Incontestably, many businesses – small and big have collapsed or are facing imminent closures due to the effects of the current global economic crisis. At the local level, the crisis has resulted in high operational costs reflected in high-interest rates for loans/credits, the rising cost of raw materials, hyperinflation, and the depreciation of the local currency against major trading currencies among others. The accumulated effect is the reduction or elimination of the capacity of start-ups and small and medium-sized enterprises (SMEs) to access funding from traditional sources for their continuous operation and support their resilience initiatives as part of their recovery plans.

While traditional funding sources cannot be completely ignored even in this difficult time, start-ups and SMEs must explore alternative funding arrangements in order to guarantee the availability of funds and promote their survivals amidst record low and slowing sales revenues and increasing defaults or limited recovery of operational debts.

The intent, therefore, is to highlight some of these funding alternatives that start-ups and SMEs can explore and the steps that must be taken in line with securing such alternative interventions.


Funding for entrepreneurial ideas could come from different sources. And over the years, some of these sources have emerged as the dominant or traditional ways by which founders can draw funds to pursue their entrepreneurial dreams. Traditionally, start-up or SME funding can be in the form of equity (a stake in ownership) or by means of debt financing (repayable at interest). Some principal and known sources of funding through equity or debt include:

  1. Bootstrapping or other equity sources: In all instances, a founder must be ready to invest his or her own money to support the promotion of the business idea – referred to as bootstrapping. Nonetheless, self-financing has never been adequate or sufficient to support any business operation and founders always explore other equity funding options.

Other equity funding sources include raising investments through friends and family, private equity firms/investors, venture capitalists, angel investors among others who sometimes provide the required funding needed for a share of ownership in these startups. However, with the current economic meltdowns, the tendency to secure funding through these means is dwindling even for startups and SMEs with high prospects and growth potentials.

  • Debt and debt financing arrangements: An overwhelming majority of start-ups and SMEs rely on various debt financing arrangements to fund their operations. These arrangements, usually in the form of business loans, extended credit lines, overdraft facilities, etc. are accessed based on some metrics of healthy financial position, sales potentials, and/ or the nature of business among others. And in this present economic dispensation, businesses are not in the position to post suitable financials to warrant lending or credit approvals.

Additionally, responses by the government through economic policies aimed at addressing the current imbalances and restoring economic stability have resulted in lending rate hikes, pushing access to credit or loans beyond the means of average start-ups and SMEs. The high cost of borrowing or lending is gradually cutting off institutional debt financing arrangements and limiting individual efforts to support businesses through loans, as debt defaults are being normalized and higher default rates are projected.

Quite frequently, a start-up’s ability to secure debt financing arrangements is influenced by its ability to provide security (collateral) for expected facility and most start-ups do not have assets that meet the evaluation criteria for secured financing. It is only a rare instance that a creditor will provide an unsecured debt financing arrangement. Even so, risks associated with such unsecured arrangements will be mitigated through high rates, corporate and personal guarantees, and assignment of receivables among others.  


The indication to consider the below proposals as alternative funding options does not imply the creation of new categories of funding options available for start-ups and SMEs beyond equity and debt. Rather, the recommendation is to consider, innovate and increase the use of these funding options which are subsets of the two broad funding categories of equity and debt financing arrangements.

Their consideration and use should be informed by the need to go beyond the common and well-known traditional financing arrangements discussed above due to the latter’s limited ability to facilitate actual funding in difficult economic times such as is being experienced currently.

These alternatives offer greater flexibility and remain less structured approaches to raising funding for start-ups and SMEs.

  1. Credit arrangements: In fact, startups do not necessarily need money. They need the means or arrangements to procure goods and services which constitute raw materials or inputs for their delivery of goods and services. Also, they require similar arrangements to support auxiliary services such as human resources, sales, and marketing, customer service among others. Therefore, where the ability to secure funding in the form of money is constrained, start-ups must explore credit arrangements that allow them to access essential goods and services for their operations. Nonetheless, startups must ensure payment obligations of amount and tenure are religiously honored to create good credit standing and relationships within their support ecosystem.

Therefore, the focus must shift from looking necessarily for money to securing arrangements that enable the procurement of essential goods and services on credit.

  • Profit sharing: It is an age-long fact that humans are inherently selfish and greedy. Sometimes, the overwhelming desire to own and profit alone to the exclusion of others has compounded the funding needs of some startups. Fundamental to every economic activity is the issue of cost, revenue, and profit. Where startup founders clearly understand their profit-making arrangements, they can leverage same to get the related cost of production traded off in a profit-sharing arrangement with suppliers, producers, or service providers. Greater transparency and accountability are required to be able to design schemes that allow suppliers, producers, or service providers to waive related service costs for a share of profit.

