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5 Important keys on how to Secure a loan from a bank - Business - Nairaland

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5 Important keys on how to Secure a loan from a bank by nairametrics: 2:47pm On Nov 03, 2017
Banks are in the business of making money. One of the ways through which banks make money is from interest income on loans to businesses.

The whole process or methods used by banks to ascertain the creditworthiness of a borrower is very rigorous. Whatever process the bank you may seek for a loan from is, there are some guiding principles which will help you get a loan faster.

Whether or not you are applying for a commercial loan, real estate financing, a line of credit for business working capital, some of the basic lending principles of banks still apply. They are known as the 5 C’s of lending;

Character
The character of a prospective borrower is the most difficult to measure out of the 5Cs, as it is intangible.



As an individual, would you lend your own money to someone you have never met? Or to someone who has had a long criminal record. I guess your answer is no.

Banks look for borrowers with good character. A background check on you should turn up no red flags that would call into question your willingness or ability to fulfill your financial obligations.

To judge the character of a prospective borrower, several traits are analyzed by a bank to assess you. Some of these traits include;

Successful prior business experience.
An existing or past relationship with the bank (e.g. prior credit or depositor relationship).
Referrals from professionals (lawyers, accountants, business advisers) who have reviewed your business proposals.
Evidence of your care and effort in the business planning process.
The amount a borrower is willing to commit to the business is also a good pointer to the character of the borrower.

Ultimately, by assessing your character, banks want to know that if things go wrong, you will be there to ensure that the company honors its commitments to the bank.

Even if you do well in the other C’s of credit, you will be refused a loan if the character test is failed.



Capacity
The Capacity of a borrower measures a borrower’s ability to repay a loan.

A bank needs to be certain that the borrower will be able to generate enough cash-flow from his business to service the interest and principal on the loan.

If you are a business owner, you will need to show the bank in your presentation a historical and projected cash flow of your business and compare it to the company’s projected debt service requirements.

Commonly used metrics used by banks to measure the capacity of a borrower depending on the type of loan include; working cash flow ratio and Debt to Income ratio.

If you are a salary earner, the bank will look at how long you have been at your job and how stable your job is.



Capital
The amount of capital a prospective business owner puts in a business shows how much equity you have in that business.

A bank will believe that if you have none or a small percentage of your money invested in the business you are seeking funds for, it will be easier for you to walk away from servicing your debt if things go bad for your business.

There is no precise measure or amount of enough capital, but it is specific to the situation and the owners’ financial profile. The bank will look at the borrowers’ investment in the business relative to his net-worth to ascertain the level of seriousness of the borrower.



Collateral
Sometimes things don’t work out as planned and the business may fold up. The bank will therefore need a secondary source of repayment. This is where “Collateral” comes in.

If the company is unable to generate sufficient cash flow to repay the loan in the future, the bank will fall back on the collateral provided by the borrower. In most cases, the bank will want the collateral value to exceed the loan value.

Some of the asset classes that banks are interested in as a form of collateral include; Real estate, Equipment, Accounts receivable and inventory.



Conditions
Conditions refer to the overall environment the bank is operating in. The bank will assess the conditions affecting the company, its industry and the macro-economy as a whole.

Some of the issues the bank will look at to gauge the business will include; Competitive landscape of the business, nature of customer relationships, supply risks and macroeconomic factors

https://nairametrics.com/5-important-keys-on-how-to-secure-a-loan-from-a-bank/

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by modelmike7(m): 3:43pm On Nov 03, 2017
It is easier for a camel to pass through the eye of a needle than for a layman to get a loan from a NIGERIAN Bank!

25 Likes 1 Share

Re: 5 Important keys on how to Secure a loan from a bank by free2ryhme: 3:43pm On Nov 03, 2017
Loan from banks are greek gifts

4 Likes 2 Shares

Re: 5 Important keys on how to Secure a loan from a bank by free2ryhme: 3:44pm On Nov 03, 2017
modelmike7:
.

Na dem

Space bookers association

2 Likes

Re: 5 Important keys on how to Secure a loan from a bank by modelmike7(m): 3:46pm On Nov 03, 2017
free2ryhme:


Na dem

Space bookers association
Please stop tagging/quoting me on a sex video on YouTube as u did on the other thread.
Be warned.

https://www.nairaland.com/4033195/visit-kalakuta-republic-museum-fela/3#62039508

Your 2nd moniker.

