(11).   Credit Union – Cooperative Societies

This is another major sources of capital that prospective entrepreneurs can avail themselves.Cooperative societies come in various forms, but the particular type that will suit the needs of entrepreneurs is the cooperative thrift and credit option. A major advantage enjoyed by members of the society is the easy access to loanable funds. Applying for loan and redeeming it is made easy for members.

(12).   Joint Venture

Entrepreneur searching for startup or expansion capital can end their search by widening the ownership base of their organization. The owner will obviously have to give away some control but he will still retain majority share holding to protect his interest. The sum total of the fund the new owners bring in would readily solve the unavailability of funds for expansion.

(13). The Leasing Option

Leasing is a veritable tool for solving entrepreneurs’ financial problems capital requirement for their start-up and expansion programmes. It is a new financial product that has been developed to bridge the gap existing between the supply and demand for long-term credits/loan. Leasing reduces the capital necessary for the establishment of business, thus the promoter/entrepreneur needs lower credit and therefore has to pay less installments on the principal and interest. It saves liquidity, which is very important for start-ups enterprises and it provides relatively updated equipment standard which help to keep productivity at a certain level while producing good quality products.

        A lease is an agreement between a lessor and a lessee in which the lessor allows the lessee the quiet use of an asset owned by the lessor, in return for the payment of rentals over an agreed period of time.

  • A lessor is the owner of the capital asset in a lease agreement.
  • A lessee is the user of the capital asset, having a quiet possession and right of use of the asset for an agreed rental payment over an agreed period of time.

The following are the benefits/advantages of the leasing option:

  • New source of fund
  • A smooth cash flow and affordable means of acquiring equipment.
  • Provide 100 percent financing.
  • Leasing generally offers 100% financing.
  • Provide lower lease payment
  • Flexibility in lease payment
  • Larger payment terms

Banks and other financing institutions usually provide 60 to 70 percent of the capital value of the asset as loan facility to entrepreneurs, the balance being equity contribution by promoters/entrepreneur.

Financing Reporting Consideration

Any asset acquired through operating lease is not recorded as an asset in the books of the lessee since it is an off-balance sheet financing. This will enhance the financial performance ratios of the entrepreneurs and improve its return on assets (ROA), thus providing better prospects for additional credit facilities for the entrepreneur who will need to borrow more funds to expand his business.

Exclusive Tax Advantage

Leasing shelters both the lessor and the lessee from taxes. Depending on the lease arrangement, the lessor sometimes claims capital allowance, which shields it firm some tax liabilities. From the lessee’s view point, the lease rented is allowed as an expense in the calculation of taxable income. This is an advantage for the entrepreneurs to utilize.

Technological Change

Leasing provides a definite hedge against technology change and usually at no extra cost to the entrepreneur.


Higher Level of Certainty and more Rapid Turn-around Time

Lease facilities are often easier and faster to obtain than term loans. The equipment under lease serves the dual purpose of being the facility and collateral for it, since ownership actually remains with the lessor, not the lessee. This also serves as the main reason why financial institutions embrace equipment leasing as it is safer and in the event of rental defaults by lessee, the lessor can withdraw the equipment.

(14). Daily Contributions/Group contribution

People, group and individuals can raise funds through daily and monthly contributions. In the case of monthly contributions, people come together, agree on certain terms and raise fund for an individual to meet financial obligations. While daily contribution helps a lot of people to save some amount of money the person who organizes the daily contributions can also lend/borrow other people the amount contributed, thus helping people to start their own businesses.

(15). Foreign Assistance

Nigeria has economic pacts with some foreign governments. Some of these governments render assistance to existing or start up entrepreneur. This source can be tapped by visiting the commercial department of some of their embassies in Nigeria.

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Additional Links

Creative and Innovative way to raise capital for your Business

Ten Guidelines if you must Borrow

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