Itsrm:


I actually agree with you and seatrade. It really does not make any sense paying 15/24% interest on a loan when your collateral for the loan can easily be liquidated.

If the collateral was a house or landed property, it will make more sense

If I am going to take a loan with my mutual fund as collateral, the interest on the loan has to be less than 5%

Sharp!

SeaTrade:
He still lost 500k ,I wonder how you failed to see it.
If he had not bought mutual funds and used that his money to import, he would have had all the 5m to himself.
But according to you,he should buy mutual funds and use as security to get a loan to import.
Okay,still on the 20m loan,he pays interest of 1.5m throughout the period of the loan.okay.
Take that off from his 5m profit is ;5m-1.5m=3.5m.
Okay add that to the 1m he made from the mutual funds and what you get is 4.5m.
Now tell me,where is the sense in this?
Not also forgetting that he will be remmiting interest and capital back to the bank monthly throughout the loan period which is going to take away all the purchasing power from his hands before the loan elapses,gradually killing the business and taking away profitability.
I don't see how this is such a smart thing to do tbh...

I wonder too because I believe he's investment savvy and his financial literacy is top-notch

Foodempire:


The illustration you put up there is best described of a fearful business man, getting a loan to boost one's business is great but as far as mutual funds investor is concerned this type of loan is unsuitable. such business man is only afraid to take the bulls by the horn.

He's like someone looking for the best way to die, forgetting all die na die. If you fail to pay back the loan , your asset will be forfeited so why not take your your own destiny in your hands.

It appears as if you are running your business on loan but in the real sense of it, you are only making use of your own funds yet you still pay interest on it, if anything goes wrong it's still a one way ticket thing.

Asset Backed loans, can be on for years provided you have enough margin cover and you are servicing your interest every quarter.

With N20 million at 15%, the quarterly interest on the loan is about 750k, and the businessman is getting about N2.5 million per quarter trading profit and 500k dividend from his mutual fund. Ploughing back part of his profits and dividends, he can build the fund to over N35 million in 2 years and increase his loans for the expansion of his business

If he uses overdraft, his interest will only be on the amount drawn down. If it is an account that has a high turnover of inflow and out flow, his interest payments won't be substantial.

When one looks at how you have simplified it, it becomes tempting to agree 100% with you, but cash backed loans is very popular with business
savvy folks. Maybe it is the desire to stay disciplined with payment or the lure of having cash at the bank,, but I do know it is a strong recommendation.
It is also good for people who have a predictable inflow that want to use that inflow to finance a business and do want to wait until they have saved the required amount so they decide to borrow upfront, but rather than use their asset as collateral, they opt to use the cash with the bank as the collateral knowing that their inflow can handle the loan repayment.

You are seeing that mutual funds as cash, but the owner is seeing it as an asset just like a house that he would not want to sell in order to do one quick 6 months business. My thoughts

Foodempire:


This type of leverage is different, when you keep a liquids (cash) type of collateral of same values with your creditors to secure a loan with interest, this is not called a loan but a joke and gimmick to milk you off.

Kindly answer this simple question: will you seek for a 18 naira loan from me while I have your 20 naira cash with me then still ask you for a pay back of 18.50 naira? A good leverage is when you have less and you are granted more in order to make more

ojesymsym:
When one looks at how you have simplified it, it becomes tempting to agree 100% with you, but cash backed loans is very popular with business
savvy folks. Maybe it is the desire to stay disciplined with payment or the lure of having cash at the bank,, but I do know it is a strong recommendation.
It is also good for people who have a predictable inflow that want to use that inflow to finance a business and do want to wait until they have saved the required amount so they decide to borrow upfront, but rather than use their asset as collateral, they opt to use the cash with the bank as the collateral knowing that their inflow can handle the loan repayment.

You are seeing that mutual funds as cash, but the owner is seeing it as an asset just like a house that he would not want to sell in order to do one quick 6 months business. My thoughts

In other words,the bases of mutual funds is emotions,not logic then.
"Make e be say bank owe me money and I can access credit too"...

lol... There is some logic to it, but would you sell your house or truck to get cash to run a short term business? Wouldn't you rather stake the house as a collateral to get the funding?
That stock, mutual fund and bond is usually viewed with the eyes of a physical asset even though it is liquid so guys would rather bank with it.
It is the same way where an average naija man will not understand why people live above their means in the US using credit card.

