BANK OF INDUSTRY LOANS FOR SMEs (FACTS AND FIGURES)

Bank Of Industry is Nigeria's leading development financial institution set up for Providing financial assistance for the establishment of large, medium and small projects; as well as expansion, diversification and modernization of existing enterprises, and rehabilitation of ailing industries.

The Bank's core focus is on projects that have to do with manufacturing, production line, processing and industrial in nature. However, there are various intervention funds to accommodate other areas or line of businesses.

It is one thing to have a business idea, and it is another to get funds to kick start it. The following will be discussed in this article. What BOI is about; Who BOI assist? How BOI assist? the criteria for selecting a project that requires funding? different products and funds that are available as well as their pricing (i.e the applicable interest rate), the requirements for loans below a million to a maximum of 10million and loans exceeding 10million, the presentation also covers the security or collateral arrangements for each type of loan and then questions and answers segment.

HOW TO ACCESS BOI FACILITIES?
Before accessing BOI, you must have a business registered with the Corporate Affairs Commission (CAC). You can either register a Business name under Part B (I.e, either as a proprietor or a partnership) or Limited Liability Company under Part A of CAMA. For Business Names, the maximum amount accessible is 10million while there are no restrictions placed on borrowers operating as a Limited Liability Company.

HOW DOES BOI ASSIST?
The Bank can render in line with its mandate, financial assistance through setting up of greenfield or start-up industries, expansion of an existing project and assist in the modernization and rehabilitation of ailing industries. This means the Bank will finance both start-up businesses as well as existing businesses. Based on this, the Bank finances the acquisition of Plant and machinery (equipment-based financing) as well as essential utilities to aid production. In other words, the focus is to buy the equipment for the borrower and not give cash to the borrower. The borrower is at liberty to source for, anywhere in the world, at least two equipment suppliers. After sourcing for and finding suppliers, it is then the responsibility of the Bank to carry out due diligence on the recommended supplier to ensure the capacity/Genuity or otherwise of the supplier. However, there are certain projects that require both equipment financing and raw materials (this is as good as giving cash), the bank will based on the circumstances of each case oblige the request of the borrower. This assistance is given to Large Enterprises (LE), Small and Medium Enterprises (SMEs) and Micro Small and Medium Enterprises (MSMEs). However, for the purpose of this presentation, we are going to dwell more on the facilities to MSMEs.

PROJECT SELECTION CRITERIA
Capacity to substantially add to industrial output.
Projects that use largely domestic raw materials.
Industry in which Nigeria’s comparative advantages could be converted to competitive ones.
Ability to promote the expansion of exports through the production of high quality products that are attractive to domestic and export markets.
Niche projects that produce for worldwide consumption.
Projects that create both forward and backwards linkages, with the rest of the domestic or regional economy.
Ventures that promote inter-state or regional integration.
Small and medium enterprises (SMEs) that have linkage with large firms, belong to clusters and operate under franchise.
Enterprises with high employment generation capacity.
The project must be technically feasible, commercially viable and economically desirable.
Projects that are environmentally friendly.
Enterprises that have good management set-up and proper accounting procedures.
Enterprises promoted by women entrepreneurs.

AVAILABLE FUNDS AT BOI
As mentioned above, the core focus of BOI is manufacturing, production and processing. But there are various intervention funds to accommodate other lines of businesses. The Funds are:
Nollyfund - For Film production value chain. (i.e from pre-production to post-production) the interest rate is 10% per annum
Fashion Fund - Fund to support the fashion value chain, including but not limited to garments, women’s shoes, handbags and jewellery/accessories. Interest rate is 9% per annum
Cottage Agro-Processors (CAP) Fund - The Fund may be accessed by Limited Liability Companies, Enterprises and Cooperative Societies engaged in the processing of agricultural products either into finished food products or raw materials for industry or for the export market. i.e. Cassava, Oil Palm, Rice Paddy, Groundnut, Yam, Maize, Sorghum, Aquaculture, Livestock, Cocoa, Shea nut, Plantain, Cash
National Automotive Council’s (NAC) Fund - To achieve the development of the automobile industry subsector of the economy. Interest rate is 10% per annum
Business Development Fund for Women (BUDFOW) - On behalf of The Federal Ministry of Women Affairs and Social Development (FMWASD) (provides soft loans to women entrepreneurs.
Graduate Entrepreneurship Fund (GEF)- This fund is exclusively meant for NYSC members who are desirous of going into any business. The maximum loan value is 2million and the interest rate is 0%
Youth Entrepreneurship Scheme Programme (YES -P) Fund - meant for youth within the age of 25 - 39. Interest rate is 9%
State MSME (Micro Small & Medium Enterprises Development) Marching Fund - This is an arrangement between the Bank and State Governors to enter into matching Fund agreements for entrepreneurs in their respective State. When this is done, the State Government is expected to bear half the interest rate of any project funded under the scheme. The Bank's interest rate is 10%. When projects are funded under this arrangement, the State Government automatically bears the cost of 5% per annum and the Net Interest rate is 5%. The Bank currently has this matching fund arrangement with 21 States including Anambra, Delta, Kwara, Niger, Kogi, Osun, Edo, Ondo, Ekiti, Ogun, Oyo, Gombe, Benue, Kaduna, Taraba, Enugu, Ebonyi, and Cross River States. while others are in the pipeline.

