What You Should Know About Business Loan in Nigeria
What You Should Know About Business Loan in Nigeria
Businesses thrive successfully when there is ready income to see out transactions and make profits. A lot of enterprises remain dormant due to poor finance on the part of the owner to help execute deals and move forward. In a bid to fix the problem of inadequate funding, entrepreneurs seek for loans to support their trade. Loans could come from banks, government, private enterprises or loan agencies. However, a lot of investors just ask for loans without knowledge of requirements for getting them or even doing a thorough evaluation of why they need to secure loans. Fortunately for entrepreneurs, loans are reachable provided they meet requirements for them, it is very necessary to know vital information about loans.
Many business men/women do estimate of amount needed, they do not even have a certain amount. Imagine yourself in the shoes of a lender willing to loan you substantial amount of money and you are not sure of the amount you need, it sends poor signal to the lender and you might be unable to succeed in getting the loan. Every lender has a ceiling, you cannot ask for more than what lenders are willing to give. Banks have access to the most capital, and commonly issue loans that are six and seven figures. If you need a smaller amount of money, banks are surely not the best options. A bank has to spend the same amount of time servicing a #1 million naira loan and a #100,000 naira loan but makes much more profit on the former. As a result, banks are much more interested in lending bigger amount of money which entails larger profit.
Why you need a business loan
Some entrepreneurs fail to carry out thorough self-examination on why they need business loans. People equally fail to check if there is another way of boosting the business other than loans which in most cases are difficult to repay. No lender dishes out money just because they hear you need it, why you need the money you are asking for is equally important. When you fill forms meant to give you grants whether from government or private individuals, you have to answer a lot of questions before submitting your requests and experts have to look through your answers because a loan that cannot be repaid is lost money. Little wonder collaterals are worth more than the amount borrowed.
When applying for a loan, liken it to a job application, a stellar application should come in place of your resume/cv. It is crucial for you to understand your financial situation and decide what you can use for collateral, which might include valuable assets like your house, or plot of land. Using valuable properties as collateral shows great belief in your business and a lender would hardly turn you down. Thus, you must have tangible reasons as to why you are requesting for a business loan, some lenders especially loan agencies need testimonies of how important the money you borrowed from them saved your dying business or promoted your trade so they can get more loan applications, hence, they need results.
Funny as it may sound, a lot of ventures lack a properly documented business credit score, and some do not even have an idea of what it is about. Many entrepreneurs are unaware that their business has a credit score which measures their business’s creditworthiness based on your business’s history of payments to suppliers and lenders. Not to forget, your business’s industry, size, and revenue can also impact the score.
Many business owners do not even know that having a well documented credit score is a common business loan requirement. Needless to say, not all lenders require your business’s credit score before granting your loan request, but it is essential as it helps to check stability of your venture. It is a loan factor that should not be neglected because it could serve as boost for you to move forward with your request for loan and it could discourage you from making the mistake of getting a loan due to your previous record of difficulty in paying back loans or failures resulting from loans.
Learning from your mistakes
Because you failed in a bid to secure loan from someone or an agency does not mean you should forget about trying elsewhere especially when the loan is a necessity. If one lender rejects you, figure out why you could not be granted your request, let it serve as a tool when you go to the next business lender, address that deficiency. For instance, if you apply for a loan at FirstBank of Nigeria and it was refused because you exceeded the limit they can give out, make sure that when you apply for a loan at Guaranty Trust Bank, you find out the minimum and maximum amount of money they can offer, that way you have solved the problem encountered at the former.
Duration of your business
Some lenders might be unwilling to grant your loan request if you are just a starter, they might prefer to issue loans to establishments that have stood the taste of time because it is more certain they will be repaid. The longer you have been in business, the better. Traditionally, most banks grant loans to businesses that have lasted for over two years though things are beginning to change now in a bid to support startups. If you are a starter and you need financial support, make sure you present a solid business plan, else you might find it difficult to secure a business loan.
Your business plan might not be part of required documents needed to secure a loan but it is not a bad idea if you choose to include it as some lenders might want to go deep into knowing how beneficial their loan could be to you. Detailed financial goals, future sales, profits, income, cash flow, and your qualitative business goals might just be what a lender wants to know before issuing out loan to you, neglecting a business plan could be a huge mistake, you never know. An interesting thing about a business plan is that it could attract investors. For instance, if you present a loan request to an angel investor with your business plan attached to it, he could decide to invest in it alongside you which is a big advantage for your business.
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