BY JOSEPH OKPAIRE
Image source: everyinvestor.co.uk
Shola is a graduate of Animal science from the University of Benin. With the “there are NO jobs” flying around town. He has decided to continue his career path as an animal scientist in pig farming. He has understudied all the technical manuals on pig farming, pig processing, and marketing. He even watched videos on YouTube to further complement his technical skills. He has even read great articles on many platforms like Senceagric on how to manage a pig farm.
Then comes the big question, “How do I raise money to run my pig farm?” At this juncture, he was stuck. Thinking and pondering…
Most of the agribusiness enthusiasts I have seen are like Shola. They have the zeal and passion to join the small league of manufacturers but their dreams are crippled by the harsh reality of the ‘’Nigerian” factor. Today, we will try to inform us on how to access agribusiness loans to fund that bright idea that will fetch high return on investment (ROI).
Agribusiness in lay terms simply means the business of agriculture.
Keyword: ‘Business’: meaning money must be involved.
Most agribusiness enterprises can be grouped as Start-Ups, Developing and Established units. Securing funds for your bright idea depends on the current state of your business.
You can source for funds for your bright ideas from:
a. FAMILY AND FRIENDS:
As clearly stated; these are your family members and close friends who believe in your idea and are ready to support you. Most times, they provide funds based on your integrity and passion for your bright idea.
b. VENTURE CAPITAL ANGELS:
You can call them investors. The individual must look at the return to their investment (profit) if they fund your business. There is usually a form of agreement (contract) between the business owner and the investor. The contract most times have a profit-sharing ratio attached to it and other terms and conditions. Under this class comes the theory of crowdfunding and other various financing models.
c. COMMERCIAL BANKS:
These are financial institutions that set up systems to provide loans to business units, and in these units, lots of factors are considered before the loan is granted. The ease of accessing finance with most commercial institutions depends on whether the enterprise is a start-up, developing or established structures. Most start-ups usually it difficult to secure loans from commercial banks. This is obvious because the risk is very high.
d. GOVERNMENT INTERVENTIONS
This includes various initiatives employed by government institutions to provide capital or finance for business set-up. These scheme comes with its own terms and conditions and is also highly competitive. Yeah of course! because it’s Government money. Examples of such schemes include Nigerian Incentive Risk-Based Sharing Agricultural Lending (NIRSAL), Anchors Borrowers Program (ABP), Agric-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS), etc.
e. CAPITAL MARKETS
Capital markets are principally a market for long term investments where corporate equities and long term debts securities are issued and traded. Example of capital markets can be found here. These markets are regulated by the Securities and Exchange Commission (SEC). These institutions mostly provide funds for established business enterprise with its own terms and conditions
f. GRANTS
These are funds released by philanthropists, corporate bodies, institution to support individuals with bright ideas. Examples include the Tony Elumelu Foundation (TEF), International Fund for Agricultural Development (IFAD), Gates Foundation, etc.
From my personal experience, the ease of accessing funds depends on the state of your business unit. I have observed it is relatively difficult for start-ups to secure funds from commercial banks and don’t even try capital markets. Developing businesses may be able to secure funds from banks but never from capital markets while established units can secure funds from anywhere possible.
In our next epistle, we will outline some of the basics necessary for securing loans from financers.
Keep it locked down.