REQUIREMENTS FOR ACCESSING BOI LOANS.
SME LOANS- BUSINESS ENTERPRISES OF LOAN VALUE BELOW 10MILLION.
PRE – APPROVAL CHECKLIST
1. Formal Application on letterhead
2. Duly completed Loan Application Form
3. Photocopy of Certificate & Form of Registration
4. Business Plan which includes detailed Profile of the Business Enterprise with Curriculum Vitae of the key Management Staff and write-up on technology/manufacturing process(es)/ Technical Partners
5. Quotation/ Proforma invoice for the supply of items of Machinery and Equipment
6. Sources and quotations for Raw Materials expressed in quantity and amount
7. Four (4) passport photographs and Biometrics Verification Number (BVN) of the Promoter(s) (i.e. business owner[s])
8. Means of identification of the Promoter(s) (i.e. photocopy of International Passport or Driver’s License or National Identity Card or Permanent Voter’s Card)
9. Bank Statement of the Business Enterprise for a period of one (1) year (for an existing business)
10. Declaration of Outstanding Liabilities to other Banks and Individuals
11. Security:
If the Security is with two external Guarantors, then the following will be required;
Customer will be required to pay 10% of the loan value as a security deposit to be domiciled at BOI MFB;
Customer will be required to submit a Letter of Intent from two (2) external Guarantor who will execute an irrevocable personal guarantee supported by a Notarized Statement of Net Worth.
OR
If a landed property is being pledged as security to the exclusion of an (i&ii) above, then the following will apply:
Photocopy of the title document(s) to the property being pledged. This could be a Certificate of Occupancy, Deed of Sublease or Deed of Assignment/Conveyance ((with an unexpired tenor of at least 25years – in all cases, the property must be in an urban area and accessible)
OR
If Bank Guarantee is the security to the exclusion of a & b above, then a letter of intent from the head office of issuing commercial Bank will be required.

SME LOANS- BUSINESS ENTERPRISES OF LOAN VALUE OF 10MILLION AND ABOVE
PRE – APPROVAL CHECKLIST
1. Formal Application
2. Duly completed Loan Application Form
3. Photocopy of Certificate of Incorporation
4. A certified true copy of Memorandum and Articles of Association and Forms CAC 2.5 (Allotment of Shares), CAC 2.3 (Particulars of Directors) and CAC 2.1 (Appointment of Company Secretary); Annual Returns must be up to date.
5. Business Plan to include detailed company profile, Curriculum Vitae of the key Management Staff, write-up on technology/manufacturing process(es) and agreement with Technical Partners (if applicable)
6. Quotation(s)/ Proforma invoice(s) for the supply of item(s) of Machinery and Equipment
7. Sources and quotation(s) for Raw Materials expressed in quantity and amounts
8. Eight( passport photographs of the Chief Promoter and one other Director of the company
9. Means of identification of Chief Promoter and one other Director of the company (i.e. photocopy of International Passport/Driver’s License/ National Identity Card and Permanent Voter’s Card)
10. BVN (Biometric Verification Number) of Chief Promoter, Directors and Shareholders of the company
11. Three years' Audited Financial Accounts and most recent Management Accounts from BOI accredited auditors (for an existing business)
12. Statement of Affairs (for businesses less than one (1) year)
13. Company’s Bank Statement(s) for a period of one (1) year (for an existing business)
14. Declaration of Outstanding Liabilities to other Banks and Individuals
15. Security:
(a) If Bank Guarantee, a letter of intent from the head office of issuing commercial bank
OR
(b) If a landed property is being pledged as security, then the following:
(ii) Photocopy of the title document(s) to the property being pledged. This could be a Certificate of Occupancy, Deed of Sublease or Deed of Assignment/Conveyance. (with an unexpired tenor of at least 25years – in all cases, a property must be in an urban area and accessible).