1 Like 2 Shares

Re: 5 Important keys on how to Secure a loan from a bank by GoodMuyis(m): 3:47pm On Nov 03, 2017
Most of these condition did not favour startups who has promising future. For example NafarmFoods a startup company have being working to change the we people consume and store Tomato. if we are able to enter market we will knock off tomato paste business, because our product is organic, i.e. no preservatives but pure tomato.

Our Challenge, African challenge is funding, we have approach banks, but rejected, or their terms is just too scary. Terms like 35% interest rate and some hidden charges that will increase the interest rate to about 40%.

The only solution is for govt to hasten to pass the MSME bill presently debate in the house and to enfore 2 digit interest rate, anything from that we are OYO

3 Likes

Re: 5 Important keys on how to Secure a loan from a bank by adedayo3193(m): 3:50pm On Nov 03, 2017
"Taking loan from banks",nah I will pass

2 Likes

Re: 5 Important keys on how to Secure a loan from a bank by whitepaul: 3:51pm On Nov 03, 2017
I want a bank that will give me loan and leave me alone

10 Likes

Re: 5 Important keys on how to Secure a loan from a bank by 9jvirgin(m): 3:52pm On Nov 03, 2017
Just say 5 key ways to secure your own death.

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by free2ryhme: 3:52pm On Nov 03, 2017
modelmike7:

Please stop tagging/quoting me on a sex video on YouTube as u did on the other thread.
Be warned.

https://www.nairaland.com/4033195/visit-kalakuta-republic-museum-fela/3#62039508

Your 2nd moniker.

you sure say you no smoke anything before you post this comment

stop this false accusation

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by modelmike7(m): 3:53pm On Nov 03, 2017
free2ryhme:

you sure say you no smoke anything before you post this comment
stop this false accusation
Just be warned!
Re: 5 Important keys on how to Secure a loan from a bank by free2ryhme: 3:54pm On Nov 03, 2017
modelmike7:


Just be warned!

why shld i own a second account when i have been using one for the past 10 years +

2 Likes

Re: 5 Important keys on how to Secure a loan from a bank by Maleeq(m): 3:56pm On Nov 03, 2017
#1. Get an white man (even Indian or chinko) to follow you to the bank and they will give you that business loan fast!

Our banks frustrate genuine budding entrepreneurs seeking facilities. But they would be the first to run to the entrepreneur when his business thrives!
Re: 5 Important keys on how to Secure a loan from a bank by kay29000(m): 3:59pm On Nov 03, 2017
Hmm! Okay.
Re: 5 Important keys on how to Secure a loan from a bank by Slayer2: 4:03pm On Nov 03, 2017
God punish all these bank people. Them no gree give me loan even with my complete land documents because they say I don't have C/O, C/O for virgin land?? ? I just hiss commot the bank angry angry
Re: 5 Important keys on how to Secure a loan from a bank by Jagz16(m): 4:10pm On Nov 03, 2017
May I never take loan from bank instead I’ll be the one giving them loan ...Amen

1 Like 1 Share

Re: 5 Important keys on how to Secure a loan from a bank by Koolking(m): 4:17pm On Nov 03, 2017
nairametrics:


Whether or not you are applying for a commercial loan, real estate financing, a line of credit for business working capital, some of the basic lending principles of banks still apply. They are known as the 5 C’s of lending;

Character

Capacity

Capital

Collateral

Conditions



Possessing all other keys will keep your proposal with the security men at the gate.

The only requirement of securing a loan from Nigerian banks is collateral. Not just any collateral - Landed Property or something worth more in value than the loan amount itself. Another condition worth considering is if you are the Dangote type of business man.
Re: 5 Important keys on how to Secure a loan from a bank by hardon1(m): 4:20pm On Nov 03, 2017
dey there dey speak drama 1. coLLatERal 2. COllateRAL 3. CoLLATERal 4. C-o-l-l-a-t-e-r-a-l 5. C.o.l.l.a.t.e.r.a.l

2 Likes

Re: 5 Important keys on how to Secure a loan from a bank by aolawale025: 4:26pm On Nov 03, 2017
Koolking:



Possessing all other keys will keep your proposal with the security men at the gate.