SeaTrade:
In other words,the bases of mutual funds is emotions,not logic then.
"Make e be say bank owe me money and I can access credit too"...

emmasoft:


Most of the banks gives rate base on the amount and duration.

Fixed deposit is no longer popular. Money market fund is better.

Advantages of Money market fund:

No withholding tax (WHT)
Higher interest rate that can even be higher after investing,
Tenor determined by the investor
Investors are free to withdraw all or part of their money without any penalty after 30days
You can also top up with any amount at any interval.
Anyone can start investing with as low as N1,000.
Rates are not determined by amount and tenor. All funds get same interest irrespective of duration.

To open Money market fund with investment one click the link on my signature. You can also as well contact me with details on my signature.

Interesting!

The last two pages have been very thought provoking and insightful I must say, very interesting debate and solid points from both angles on this argument.

Hmm, very educative post.

Me get 200k like this, I just dy find how I wan use invest am.

ojesymsym:
lol... There is some logic to it, but would you sell your house or truck to get cash to run a short term business? Wouldn't you rather stake the house as a collateral to get the funding?
That stock, mutual fund and bond is usually viewed with the eyes of a physical asset even though it is liquid so guys would rather bank with it.
It is the same way where an average naija man will not understand why people live above their means in the US using credit card.

Let me add to this your points.

It is like somebody asking why a person having 10m in the bank is taking a loan of 8m to buy a transport vehicle and that why did the person not take 8m out of the 10m as he will still be let with 2m.

Strong minds discuss ideas.

Average minds discuss events.

Weak minds discuss people...

Ciao!

jobark:
The last two pages have been very thought provoking and insightful I must say, very interesting debate and solid points from both angles on this argument.

ojesymsym:
When one looks at how you have simplified it, it becomes tempting to agree 100% with you, but cash backed loans is very popular with business
savvy folks. Maybe it is the desire to stay disciplined with payment or the lure of having cash at the bank,, but I do know it is a strong recommendation.
It is also good for people who have a predictable inflow that want to use that inflow to finance a business and do want to wait until they have saved the required amount so they decide to borrow upfront, but rather than use their asset as collateral, they opt to use the cash with the bank as the collateral knowing that their inflow can handle the loan repayment.

You are seeing that mutual funds as cash, but the owner is seeing it as an asset just like a house that he would not want to sell in order to do one quick 6 months business. My thoughts

But the truth is that it's a raw cash, Mutual funds is the most liquids in The system unlike shares, you can get your redemption within 24/48 hours. Securing such loan can't boost your credit scores with any financial house or bank, it's a garbage in and out thing, once you are out of cash your partnership with them ceased until further inflows from you

Does anyone know how much dollar is being sold for now.

The $10,000 I bought at N370 in 2020 is sitting idle under my pilliow.

How much does dollar sell for now?

PresidentBuhari:
Does anyone know how much dollar is being sold for now.

The $10,000 I bought at N370 in 2020 is sitting idle under my pilliow.

How much does dollar sell for now?

560

NL1960:


Let me add to this your points.

It is like somebody asking why a person having 10m in the bank is taking a loan of 8m to buy a transport vehicle and that why did the person not take 8m out of the 10m as he will still be let with 2m.

If the 10m was just sitting idle with no purpose,I'd say use it.
You somehow forget to see that a loan has something called interest attached to it and also remitting capital and interest in non collateral cases.

SeaTrade:
If the 10m was just sitting idle with no purpose,I'd say use it.
You somehow forget to see that a loan has something called interest attached to it and also remitting capital and interest in non collateral cases.

It might be idle as you say and it might not be idle. The person taking such a decision knows why. It could be it is being kept for an opportunity that can come out from the blues.

Foodempire:


But the truth is that it's a raw cash, Mutual funds is the most liquids in The system unlike shares, you can get your redemption within 24/48 hours. Securing such loan can't boost your credit scores with any financial house or bank, it's a garbage in and out thing, once you are out of cash your partnership with them ceased until further inflows from you

Mutual Funds include Money Market Fund, Equity funds, fixed income funds, REITs, Eurobond funds, balanced funds.

Mutual Funds can be converted to cash between a day and 5 days.