Questions for Clarifications:
Do these requirements also pertain to NYSC applicants?
Answer: NO. not at all. For NYSC. The security is a lien on the NYSC Discharge Certificate. However, they must register a business with the CAC. Produce just one guarantor and also fill out a form. The loan application form is designed in a way that, after completing the form, there is no need for a business plan as all the project appraisal officer needs are extracted from the form.

Among the requirements listed, is there any that is optional?
Answer: The documents are all mandatory. The only optional requirement is that of the collateral When you take the requirements one after the other, you will see that the requirements are not burdensome
The formal application is on the borrower's company letterhead, an application form is given by BOI, items 3 and 4 on the requirements are given by the CAC upon the incorporation of your business. A business plan is mandatory. Quotation for equipment and raw materials is mandatory. A borrower who intends to buy XYZ equipment must have a supplier who deals in such equipment either right here in Nigeria or Abroad.. passport photographs, valid means of ID and BVN are an all mandatory.. statement of affairs or audited accounts are regulatory requirements which every business ought to have. You can see that the requirements are not herculean or burdensome to get.

Also, can I access a loan to bring in Media equipment for a new company?
Of course. BOI may finance strictly the equipment for the project. The Bank finance both new or start-up companies and also existing ones. .NOTE. the factory site, studio, farm, or place of business in whatever form, is the responsibility of the Borrower. The place of business will also be visited by BOI staff before the application can be processed.

How do I get the application form for a loan below 10m?
At the Bank's website, OR At any of the offices. Just google the address near you and obtain the form.


Is this loan available for school business?
School is a seasonal business. Loan repayments are not seasonal. However, the Bank will finance technical schools because technical schools are equipment-based financing.

Do I need to open an account with BOI before I can process the loan?
NO. BOI is a development Bank and not a deposit money bank or commercial bank. It does not deal with cash. You have to open an account with a commercial bank in the name of your business. BOI does not accept an account opened in the name of the director or promoter of the business.

what are the major challenges you can encounter when applying for this loan? Are loans easily accessible without lobbying?
There is no form of lobbying. The more these loans are granted, the more the Bank's impact is seen in the economy. The Bank’s process is automated. Borrowers can track their loan application at the comfort of their homes and escalate any delays.

What of piggery and poultry businesses? Is the loan available for them?
Yes. The livestock business is bankable businesses.

What is the tenor of BOI loans?
The tenor of the loan is between 3-5 years for loans of 10m and below and 4 - 7 years above 10. Depending on the circumstances of each case. BOI also give moratorium period between 6months and 12 months

Please for a farming business that has no office, what Will BOI do? Visit the farmland?
All businesses must have a factory/farm/studio/ or place of business and a corporate office. In most cases, the factory site and the corporate office are the same places. For you as a farmer, for example, Now, when you farm, where do you sell your finished goods or agricultural products? At the farm? Not advisable. Even if it's your house or rented premises, you must have a place where you can easily sell your products to the outside world. That can be interpreted to be your corporate address depending on the nature of the business.

BOI has a long term repayment plan, how do they handle recovery?
Good question. The Bank's aim is for the project to pay itself. That is why a thorough appraisal process is carried out. So when we finance a piece of equipment, the equipment must be functioning and producing, that way, the customer is working and in business and is able to repay the loan. The projects are dear to the Bank. The collateral is the last resort for recovery when a project goes bad. There are restructuring, there is additional working capital. This means that when a project is bad. The bank will do whatever it takes to see how the project can work again before resorting to the collateral

What are the possible loopholes or setbacks that might deny one getting a loan from BOI? Or does everyone who provides all the needed information get the loan?
Deceit, diversion of funds, fraud, connivance with supplier because, the truth is, there are various stages to pass for the loan. The person will be caught.

In conclusion, As a Nigerian, you have a right to apply to BOI for a loan. Once your business is bankable, and the requirements are met. The loan will be disbursed to you

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