How to Get a Small Business Loan in Nigeria
Are you in search of a small business loan in Nigeria? One of the most difficult aspects of starting and expanding a small business in Nigeria is obtaining funding. People typically start businesses using money they have saved and donations or loans from friends and family. When money from these sources isn’t enough to build a business, the owner must hunt for new funding sources.
Obtaining a small business loan in Nigeria is a huge challenge for most small enterprises, owing to a lack of appropriate credit facilities for small business owners and entrepreneurs. However, outside money is sometimes required to start or grow a firm and cover day-to-day expenses such as payroll and inventory. Although locating, qualifying for, and receiving approval for small-business loans might be challenging, the more information you have, the easier it will be.
Ways to Get a Small Business Loan in Nigeria
This article outlines the most important methods and ways you can secure your small business loan today:
Banks & Financial Institutions
Individuals who want to start their own business but lack the necessary cash might turn to banks for assistance. Banks and financial institutions help small businesses and firms at practically all phases of their development. A financial institution will grant you a small business loan in Nigeria if your business concept, estimated returns from the firm, ability to repay the loan (through business or otherwise), management experience and competence, and other securities provided satisfy them.
Even though most bank loans have a high-interest rate, you must do your homework by analyzing the numerous business loan choices available for small businesses from Nigeria’s major banks. Before deciding which option to choose, make sure you completely understand the terms of the loan agreement and are confident that you will repay the loan within the specified time frame.
Here are five basic steps you can take to improve your chances of acquiring a bank loan and growing your business.
- You must fully appreciate why banks grant loans in the first place. Banks loan money with the expectation of repayment. A bank will not lend you money unless you can demonstrate that you have a solid business plan and that you will spend the funds as directed in your plan.
- Secondly, they consider your reputation. Most banks will not give you money if you have a history of not repaying debts or issuing bounced checks.
- Does your company have a good accounting system in place? Many banks will only lend to companies with a well-organized and precise accounting system.
- Are you well-versed in your field? It is simpler to persuade a bank to lend to you if you can demonstrate that you understand the industry in which you operate and the value you contribute to that industry.
- Do not underestimate the role of persistence. Many small business owners apply to only one or two banks. They give up on their objective of obtaining a loan after being turned down. It’s crucial to understand that banks specialize in different areas of business.
Government Loan Schemes
Small and expanding firms should always choose government-sponsored loans because they are more economical.
SME loans issued by the Nigerian Government go a long way to assist SMEs. Small businesses use the funds for their day-to-day operational costs, growth, and expansion costs, and infrastructure expansion. The Nigerian federal government largely assists small and medium-sized businesses in their development through the following established institutions:
- The central bank of Nigeria (CBN)
- Bank of Industry (BOI)
- Bank of Agriculture (BOA)
- Small and Medium Enterprises Development Agency of Nigeria (SMEDAN)
- Development Bank of Nigeria (DBN)
- Nigerian Export-Import Bank (NEXIM)
Several additional Nigerian banks and financial institutions collaborate with the government to give business loans. They do this through government-sponsored funding schemes like YouWin and NPower through NASIMS. Most of the time, these government-sponsored funds are in the form of a grant or a low-interest loan. This makes getting one extremely difficult because you’ll be up against a slew of other business owners.
The lending conditions and interest rates differ depending on the organization and loan type. Some of the current federal government loans for small businesses in the country include:
- AGSMEIS Loan for SMEs and Agricultural businesses
- Creative industry Financing Initiative (CIFI Loan)
- Anchor Borrowers Programme (ABP) Intervention for Agriculture
- MSMEDF Loan – Micro, Small and Medium Enterprise Development Fund
- Accelerated Agricultural Development Scheme (AADS Loan)
Loan Service Providers
We’ve all been in a scenario when we needed money right away to take care of a pressing matter. What do you do if a bank loan takes a long time to come through? This is where internet lending services come to your rescue.
Small businesses and individuals in Nigeria now have access to quick and cheap short-term loans, thanks to FINTECH. Private companies such as Paylater, Renmoney, KiaKia, Palmcredit, C24 loan, and Quickcheck are leading the way in offering short-term financing.
You can now apply for quick loans online and receive them in as little as 24 hours. This type of loan is only available for a short period (usually 3 — 6 months). It has a very restricted amount of capital available. However, it may be your best bet for immediate cash to complete a customer order or supply your inventory.
There you have for how to get a small business loan in Nigeria. It’s time to apply for the loans that meet your financial demands and that you qualify. Before you do this, you must first review your options and decide on which one you want to go with. Read through the loan requirements and be sure that you have the necessary documents before applying. Meanwhile, check out SME360 for other articles to help you build your small business.