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Thursday, August 17, 2017


Linda Ikeji speaking in a video said, “In 2008, Linda ikeji the struggling entrepreneur decided to go to the bank. All I needed was I million naira. So, I wrote this huge business plan and took to the bank. Not I, not 2, 6 banks. I went consistently from days to months, up to a year. I finally gave up when I realized I was wasting my time. ….”

“Fast forward to 9 years, I was planning   my self-made woman conference, I went to 3 banks and guess what? All 3 banks said yes. Not 1, not 2 all 3 banks very willing to give me money for my show. This was my dream and they paid for it. And this was not 1 million naira. It was in millions of naira.”

“Recently I got a biz proposal from a bank. They came to me, I didn’t to them. They offered me 5 million naira loan to use in the expansion of my media business. Not the 1 million naira I was begging them 9 years ago. And I told them, I don’t need your money now, keep your money.”

The raising of capital is the major talk in the entrepreneurial journey in Africa and I tell you: it won’t stop until we find a solution.

It is an established fact that entrepreneurship is the way out of unemployment and poverty in Africa.  A majority of our population, especially the youth, have laudable business ideas, yet there’s no capital and the lack of capital is trying to make a caricature of their ideas.

Yet we hear some experts say, you don’t need capital to start a business, all you need is an idea. This statement is true to an extent, but not always. Reason: there are only a few business ideas you can launch without capital, such as consultancy, supplies and trading, but the majority need capital.

This statement portrays capital as a trivial issue in business. Whether or not you agree with me, capital is a major issue in business startup and expansion.

I once attended a training in 2006, in an exclusive hotel with breakfast and buffet launch, quality writing materials, most sought after facilitators, and the like, without a dime from my pocket. After the training I was telling a friend it was free and her husband had to enlighten me about the use of the word ‘free.’ His point was that the training was not free; someone or an organization somewhere has fully paid for it.

Right from that day, the use of  the word ‘free’ left me. Just like we say in local parlance, “even in Freetown, there is nothing free.”

In the same vein, an idea alone is not enough. Even if the entrepreneur gets everything required to startup the business on a Plata of gold, someone somewhere has carried the burden of capital for the business to take off. So an idea alone cannot fly.

Do you know the cost of logistics alone has delayed a good number of ideas from coming to lime light? Let alone getting the startup capital itself.  When someone with an idea is unable to take care of the basics- cost of paper work, transport fare, call credit, etc -  that will get his idea across to prospective investors, it becomes a major issue.

With this understanding, how can the burden of capital be taken care of in business?

This is where the issue of raising capital should be treated with utmost care and not trivialized. Our banks are barely there for entrepreneurs and when they do, there conditions are so stringent that ‘it takes a cool day in hell for an entrepreneur, especially a startup to secure a loan without collateral.’  Their criteria is either too tight or the process is too long; this is what wears entrepreneurs out.

Raising capital has become so corporate that, you have no chance without being familiar with the structures and processes. This takes us to the conclusion that bank loan is meant for a selected few who are part of the system.

From Linda Ikeji’s story,  the same set of banks that turned her down in 2008, offered her 500 Million naira loan she never asked for  in 2016, when she was about  setting  up her media house.  The same set of banks used millions of naira to fund her self -made woman conference this year- 20017. What a life!

Why are our banks always looking for already made businesses to fund? Are they not supposed to be assisting startups to find their feet? Why are they always looking for already made and not wanting to build businesses from crash?

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We hear the banks say entrepreneurs have shortcomings. Fine, they do, but the banks can work out modalities on how to manage those shortcomings, if the truly want to build.

The micro finance banks that were seen as the messiahs to the entrepreneurs are extorting entrepreneurs with their ‘hyper’ interest rates and tight payback period. 

A majority of Entrepreneurs and aspiring entrepreneurs are left with no option than to remain with their ideas or source for other avenues, which are farfetched in most cases.

The hyper interest rate and tight payback time has been very detrimental to most entrepreneurs. Research has it that businesses fail before 5 years and a closer look at the root cause of the failure, will reveal to you that capital is the major reason for the collapse.   

You get a loan from the bank to startup a business, while the business is yet to stabilize, the bank is after you for their money. It’s very obvious that in such a scenario the Entrepreneur is bound to be emotionally unstable and that is the beginning of the collapse of the business; an unstable mind cannot drive a business to succeed.

A friend that is into food business got a loan from a microfinance bank and she almost closed shop. Why? The loan was almost like a curse; the bank was on her neck for more than 24 hours in a day. She wasn’t herself all through, until she finished paying the loan.  She ended up just working to pay the loan without anything to show for the business.

A bank loan is for a short term project and a startup is a long term project in most cases; the entrepreneur needs sometime to stabilize the business before funds can be taken out of the business. The truth is, some businesses require additional capital after startup. So why should the business survive when the reverse is the case? 

Entrepreneurs run to Venture capitalists and Angel Investors with the hope that these groups will salvage the situation, yet these investors are seeking for high returns for short-term investments, that probably the business in question can barely pay. Their style of investment is entirely different from what is obtainable in the international scene.

MY SUBMISSION:                                                                                                             
There is little or nothing you can do as an entrepreneur, than to make do with what is available to you.

Due to the rigors associated with bank loan, I can barely make an entrepreneur see a bank loan as an option. I categorically wrote an article on business finance titled: 13 Ways to Finance Your Business Without A Bank Loan. A bank loan is for short term projects. You don’t borrow short term fund for a long term project.
The banking system has to relax their criteria in financing of businesses, especially small businesses. They should learn to replicate the concept of offering entrepreneurs unsecured loans , with approval based on feasibility. This happens in other countries; it can be done here as well.
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Our banks shouldn’t just end it at, “ They are not sincere people, so we can’t give them loans without collateral.” There should be innovative ways of giving unsecured loans to small businesses.

Due to the distrust in the system, sourcing for capital has become a risky game for both the entrepreneur and investors and one reason why over 60% of businesses fail before 5 years.

Administrative charges on loan should be reduced. A friend and her husband got a loan from a bank for business, with stringent conditions. When the loan finally got to their account, they couldn’t use it for the purpose because admin charges had eaten into the money.

They had to start looking for a way to complete the money. While they were on that, the bank started deducting the loan from her husband’s salary. Meanwhile the business was yet to commence. What a system!

Amortization of loan should be put into consideration when giving out loans to business owners, especially startups, as it allows the entrepreneur some time to run the business before the installmental payback period commences. This gives the entrepreneur some emotional balance to a large extent.

To the entrepreneur:

You can partner with individuals & organizations with credibility to increase your chances of getting loans from the banks, as the name involved in a business goes a long way in attracting capital to the business.

No man owns any big company alone; you can find out from Bill Gates and Mark Zuckerberg.  When you think you can make money alone, it narrows your chances of raising the required capital for your business.

 Make it open for people with credibility to share in your idea and make money as well. After all, money is meant to be made with people and not alone. People who make money alone in business, run out of people which is more dangerous lacking capital. 

Have a virtual board that will be a good source of advice to you. This should be individuals you look up to, that have succeeded in their ventures and can give meaningful advice when necessary.

Don’t be discouraged when people don’t help you on your journey up. Don’t get mad when people choose to shut their doors on your face, they are only humans.  When they shut their doors to you don’t relent, keep fighting.

You can start from where you are or as little as you can. For you conceive a sound idea, it means you have a brilliant mind; use it and the banks and other investors despising you today will surely come begging you with their money when you are made.

It is your dream; we are in the dreamers’ world. Keeping fighting; you’ll surely get there!    

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