – both good and bad. Part of the information includes telling them of the possibility of losing all their money along the line. To make things easier, advise them to only invest an amount they can afford to lose if there’s a loss.

Top 6 Funding Options To Raise Startup Capital For A New SME In Africa
Raising startup capital is a major challenge for entrepreneurs all around Africa

Financing your business with help from family and friends can either be equity or a loan. Whatever your choice is, always hire the services of a lawyer to draft all necessary legal agreements.

Angel Investors

Angel investors are individuals who are so rich they can provide SMEs in Nigeria with capital for starting up their businesses. For angel investors, they are usually on the lookout for businesses that possess great growth potential.

When going into a partnership with an angel investor, the extent of control they have over your business is dependent upon the total amount of money invested in your business. While having an angel investor is a good way to finance your small business in Nigeria, care must be taken to avoid getting kicked out of your business.

Cases like this may arise when your investor puts more funds into the business than the business owner. However, for SMEs in Nigeria planning to let go of their business after a short while, the investor can own a larger share.

In a situation where you are a really smart business owner, your angel investor will have no problem with you running the business fully despite owning a larger share.

Venture Capital

Another way to finance your small business in Nigeria is through venture capital. Venture capital involves a group of wealthy individuals coming together to provide funds for small business owners.

These individuals are referred to as Venture Capitalists. Venture capitalists are on the lookout for businesses with prospects and huge potential for making a profit. They rarely invest their money in new businesses. However, new businesses with profit that can be measured will benefit from this arrangement.

This form of finance for SMEs in Nigeria is a great option as more often than not, the money invested in your business doesn’t have to be repaid. However, care must be taken as a venture capitalist might demand some amount of control over your business with time.

Online Lending Platforms

SMEs in Nigeria looking to finance their small businesses can get funding from online lending platforms. Some online loan available for SMEs in Nigeria include:

  • Carbon (Paylater): Over time, Carbon has become one of the most sought-after online loan platforms. With Carbon, no collateral or guarantor is needed to access funds. This makes it easy for you as a business owner to finance your small business in Nigeria.
  • Fair Money Instant Loan: Small businesses can access loans as much as N150,000. The earlier loans gotten from this platform are repaid in time, the more benefits accruable to business owners.
  • Branch Loan: Another online platform available for SMEs in Nigeria. All it takes is to meet up with all requirements. This platform offers small business loan amounts as low as N1000 and as high as N200,000.
  • GroFin Fund: GroFin Fund makes financing available for businesses contributing positively to the environment they operate from. Also, there must be an ability for sustainability.
  • Specta: Specta has a loan offer for small businesses called Specta4business. It is available for business owners in need of urgent funding for their businesses.


There are several grants out there small business owners can take advantage of. These grants have been set up to promote businesses and ensure SMEs in Africa have funding for their businesses. Different grants come with different eligibility requirements and it’s up to you as a business owner to meet these requirements.

One advantage grants have over loans is that, unlike loans, grants don’t require interest. Although grants can be quite competitive, they are not unattainable for business owners willing to put in the work.

Business Contests

Now and then, companies and organizations organize contests for small business owners. Some of these contests usually involve submitting business plans and the best plan receives a  monetary amount. First-time entrepreneurs will benefit a lot from business contests. Also, business owners get to refine their business plans and improve their pitch skills.


While there are several options available to raise startup capital in Africa, the aforementioned are top on the list. Some factors should be put into consideration such as the size, and also nature of the business.

Once all these have been sorted, deciding what means of financing to go for will be easier.

Alara Charis
Alara Charis
Alara Charis
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