However, the caution is that this arrangement may not be suitable for all industries or goods or services. Equally, not all service providers, producers, or suppliers may be interested and be prepared to sign up for such a scheme. Despite these, startup founders should not discount its use as a way of closing funding gaps.

  • Pre-financing: Start-up founders must explore the burden-sharing option of securing some pre-financing of bulk orders or contract supplies. Most times, startups find it difficult to raise funds to meet supply demands usually involving mass production. Therefore, with confirmed orders, startup founders can negotiate pre-financing arrangements where customers/consumer advance at minimum the related production of goods or the rendering of services costs to lessen the burden of looking for funding. With good negotiations, founders can secure some significant advance payments which will reduce the full burden of funding.
  • Production financing and Payment discounting: Where startups produce to order, it provide some guarantee of off-takes and payments. Such guaranteed offtake or supplier arrangements could be in the form of Purchaser Orders (POs) based on which some pre-financing could be secured.

Likewise, payments could be made for supplies that are however due for value at future dates. Such post-dated cheques could be discounted for immediate value, and this will help improve the liquidity position of startups. Therefore, where such opportunities of secured orders or post-dated payment commitments arise, founders must leverage them to draw immediate funding needs for their businesses.  

  • Lease not Purchase: There is great value in ownership of assets and properties by startups. It helps improve the financial position of the company and offers value that the startup can utilize sometimes to access traditional funding with security requirements. However, it is not all assets or properties that must be purchased outright by startups. Before making such purchase decisions, founders must undertake a “use analysis” of an intended acquisition to ensure maximum efficiency and productivity will be derived at all times during the useful life of the asset. This will help avoid purchasing an asset with infrequent use when it can be alternatively secured through a leasing arrangement.

In circumstances of limited funding options, efficient and effective use of resources must be prioritized to avoid the ownership of aesthetic and non-productive assets which could equally be leased due to their infrequent use. Where possible, founders must lease or rent rather than purchase assets with huge outright financial commitments to free up funds for other activities.

  • Peer-to-Peer (P2P) Lending: While the legislative framework for the commercial rollout of P2P lending platforms in Ghana is under consideration for adoption by regulators, its usefulness as an alternative means of raising funding for startups and SMEs cannot be overemphasized. P2P allows for digital equity and debt participation by individuals with an interest in the business activity of a startup. This helps in raising capital or debt in a flexible and unstructured manner devoid of all the rigidity, complexity, and compliance demands of borrowing from traditional funding sources.

Therefore, founders should build an understanding of how P2P works and consider its use when regulated as a permitted activity in Ghana – which regulation is likely to be in place and effective in the short term.

  • Impact Funding: Profit-making is the primary objective of every investor. This results in funding appraisals that focus on financials either past, present, or projected. However, with the growing emergence of Environmental, Social, and Governance (ESG) considerations, investors are shifting to invest in startups and SMEs with socially responsible and sustainable business outlooks. To support the full adaptation and implementation of these sustainable demands, alternative and specialized funds with cheaper and flexible financing demands are being set up globally. Startups stand the chance of accessing these impact funds with strong commitment and demonstration of compliance with their related impact demands. Founders should explore this option to close existing financing gaps while helping protect our planet.


Assessing alternative financing is not without conditions. While the honoring of ensuing commitments of repayments is paramount, enablers of these alternative financing expect full compliance to prior regulatory demands, the demonstration of creditworthiness, knowledge of specific use of financing, and maintenance of proper and accurate books of accounts among others. Therefore, the need to demonstrate that a business truly requires support and financing must be the focus of founders and they must endeavor to build and demonstrate a track record worthy of support long before the need to raise funds. Alternative financing is never the waiver of the requirements of funding appraisals and approvals.


Times are hard – and it is that simple. And businesses are not spared the effects of the current economic challenges in the process impacting their ability to raise funds using traditional sources of funding. Therefore, the consideration of alternative funding sources and a clear understanding of these options is becoming imperative. Founders must consider some of the options discussed in this article and commit to honoring the ensuing obligations.  

ABOUT THE AUTHORRICHARD NUNEKPEKU is the Managing Partner of SUSTINERI ATTORNEYS PRUC ( a client-centric law firm specializing in transactions, corporate legal services, dispute resolutions, and tax. He also heads the firm’s Start-ups, Fintech, and Innovations Practice division. He welcomes views on this article at