NL1960:


It might be idle as you say and it might not be idle. The person taking such a decision knows why. It could be it is being kept for an opportunity that can come out from the blues.

Being liquid gives options and opportunities.

Someone bought a property of N40 million for N25 million, because he could produce cash within 3 days

omotola90:
branch is able to offer that simply because they don't have branches scattered all over the country for maintenance and the likes, the most downloaded app on play store(before peeps start saying I'm advertising for them) has their finance office in St. Nicholas house Catholic street Victoria island lagos Nigeria... Licenced by cbn, they are credible just I've stressed earlier.... Their partners are visa and andressen horrowitz(early backers of Facebook).... I'm reffering to the person who ask about branch

This do not explain how they generate that return. 20% a year is huge. Probably they are trying to attract investors over time it will reduce drastically. They seems Legit and very serious.

Neverlosemoney:

This do not explain how they generate that return. 20% a year is huge. Probably they are trying to attract investors over time it will reduce drastically. They seems Legit and very serious.

They lend at an average rate of 10% per month so they should be able to pay 20% annually. The problem occurs when they raise more capital than they can successfully deploy.

einsteine:


They lend at an average rate of 10% per month so they should be able to pay 20% annually. The problem occurs when they raise more capital than they can successfully deploy.

Crazy, that is like 120% per annum

Neverlosemoney:

This do not explain how they generate that return. 20% a year is huge. Probably they are trying to attract investors over time it will reduce drastically. They seems Legit and very serious.

yes..they are legit.. It's a crucial reason.... Paying multiple staffs compared to banks.... You sure know how that works from paying allowances... Will the rate reduce very soon? Well let's fold our hands...

einsteine:


They lend at an average rate of 10% per month so they should be able to pay 20% annually. The problem occurs when they raise more capital than they can successfully deploy.

Hearing of 10% per month for the first time. Had always thought 6% per month was the highest.

emmanuelewumi:


Crazy, that is like 120% per annum

They are mainly short term loans. Doubt anybody will take 10% per month for one year.

emmanuelewumi:



Crazy, that is like 120% per annum

That's even normal. The Chinese loan apps lend at 50% per WEEK. They don't accept deposits because they bring the money from China.

NL1960:


They are mainly short term loans. Doubt anybody will take 10% per month for one year.

Actually a lot of people basically roll over (that is, pay then retake another loan). So it actually ends up being for a whole year. They are meant to be short term but the hard times make people unable to repay.

NL1960:


They are mainly short term loans. Doubt anybody will take 10% per month for one year.

Basically for consumption, new phone, aso ebi etc, before pay day

NL1960:


Hearing of 10% per month for the first time. Had always thought 6% per month was the highest.

We have 15% per month at 0.5% per day from Page a Fintech money lender

Money lending is good business.

Loans to customers for United Capital increased from N24 billion in 2020 to N77 billion in 2021.

The 9 month result for 2021 was released today

Hello great minds. What do you suggest I do with a floating money of 40 million naira ? A long term savings or something

NL1960:


Great insights. What you just described here happened exactly to an India who was working in a UK branch of a company that a friend works. He was recruited in India to work in the UK branch. He thought he was being credit worthy by not 'borrowing'.

Not an unusual scenario with folks who cross the divide. It takes years to see that different nations operate differently.. Most business opportunities that'd bring good money in Nigeria wouldn't in other climes as they're already structured or industralised (e.g agro storage)... Reverse is also the case

In a developed nation, being unable to leverage the opportunities the society provides means you might just end up working for others or to pay tax

Youngzedd:
The loan interest rate is high and that discourage lots of people.

Some banks giving up to 28% per annum with lots of requirements.

GTBank is giving out credit facility @ 18% per annum for 6 months term, details >> https://www.gtbank.com/business-banking/sme-banking/loans-advances/quickcredit-for-small-business

1. High rate (18% per annum).
2. Short tenure (6 months).


I see no reason why it should be more than 10% if truly the CBN want to change the narrative or boost SMEs.

The effective rate on GTB is less...abt 10% apr in actual terms... Also, the way it's structured, relatively more of the interest is paid at the initial months hence after a while, it might make sense to hold it for the full term.

6 months cap is for the first tenure... Subsequently, it's upto a year.

Rates could be better, but you also have to look at CBN borrowing rates (i.e TB's) which is usually a benchmark.... Banks would lend less than TB rates