Getting a business loan continues to be a huge task for most business owners in Nigeria. The statistics are better in developed and serious emerging economies in the world. In Nigeria however and this due to a myriad of reasons (both external and internal to the business), a lot of businesses have failed while many continue to struggle day to day without any hope of scaling to the next level in their aspirations.

At this point, it is noteworthy to say that a lot of the reasons why businesses fail to raise capital from lenders (banks, etc) are due to their own failings themselves. In other words, business owners would be better positioned for a consideration of their loan applications if they are able to put in place lots of the things a typical lender is looking out for in an applicant.

By the way, it is needless to say that the money you are seeking from the bank is also being kept in custody of the bank (it does not belong to the bank but to individual and corporate depositors alike) and these funds are at a cost to the bank i.e. the bank will not only return the money to the depositor when demanded, it will also return it with interest. It is therefore important for banks to be entirely sure that you/your business is able to return the loan capital plus interest as at when due.
In this thread by the grace of God, I will be sharing to the SME community how you can structure yourself and your business for your loan approval across various lenders (commercial banks, microfinance banks, marketplace lenders). A lot of people will not even dare approach a commercial bank for a loan because of the belief that commercial banks don’t give loans to SMEs. Like I said, this is largely true because the business is not worthy (as currently structured) of a loan. Some are also suited for micro-lending but instead, they approach commercial banks and without even filling any form, they are turned down.

Why should you listen to me?

I need to state here that I am not here to sell any eBook. I spent over 12 years in the banking sector with various experience in branch management across, operations and business development/relationship management with lots of interface with business analysts, credit appraisal and risk managers. In less than 5 months after I exited the sector, I secured 50% funding for a multi-million naira project (after I decided to commence my entrepreneurial journey fully).

At a point in this lecture series, depending on responses, I would select 5 businesses that have had their loan applications rejected before by helping to repackage the business for a loan application/approval. Businesses who have not applied before too will be considered. I am not given any guarantees but be rest assured that you and your business will be the better for it. There are instances where a business that has received one or more loans in the past would have an application turned down may be due to economic events in the businesses’ sector etc. There are also instances where a bank turns down a loan application only for another bank to approve the same application.

I am doing this to freely share of the knowledge that I have as I see a lot of business owners struggle as a result of lack of knowledge. Like I said, I am not giving any guarantees. The best of business plans still fail in reality but every experience makes you a better entrepreneur in your journey to realizing your dreams.

In my next write up, I will be sharing various kinds of business loans available in commercial banks and alternative/marketplace lenders and which are relevant to most SMEs. A lot of us don’t even know that our business activities/operations can be easily funded by a bank.
Another section will include “reasons why business loan applications are turned down and what you should do about it.” It will also cover “what lenders are looking for in your application and business.” This is major and the whole essence of this lecture. I will also be covering loan applications to some of the development banks we have in Nigeria such as Bank of Industry, Bank of Agriculture etc

Success!!!

Great to be back.

In my first write up, I said I would be talking about some business loans that are relevant to the SME community here. I know we are engaged in various business activities. From agriculture, ICT, ecommerce to selling/supplies of various kinds of goods, engineering and technical services, education, etc.

It is unfortunate that the government pays lip service to SME development. They say SMEs are the bedrock of the nation’s economic development but they do very little. Unlike the SBA(small business administration) of the USA and similar government agencies in serious minded countries who are very supportive in the area of funding and other kind of support from startup to growth. During this Covid-19 period alone, the SBA has approved 1.6 million loans totaling $342.2 billion and more funds are still being made available by the government in the neibgourhood of $300 billion for the SBA. Back here in Nigeria, few people knows what is going on with the CBN’s N50 billion credit facility for SMEs affected by the coronavirus pandemic.

Ok, that’s a digression.

Various types of loans are available in various classes. From secured to unsecured and revolving or overdraft to term or tenured loans. But this is not an academic attempt but a practical one. So I’ll just try and do justice to the topic in a way that will address our immediate knowledge need.

Type of loans

Overdraft: is an extension of credit from a lending institution that is granted when an account reaches zero. Basically, you are allowed to draw below your available balance a set amount of money. Tenor is usually in 30days or more. This loan can be used to meet running costs, emergency working capital etc. I have seen overdrafts as low as N300k and as much as N2m to N5m. Larger amounts would need to be secured. Virtually any business can take this loan most especially if you can show the lender that your business cycle and financial dynamics can repay at the end of 30 days or as agreed by the lender.

Contract Finance: is a loan that is provided against a signed contract that your business has won, and the money must be used to complete the contract work. Some lenders have a list of principals already approved such that if you win a contract from a company already in the lenders approved list, securing the loan is easier provided you can fulfill other conditions. There could also be a special consideration if the principal is not in the approved list of the lender. Facilities above a particular amount say N50m will require an additional acceptable security.

