How SMEs can access funding opportunities

SMEs Banks

Over the years, SMEs have continued to play a vital role in Ghana’s socio-economic development- creating employment opportunities, fostering innovation and entrepreneurship, boosting economic growth, skills development and capacity building among others. Despite their significant contributions to the Ghanaian economy, many small businesses face a number of challenges including lack of infrastructure, limited access to markets, inadequate entrepreneurial skills and knowledge, lack of institutional support and most importantly, limited access to financing.

In sub-Saharan Africa, most SMEs fail as a result of lack of support from government and limited funding opportunities by traditional banks. In Ghana where we predominantly operate a traditional banking model, SMEs face barriers in securing adequate funding for their operations and expansion. This is largely as a result of the perceived problems in financing small firms have significantly hindered the role they play in the overall macroeconomic performance of the Ghanaian economy.

Despite these barriers and other inherent challenges that continue to affect SMEs, there are still a number of ways SMEs can access funding opportunities in Ghana through various channels. Here are some ways SMEs can access funding in Ghana:

  1. Personal investment – For many entrepreneurs and business owners, they rely on personal savings and investments to fund their businesses. Before you venture into entrepreneurship, you need to have capital you can inject into the business during the first few months and years.
  2. Loans from friends & family – This is the second go-to alternative for small business owners. Small business owners who are looking for funding also rely on family and friends for support in the form of loans. Sometimes, depending on the nature of the business, some friends and family will also decide to give funds in exchange for equity or some stake in the business.
  3. Venture capitals & Angel investors – Angel investors and venture capitalists provide funding in exchange for equity or share of the business. These investors are mostly interested in startups and high growth potential businesses. In Ghana, there are angel investor networks and venture capital firms that invest in promising SMEs.
  4. Credit Line or Overdrafts – A credit line also referred to as line of credit is a financial arrangement between a borrower and a lender that establishes a maximum borrowing limit. It is a pre-approved amount of money the borrower can access on an as-needed basis. Unlike a traditional loan where the borrower receives a lump sum upfront, a credit line allows the borrower to withdraw funds as required, up to the specified limit. Normally for an SME to access a line of credit, the SME will have to have operated for more than 3 years, and have the relevant records and documentation to access a line of credit.
  5. Commercial banks & Financial institutions – Several banks in Ghana have loans which are designed for entrepreneurs and business owners at competitive rates. Many banks have specialized SME units or departments that cater to the funding needs of small businesses. Some banks also have dedicated desks which are focused on providing women business owners with funding opportunities, technical assistance, capacity building among others. In order to access funding opportunities from banks, it is critical to have a solid business plan and financial projections when approaching banks for funding.
  6. Microfinance Institutions – Microfinance institutions (MFIs) provide financial services, including small loans, to individuals and small businesses that may not meet the requirements of traditional banks. They usually have more flexible lending criteria as compared to traditional banks and promotes financial inclusion by being more accessible for SMEs in remote areas.
  7. Business Competitions & Grants – There are various grants that SMEs and business owners can apply. SMEs can participate in business competitions and apply for grants offered by organizations, both locally and internationally. These competitions and grants often focus on specific sectors and provide funding, mentorship, technical assistance and networking opportunities to beneficiaries. Organizations like Mastercard Foundation, Tony Elumelu Foundation Entrepreneurship Programme, GIZ among others.
  8. Government and Development Agency Programs – Government and development agencies provide funding programs specifically designed for SMEs. These programs provide financial assistance, grants, and loans to support business growth. These include the National Board for Small Scale Industries (NBSSI), the Export Development and Agriculture Investment Fund, and the Venture Capital Trust Fund.
  9. Private Equity Funds – Private equity funds mobilize money from institutional investors and high-net-worth individuals to invest in businesses. SMEs with a strong growth potential and a well-defined business model can approach private equity funds for funding.
  10. Crowdfunding Platforms – Crowdfunding platforms allow SMEs to raise funds from a large number of individuals or investors who contribute small amounts. This approach can be particularly effective for businesses with a unique product or an innovative concept. Several crowdfunding platforms operate in Ghana, such as FundRise Ghana and Oasis Capital.
  11. Development Partners and NGOs – International development partners, such as the United Nations and non-governmental organizations (NGOs), may offer funding opportunities for SMEs. These organizations often support projects that align with their social, economic, or environmental goals.

When seeking funding opportunities, it is critical for SMEs to conduct extensive research and fully understand the requirements and conditions of each funding source. Having a comprehensive business plan, financial statements as well as other supporting documents that may be necessary to demonstrate the viability and potential of their business. It is also important to invest in networking and building relationships with industry associations, business support organizations, and mentors who can provide valuable connections and insights into funding opportunities in Ghana.

Providing more funding opportunities for SMEs can go a long way to strengthen infrastructure, enhance business support services, promote entrepreneurship education and training, and create an enabling policy and regulatory environment can help unlock the potential of SMEs in Ghana.

>>> Ramat Ebella Whajah is a Banking Executive with over a decade experience in Business Advisory, Sales, Customer Service, Branch Operations among others.  She is the Founder of Girls with Purpose Foundation, a not-for-profit community passionate about mentoring young girls and the youth to find their purpose, standout and succeed. Connect with Ramat via LinkedIn: Ramat Ebella Whajah , Email: [email protected]

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