The only requirement of securing a loan from Nigerian banks is collateral. Not just any collateral - Landed Property or something worth more in value than the loan amount itself. Another condition worth considering is if you are the Dangote type of business man.

Only a lazy banker would consider collateral as the most important factor. Business cash flow ie capacity that's what pays back loans. Any good collateral is just a back-up.
Re: 5 Important keys on how to Secure a loan from a bank by Nobody: 4:30pm On Nov 03, 2017
taking a loan against my salary has been my best decision in 2017. use the money buy land. no more money for babes. when dem tax me, am like am repaying loan cheesy cheesy

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by Koolking(m): 4:37pm On Nov 03, 2017
aolawale025:


Only a lazy banker would consider collateral as the most important factor. Business cash flow ie capacity that's what pays back loans. Any good collateral is just a back-up.


Business cash flow does not secure you loan from Nigerian banks nowadays. I am speaking from experience.

To be considered, banks need landed properties in choice areas where they can lease out and get their money back should you default. Even the so call Islamic banks (non interest banks) also place stringent requirements and collateral as one of the conditions.

Like someone said earlier, it is easier for a camel to pass through the needle eye than for you to secure loan from Nigerian banks.

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by izzy4shizzy(m): 4:38pm On Nov 03, 2017
Loans sometimes do more harm than good
Re: 5 Important keys on how to Secure a loan from a bank by izzy4shizzy(m): 4:38pm On Nov 03, 2017
Loans sometimes does more harm than good
Re: 5 Important keys on how to Secure a loan from a bank by chukzyfcbb: 4:50pm On Nov 03, 2017
Koolking:



Business cash flow does not secure you loan from Nigerian banks nowadays. I am speaking from experience.

To be considered, banks need landed properties in choice areas where they can lease out and get their money back should you default. Even the so call Islamic banks (non interest banks) also place stringent requirements and collateral as one of the conditions.

Like someone said earlier, it is easier for a camel to pass through the needle eye than for you to secure loan from Nigerian banks.
very true bro, others are speaking grammer.

If you need a Loan of 500thousdan naira from the bank, then you must first present a collateral of about 4million.

With Nigerian Banks, they only give u loans when they know you have assets that is x10 of the loan.

There is no way a Nigerian bank will give you koan of 10million if your business is 10million in asset, lia lia.... If you like be generating 1million per month, impossicante!
Re: 5 Important keys on how to Secure a loan from a bank by dayo2me(m): 4:52pm On Nov 03, 2017
how can a corps member get loan during NYSC?
Re: 5 Important keys on how to Secure a loan from a bank by aolawale025: 4:55pm On Nov 03, 2017
Koolking:



Business cash flow does not secure you loan from Nigerian banks nowadays. I am speaking from experience.

To be considered, banks need landed properties in choice areas where they can lease out and get their money back should you default. Even the so call Islamic banks (non interest banks) also place stringent requirements and collateral as one of the conditions.

Like someone said earlier, it is easier for a camel to pass through the needle eye than for you to secure loan from Nigerian banks.

I started banking in 1996 with GT bank. Went through four banks over 20 years. So am sure of what I said. We were thought in credit school not to lend strict on the basis of collateral.
Re: 5 Important keys on how to Secure a loan from a bank by femimike1(m): 5:18pm On Nov 03, 2017
Nice one

Which bank has the highest rate on fixed deposit?
And how many % ?
Re: 5 Important keys on how to Secure a loan from a bank by Koolking(m): 5:20pm On Nov 03, 2017
aolawale025:


I started banking in 1996 with GT bank. Went through four banks over 20 years. So am sure of what I said. We were thought in credit school not to lend strict on the basis of collateral.


You are talking about what you were taught and not what is real. I am talking as a businessman and on what is doable now. Of course healthy business cash flow should be basis for granting loan but that has changed.

Nigerian banks are majorly 'deposit boxes' nowadays. They are very comfortable milking their customers through unwarranted deductions from their accounts.

1 Like

Re: 5 Important keys on how to Secure a loan from a bank by arrestdarrester: 6:24pm On Nov 03, 2017
These 5Cs don't apply to Nigeria. Our bankers here are very considerate. All they ask is that 1C that can enrich the directors should you default

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