Sources of Finance for Entrepreneurs for SS 3

Class: SS 3
Term: First Term
Week: 6
Age: 17 years
Duration: 60 minutes
Subject: Salesmanship
Curriculum Theme: Entrepreneurship and Business Management
Previous Lesson: Concepts of Entrepreneur in Salesmanship
Topic: SOURCES OF FINANCE
Subject Matter: Define entrepreneurship; Sources of finance for entrepreneur; Roles of micro finance organizations

Specific Objectives

By the end of the lesson, pupils/students should be able to:

Cognitive Domain

• Define entrepreneurship accurately.
• Identify at least five sources of finance available to entrepreneurs.
• List three roles of microfinance organisations in supporting entrepreneurs.

Affective Domain

• Appreciate the importance of adequate finance for business success.
• Value the support provided by microfinance organisations to small businesses.

Psychomotor Domain

• Discuss different sources of finance with relevant examples.
• Explain the functions of microfinance organisations clearly.

Social Domain

• Participate actively in class discussions about financing options.

Reference Materials

The following resources were used in planning this lesson:

• 2014 Senior Secondary Education Curriculum (SSEC)
• Relevant State Unified Scheme of Work
• Salesmanship for Senior Secondary Schools, Book 3
• FCT ERC/NAPPS Scheme of work

Instructional Materials

The teacher will teach this lesson with the aid of:

• Whiteboard or chalkboard
• Markers or chalk
• Charts illustrating different sources of finance
• Pictures of microfinance institutions or their activities
• Handouts with case studies of entrepreneurs and their funding sources

Rationale for the Lesson

Understanding sources of finance is fundamental for aspiring entrepreneurs and business students. This lesson equips students with knowledge of how businesses acquire capital, which is essential for starting and growing ventures. It also highlights the crucial role of microfinance in fostering economic development and supporting small-scale enterprises, particularly in developing economies.

Prerequisite/Previous Knowledge

Students should have a basic understanding of what a business is, the concept of profit, and the general idea of starting a venture.

Lesson Content/Board Summary

SOURCES OF FINANCE

Definition of Entrepreneurship

Entrepreneurship is the process of designing, launching, and running a new business, which is often initially a small business. It involves identifying opportunities, taking on financial risks in the hope of profit, and creating value through innovation and initiative.

Sources of Finance for Entrepreneurs

Entrepreneurs require finance to start, operate, and expand their businesses. These sources can be broadly categorised as internal or external, and also by their duration (short-term, medium-term, or long-term).

1. Personal Savings: This is often the first source of finance for many entrepreneurs. It involves using one’s own accumulated funds to start or invest in a business.
2. Family and Friends: Capital can be raised from relatives and close acquaintances, usually with flexible repayment terms or as equity investments.
3. Bank Loans: Commercial banks provide various types of loans (e.g., term loans, overdrafts) to businesses. These typically require collateral, a solid business plan, and a good credit history.
4. Microfinance Institutions (MFIs): These organisations provide small loans (microcredit) and other financial services to low-income individuals or groups who typically lack access to conventional banking services.
5. Venture Capital: This is a form of private equity financing that is provided by venture capital firms or funds to start-ups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth.
6. Angel Investors: These are affluent individuals who provide capital for a business start-up, usually in exchange for convertible debt or ownership equity. They often provide valuable mentorship alongside funding.
7. Government Grants and Subsidies: Governments or international organisations may offer grants or subsidies to businesses in specific sectors or those that meet certain criteria, often to promote economic development or innovation.
8. Trade Credit: This is an arrangement where a supplier allows a customer to purchase goods or services on account, with payment due at a later date (e.g., 30, 60, or 90 days). It is a short-term financing option.
9. Retained Earnings: For existing businesses, profits that are not distributed to shareholders but are reinvested back into the business serve as an internal source of long-term finance.
10. Crowdfunding: Raising small amounts of money from a large number of people, typically via the internet. This can be equity-based, reward-based, or donation-based.

Roles of Microfinance Organizations

Microfinance organisations play a significant role in supporting entrepreneurship, especially among the poor and those excluded from traditional banking systems. Their key roles include:

1. Providing Microcredit: They offer small loans to entrepreneurs, particularly those in the informal sector, to start or expand their small businesses.
2. Promoting Savings: MFIs encourage and facilitate savings among low-income individuals, helping them build financial security and capital for future investments.
3. Offering Financial Literacy Training: Many microfinance institutions provide training on basic financial management, business planning, and record-keeping, empowering entrepreneurs to manage their finances better.
4. Supporting Women Entrepreneurs: A significant focus of microfinance is on empowering women by providing them with access to finance, recognising their role in household income and community development.
5. Fostering Rural Development: By providing financial services in rural areas, MFIs stimulate economic activities, create jobs, and improve living standards in underserved communities.
6. Facilitating Group Lending: Often, loans are given to groups, where members guarantee each other’s repayments, reducing the risk for the MFI and fostering community support among entrepreneurs.
7. Enhancing Financial Inclusion: They bridge the gap between traditional banks and the unbanked population, ensuring that more people have access to formal financial services.

