If it's time to give your business a boost, you may consider getting a loan from the bank. Find out how it can be done in Nigeria.
Want to develop your own business, but you don't have enough money? We are going to help you then! Find out everything you need about business loans and the opportunities they give.
Kinds of loans available in Nigerian banks
To provide yourself with appropriate business growth, you must understand there exist various types of loans. They offer different conditions and amounts. Let’s observe common ones:
- Short- / long term. It is the main feature you must pay attention to. Long-term ones are appropriate for future development. By means of them, you'll be able to match loan length with useful life of asset. Short-term debt's often applied to raise cash for cyclical inventory needs, accounts payable and working capital. Long-term ones are more popular by now. However, they require more substantial collateral.
- Secured and unsecured loans. It refers not to you but to the lender. In any case, you must return the debt. However, if it is secured, there will be a guarantee for the creditor. It might be specific property (collateral) owned by the debtor. Thus, if you have no opportunity to return money, the lender might liquidate the property. For any growing business, it's advisable to choose secured loan with appropriate collateral. Unsecured loans are not supported by any property (they are not usually available for startups though).
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Can you get a cash loan from a bank?
It's a frequent case when people don't want to take credit card loans, because of interest rates, which are very high. In this situation, personal loans are good alternative. Nevertheless, when you want to find conditions, which will be appropriate for you, it's necessary to get good credit score. Otherwise, the percent might be even higher.
If you've decided to get cash from the bank, you can spend it on:
- debt consolidation,
- improvement of house,
- business needs,
- purchases etc.
Before signing anything, you should be aware of all terms. For example, there are payday loans, rates of which are too high (up to 300%). Thus, be careful and attentive.
How much can you loan from a bank?
There exist plenty of factors, which may influence sum of money you may borrow. They might be various in different banks. The most important ones are usually as follows:
- Absence/presence of dependents. Fact that you have children or any other relatives, who are disabled or ill, might have an impact on credit. It refers to every person, who needs your financial support.
- Purpose. The bank must know what you demand a credit for. You may want to get, for instance, mortgage loan or to make an investment, and so on.
- Income. The amount you earn is probably the key criterion. The more you get every month/year, the bigger credit is available for you. Special document is usually required to confirm your income. The source of it should be indicated as well.
- Expenses. Sometimes banks may ask you to write about all your expenses, including bills and current loans (of you have ones).
Make sure all information you give is true and income is legal.
How do you get a loan from a bank
Now let’s observe steps of getting business loan. They are as follows:
- Decide which variety of loan you are planning to get. In other words, what money is necessary for.
- Decide which amount is required. Some banks may refuse if they think you want too much.
- Choose the bank to borrow. It's advisable to select a local one. But you should compare the conditions. The bank must be reliable. There are top banks in Nigeria, which are even listed in the world ranking.
- For business loan, all the papers must be all right. Besides, you should correspond to the bank requirements and tell about your experience in business, possible industry risks, cash flow, and other details.
- Prepare application package. It includes business plan, your resume, projections and results (if there are ones), personal financial data (including tax payments).
After this, all you have left is to wait. The decision might take about a month or so. There are several useful tips, which may also help:
- tell the story of your business to bank worker,
- have alternative financing for different short-term needs,
- get your documentation in order.
It's possible to become a rich businessperson in Nigeria. The key thing is to understand what you want to reach. The products or services you select must be relevant. Before going to bank, think everything over. Decide which type of loan you need and how much money you want to receive. Consider the factors, which may influence the amount. And then, when you are well-prepared, you may take you chance. Follow the instructions and everything'll be all right.