SOURCES OF BUSINESS FINANCING
ENTREPRENEURS IN NIGERIA 2022
Sources of busines can be classified
into three main groups
B Medium term
C Long term
Short Term Business Financing i.e. financing Sources up to 1 year duration. Short-term finance sources are flexible.
A sources of financing usually used in financing short term working capital needs. The sources of short term financing include the following.
Borrowing from friends and relative these are funds in kind or cash from friends and relatives This source
of finance is unreliable and risky for the provider of finance For instance, you might find it difficult to enforce repayment against a defaulting relative.
Borrowing from Cooperative:: This source of finance is restricted to only members of the cooperative. The amount that can be raised is also limited depending on thecooperatives.
might be interest free or carry a litte Nowadays interest up to 2% is are charged.
The loans from the cooperatives maybe
interest rate free .
Bank overdrafts Banks provide bank overdrafts to entrepreneurs. Under arrangement, bank allow to overdraft its account even if the firm has insufficient funds deposited in the account. *To be eligible*, the borrowerwill be required to maintain current account with the bank before it can obtain overdraft.
A limit could be placed on what to overdraft. The bank charges interest on the amount overdraft overdrawn.
The interest charge on an overdraft Varies with The premium creditworthiness of the borrower.
The premium above a base rate will be smaller for a high creditworthy customer.
*Bank Loans* Bank loan is a formal agreement between a bank and the borrower that the bank will lend a specific amount of money for a specific period.
Interest is payable on the whole of this sum for the Interest charge and
requirements for security are similar to an overdraft. However, unlike overdraft that is payable on demand bank loans cannot be withdrawn before the expiry of the loan period in granting any form of bank Danke usually takes into consideration duration of the loan.