Teaching Methods/Instructional Techniques

Discussion, Explanation, Question and Answer, Group Work, Guided Practice

Instructional Procedures

Step 1: Introduction

Time: 5 minutes

Teaching Skill: Activating Prior Knowledge

Teacher’s Activity: The teacher greets the students and asks them to recall what they understand by “business” and “profit”. The teacher then introduces the concept of starting a business and asks what is needed to begin one.

Pupils’ Activity: Pupils respond to the questions, sharing their ideas on starting a business.

Learning Point: Business and capital needs

Step 2: Definition of Entrepreneurship

Time: 10 minutes

Teaching Skill: Explanation/Definition

Teacher’s Activity: The teacher defines entrepreneurship, explaining it as the process of identifying opportunities and taking risks to start a new business. The teacher provides simple examples of entrepreneurs.

Pupils’ Activity: Pupils listen attentively, ask questions for clarification, and attempt to define entrepreneurship in their own words.

Learning Point: Meaning of entrepreneurship

Step 3: Introduction to Sources of Finance

Time: 5 minutes

Teaching Skill: Concept Introduction

Teacher’s Activity: The teacher explains that for any business to start or grow, it needs money, which is called finance or capital. The teacher asks students where they think people get money to start businesses.

Pupils’ Activity: Pupils brainstorm and suggest possible sources of money for businesses.

Learning Point: Need for business finance

Step 4: Major Sources of Finance (Internal)

Time: 10 minutes

Teaching Skill: Explanation/Examples

Teacher’s Activity: The teacher explains internal sources of finance such as personal savings and funds from family and friends, providing practical examples of how these are used by entrepreneurs.

Pupils’ Activity: Pupils listen, take notes, and ask questions about the advantages and disadvantages of these sources.

Learning Point: Internal finance sources

Step 5: Major Sources of Finance (External)

Time: 10 minutes

Teaching Skill: Elaboration/Classification

Teacher’s Activity: The teacher explains external sources like bank loans, venture capital, angel investors, government grants, trade credit, and crowdfunding. The teacher highlights the basic terms and conditions associated with each.

Pupils’ Activity: Pupils participate in class discussion, enumerating sources of finance for an entrepreneur and asking for clarification on complex terms like venture capital.

Learning Point: External finance sources

Step 6: Roles of Microfinance Organizations

Time: 5 minutes

Teaching Skill: Detailed Explanation

Teacher’s Activity: The teacher explains the specific roles of microfinance organisations, focusing on how they support small-scale entrepreneurs and promote financial inclusion. The teacher uses local examples where possible.

Pupils’ Activity: Pupils listen and discuss the importance of microfinance in their communities.

Learning Point: Microfinance organisation roles

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. What is entrepreneurship?
2. Mention three sources of finance for an entrepreneur.
3. List two roles of microfinance organisations.
4. Why is finance important for a business?

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Understanding finance sources

Step 8: Note-Taking

Time: 10 minutes

Teaching Skill: Guided Writing

Teacher’s Activity: The teacher guides pupils/students to copy the essential Board Summary notes on entrepreneurship, sources of finance, and roles of microfinance organisations into their notebooks.

Pupils’ Activity: Pupils/students copy the notes carefully into their notebooks.

Learning Point: Recording lesson notes

Step 9: Conclusion

Time: 5 minutes

Teaching Skill: Consolidation

Teacher’s Activity: The teacher summarises the key points of the lesson, reiterating the importance of understanding different finance sources for entrepreneurial success and the unique contribution of microfinance. The teacher encourages students to think about how these sources apply to real-life businesses.

Pupils’ Activity: Pupils listen and ask any final questions.

Learning Point: Consolidating finance knowledge

Continuous Assessment/Further Study

Type: Homework

Instruction: Answer the following questions in your notebook:

1. Differentiate between internal and external sources of finance for an entrepreneur, giving two examples for each.
2. Imagine you want to start a small business selling local snacks. Which two sources of finance would you consider first and why?
3. Research a microfinance institution operating in Nigeria and write a short paragraph about its impact on local entrepreneurs.

Lesson Keywords

• Entrepreneurship – The process of starting and running a new business, taking on financial risks in the hope of profit.
• Finance – Money or other liquid resources used to fund a business.
• Microfinance – Financial services, typically small loans, offered to low-income individuals or groups.
• Venture Capital – Funding provided to start-ups and small businesses with high growth potential.
• Angel Investor – An affluent individual who provides capital for a business start-up, usually in exchange for equity.
• Grant – A sum of money given by an organisation, especially a government, for a particular purpose.

Differentiation

For struggling learners: Provide simplified handouts with key definitions and a table listing sources of finance. Pair them with more advanced learners during discussion activities. Focus on identifying just two or three main sources and roles.

For advanced learners: Encourage them to research specific Nigerian examples of entrepreneurs who used different funding sources. Ask them to analyse the pros and cons of equity financing versus debt financing for a start-up. Challenge them to propose a new role for microfinance institutions.

Suggested Lesson Videos

Search on YouTube for: “Sources of finance for entrepreneurs SS3 Salesmanship Nigeria”