Raising capital is not always easy. The current situation of things places businesses in a tight corner where raising capital is concerned. We are stared in the face by the unavoidable changes that will occur in the business environment as a result of COVID-19.
One way to mitigate the impending challenges regarding business capital is by accessing loans. The Central Bank of Nigeria (CBN) has an array of loans for business owners in Nigeria. This must be great news, right?
In this post, we will take a look at some of the most prominent of these loans and how to access them.
Why you need to consider taking a business loan
So far, we have agreed on a fact. Businesses need loans. The question that begs for an answer is “why?”
Let’s quickly breeze through a few reasons why you may need a loan.
a. Physical expansion.
b. Building credit for future purposes.
c. A need for additional equipment.
d. Acquisition of new inventory.
e. Exploring a new business opportunity.
f. A need for fresh talent.
Each of these reasons is self-explanatory so there’s no need to go into too much detail. Now that it is clear why you need a business loan, let’s look through provisions by the CBN.
CBN Loans you can access for your business
The Central Bank of Nigeria is the apex bank in the country. This means it oversees all the other banks. The CBN has several mandates and functions. One such function is developing the different sectors of the Nigerian economy (mostly the agricultural, financial, and industrial sectors).
Due to its mandates, the bank has an array of loan facilities it makes available to business owners in Nigeria. It does this in conjunction with different bodies or organizations. In this section, we will take a look at some of these loans and their requirements.
SMEDAN is an acronym for Small and Medium Enterprises Development Agency of Nigeria. The body was established by the government in 2003 with the goal of mentoring and promoting the growth of MSMEs.
One way it achieves this aim is by providing loans to these businesses in conjunction with the CBN. The idea is the SMEDAN acts as an intermediary, linking businesses with loans from the CBN and other providers.
How to access the loan
The steps below will help you access this loan.
1. Visit the credit information portal on SMEDAN’s website.
2. Choose the kind of loan you need. To do this, check the top menu and click “Access Loans.” There are four kinds of loans you can choose from:
a. Personal loan
b. Business loan
c. Mortgage loan
d. Credit card loan
3. Provide the required information. Some of the required information includes full name, the purpose of the loan, age, and the amount your need.
4. Check the availability of the loan. This gives you a view of the available options.
5. Apply for the loan. After going through the results from the previous step, pick a loan that suits your need.
Interest rates for this loan are friendly for small and medium businesses. As a result, interest rates are very low.
The AGSMEIS loan from CBN gives you access to a maximum of N10 million and an interest rate of 5% yearly. AGSMEIS stands for Agric Small and Medium Enterprise Scheme. It is an initiative designed to support the effort of the government in promoting Small and Medium Agribusinesses.
AGSMEIS was established in 2017 voluntarily by the Bankers’ Committee in conjunction with the CBN.
Who is eligible for this loan?
Even though it is majorly targeted at Agribusinesses, several other businesses can access this loan. Let’s take a look at who below:
· Agricultural businesses
· Creative Industry (entertainment, fashion, crafts, design, etc)
· Services (Restaurants, Hospitality, Catering, Services, etc)
How can you access this loan facility?
There are certain conditions you must meet to access the AGSMEIS loan. They include:
a. Completion of training by a registered Entrepreneur Development Institute (EDI).
b. Apply for the loan via the EDI.
c. The EDI forwards the application to the CBN.
d. The applicant will appear for an interview.
e. Qualified applicants are contacted for the loan.
What documents do you need to possess to access this loan?
a. Certificate of business registration from the CAC.
b. Tax receipts.
d. Introductory letter.
e. Guarantee letter.
f. Certificate from the EDI.
g. Passport photographs (applicant and guarantor).
h. Valid ID Card.
Learn more about the AGSMEIS here.
COVID-19 Targeted Loans
This is a N50 Billion Targeted Credit Facility created by the CBN to help businesses cushion the effects of the new coronavirus. As you know, this pandemic has crippled several businesses, especially SMEs. With SMEs making up about 90% of all the businesses in the country, the CBN had to swing into action.
The objectives of this scheme include:
a. Cushioning the effects of COVID-19 on MSMEs and households.
b. Provide support for businesses crippled by the virus.
c. Make credit available to help businesses increase their production capacity through research and development and equipment upgrades.
Who is eligible for these loans?
a. Households that have clear proof that the pandemic has hampered their means of livelihood.
b. Existing businesses with proof that their activities have come to a halt because of COVID-19.
c. Enterprises that have ideas with bankable plans allowing them to grow new opportunities from the pandemic.
What is the loan limit for this scheme?
Households have a limit of N3 million while SMEs can access up to N25 million. The amount released will be based on cash flow, activities, and the industry in which the business operates. A business applying for working capital gets 25% of the average of its annual turnover for 3 years.
How high is the interest rate for this loan?
For the first year, that is between now and February 2021, it is 5% per annum. From March 2021, it returns to 9% per annum. To learn more about this loan, click here.
Accessing loans from CBN has several advantages. The biggest of all the advantages is the low-interest rates. We have shared the 3 most prominent CBN loans for business owners in Nigeria in this post. You can avail yourself of any based on your preferences and your business.
Did we leave anyone out or do you have a question? Drop it in the comments section.