If you are interested in starting your own business, it is most likely that you will have to borrow money. But not everyone has a rich uncle, who can loan them money with a low or entirely non-existent interest rate. Therefore, you need to know what other options for loans are available now in Nigeria. Below, you can find information on where you can get a loan for your business in Nigeria, as well as some tips to guarantee you getting it.
So what exactly is a business loan and how is it different from the other types of loans? Well, as with any other loan, you receive money from a financial institution that you need to repay in a set amount of time with interest. The main difference is that, in addition to your previous credit history, money lenders consider your business idea and make a decision based on its expected profitability. If they don’t think your idea is good enough, the chance of getting a business loan diminishes considerably. There are many ways in Nigeria to get a business loan. But before you actually jump into it, take a minute to consider this: do you really need a loan? Have you considered all the other options? If the answer is ‘yes’, then, by all means, proceed.
Money lenders in Nigeria
Nigeria has set a course for aiding small and medium-sized enterprises (SME) in their endeavors, which includes making it easier for entrepreneurs to get loans. There are plenty of banks, funds and online lenders that will give you the needed money. Below, we have listed the best options available for getting a business loan.
Getting a loan from a bank
The most common and traditional way to get a loan is to go to a bank. A lot of Nigerian banks offer business loans, including loans for small businesses. The top-5 banks for this are:
✶ Bank of Agriculture. This bank offers people that want to start their own business in the field of agriculture, low cost credits. BoA aims to improve the situation in the agricultural sector by helping farmers with financing of their businesses.
✶ Bank of Industry. BoI has a special program for young entrepreneurs, which includes 9% interest rate on business loans and no collateral. However, to get it, you need to have two guarantors (a person that would pay your debt if you are unable to do it), and not everyone can do that.
✶ Diamond Bank. This bank also offers loans with no collateral and aims to help people in Nigeria with micro, small and medium-sized businesses.
✶ First Bank. What’s interesting about this bank’s offer of non-collateral loans is that you have to pass a psychometric test in order to receive it.
✶ Stanbic Bank. Stanbic’s loans are tailored to each customer. Depending on your predicted cash flow, your monthly payments will not completely empty your pocket.
Getting a loan from a fund
You can also turn to a fund to get money for your business. Most of them offer low-interest loans for up-and-coming entrepreneurs, and some also offer training and guidance. Examples of such funds in Nigeria:
✻ Lagos State Employment Trust Fund
✻ Social Intervention fund of Federal Government
✻ GroFin Fund
✻ Tony Elumelu Fund.
Getting a loan from online lenders
In the age of technological progress, there is also an option to get a business loan from an online lending platform. Most of them offer quick all-purpose no-collateral loans. However, they usually target micro and small entrepreneurs, as the amount of money you can get from such platforms is very limited. Some of the best Nigerian online lending platforms are Aella Credit, C24, KiaKia, OneFi, Paylater and others.
Tips for getting a loan
Many people have trouble getting a loan, especially from banks. Why is that? The main reason is that they don’t have a concrete idea about why they need the money. To increase your chances of getting a loan consider these tips:
* Always check beforehand what documents you are going to need. Some financial institutions have a really short list of required papers, but even they won’t give you their money without the necessary paperwork.
* Have a good credit history and overall reputation. Make sure that you pay up in time and have no outstanding debts. Most banks won’t even consider your application if you have an unpaid loan at the time of application.
* Have a legitimate business idea and a business plan. You can’t just tell the money lenders that you need money. You need to tell them why and how you are going to repay the debt. Be prepared that you might be questioned on the smallest details, especially if you are asking for a large sum.
* Be persistent. Don’t give up if two or three financial institutions turn you down. Apply for loans in as many places as you can.
* Acquire at least one guarantor. It is not easy to find a person who would be willing and able to pay your debt, but financial institutions are more inclined to give you a loan if they have a guarantee that they are getting it back.
Overall, it is not that hard to get a business loan in Nigeria. There are a lot of available financial institutions, and most of them have special programs for small businesses. Just be prepared for everything and best of luck in your business!