Local Purchase Order: LPO Financing allows businesses that have obtained purchase orders/letter of Award to deliver goods and services or carry them out. Loan amount does not usually exceed 70% of cost of supply and like contract finance, principal must likely be in the approved list.

Secured term loans: there are various type of loans that falls under this type including asset financing e.g. operational vehicle, among others. Generally, the business pledges some form of security, asset or collateral against the loan and has a specified repayment schedule and a fixed or floating interest rate.

Invoice Discounting Facility: allows business owners to leverage the value of their sales ledger/invoice by using it as collateral for a loan therefore allowing you access to cash while awaiting payment from your clients.

Other types of loans come with different names depending on the sector of focus. For example there is a health sector loan for hospitals and pharmacies usually for the purchase of drugs and other medical supplies locally and internationally with tenor from 6 months without tangible collateral if not more than N5m. There are also loans focused on the private educational sectors that allow primary, secondary and tertiary institutions to get loans for renovation, purchase of educational materials, purchase of school bus or other operational assets etc. Collateral is usually against the receipt of school fees. Other sector focused loans include petroleum products marketing for filling stations with DPR license and oil and gas contract financing, FMCG loans/overdrafts covering non-perishable food products, home used products, textiles, etc, other types of SME product financing including import finance, cement distributorship. This is in-exhaustive.

My aim here is to increase our knowledge in terms of facilities offered by commercial banks, microfinance banks and marketplace lenders. In my next post, I’ll be talking about reasons why business loan applications are turned down and what you should do about it. It will also cover what lenders are looking for in your application and business. This is major and the whole essence of this lecture.
For questions and enquiries, you can reach me preferably via email – adtenng@yahoo.com

SUCCESS!!!

Adtenven:
Getting a business loan continues to be a huge task for most business owners in Nigeria. The statistics are better in developed and serious emerging economies in the world. In Nigeria however and this due to a myriad of reasons (both external and internal to the business), a lot of businesses have failed while many continue to struggle day to day without any hope of scaling to the next level in their aspirations.

At this point, it is noteworthy to say that a lot of the reasons why businesses fail to raise capital from lenders (banks, etc) are due to their own failings themselves. In other words, business owners would be better positioned for a consideration of their loan applications if they are able to put in place lots of the things a typical lender is looking out for in an applicant.

By the way, it is needless to say that the money you are seeking from the bank is also being kept in custody of the bank (it does not belong to the bank but to individual and corporate depositors alike) and these funds are at a cost to the bank i.e. the bank will not only return the money to the depositor when demanded, it will also return it with interest. It is therefore important for banks to be entirely sure that you/your business is able to return the loan capital plus interest as at when due.
In this thread by the grace of God, I will be sharing to the SME community how you can structure yourself and your business for your loan approval across various lenders (commercial banks, microfinance banks, marketplace lenders). A lot of people will not even dare approach a commercial bank for a loan because of the belief that commercial banks don’t give loans to SMEs. Like I said, this is largely true because the business is not worthy (as currently structured) of a loan. Some are also suited for micro-lending but instead, they approach commercial banks and without even filling any form, they are turned down.

Why should you listen to me?

I need to state here that I am not here to sell any eBook. I spent over 12 years in the banking sector with various experience in branch management across, operations and business development/relationship management with lots of interface with business analysts, credit appraisal and risk managers. In less than 5 months after I exited the sector, I secured 50% funding for a multi-million naira project (after I decided to commence my entrepreneurial journey fully).

At a point in this lecture series, depending on responses, I would select 5 businesses that have had their loan applications rejected before by helping to repackage the business for a loan application/approval. Businesses who have not applied before too will be considered. I am not given any guarantees but be rest assured that you and your business will be the better for it. There are instances where a business that has received one or more loans in the past would have an application turned down may be due to economic events in the businesses’ sector etc. There are also instances where a bank turns down a loan application only for another bank to approve the same application.

I am doing this to freely share of the knowledge that I have as I see a lot of business owners struggle as a result of lack of knowledge. Like I said, I am not giving any guarantees. The best of business plans still fail in reality but every experience makes you a better entrepreneur in your journey to realizing your dreams.

In my next write up, I will be sharing various kinds of business loans available in commercial banks and alternative/marketplace lenders and which are relevant to most SMEs. A lot of us don’t even know that our business activities/operations can be easily funded by a bank.
Another section will include “reasons why business loan applications are turned down and what you should do about it.” It will also cover “what lenders are looking for in your application and business.” This is major and the whole essence of this lecture. I will also be covering loan applications to some of the development banks we have in Nigeria such as Bank of Industry, Bank of Agriculture etc

Success!!!

Nigerian entrepreneurs should learn to be truthful in their dealings and maintain high levels of integrity...I think that should be the starting point!

SavageResponse:


Nigerian entrepreneurs should learn to be truthful in their dealings and maintain high levels of integrity...I think that should be the starting point!

You can start with that in your own lecture. This is his own and this is the way he has chosen to start.