24 Oct
How to get funding from microfinance banks in Nigeria for Your Startup
Startups are springboards to reaching heights of riches if the right decisions are perfectly executed. It starts from when a brilliant idea boils up in the mind, penned down on paper and then made into a fantastic business plan, financial projections, and envisioned to tap into a billion-dollar market. Then the next thing will be the commonly asked question in the startup community - ‘How can we get funding?’
As a startup business man or woman, a petty trader or individual in need of financial assistance, microfinance banks have a primary objective of providing credit facilities to you.
Microfinance banks in Nigeria are financial institutions that provide small loans to individuals or groups. They also give entrepreneurs and organizations, access to credit facilities for their businesses. They grant loans to individuals and small scale enterprises (SMEs) to be paid back in small installments with a little interest.
The roles of micro-finance banks in the development and growth of a country’s economy cannot be overemphasized. They play key roles in poverty alleviation, agricultural development, increase in small scale businesses and so on. Here, we will be focusing on microfinance banks in Nigeria and how they grant loans.
The following are simple steps to getting a loan from most micro finance banks in Nigeria.
Have A Genuine Reason Or Project For The Loan
Microfinance banks will never loan you money for frivolities. If you want to get a loan from a microfinance bank, you must have a genuine reason for it. It could be for business purpose or personal development, so long as your purpose for applying for the loan is important.
Microfinance banks only grant loans that fall into the category of small and medium enterprises (SMEs). They are also into business, and no business wants to run into loss. Granting loans is a serious business. Therefore, whatever you need credit facility for, must be serious business or an important project, with a guaranty that you will repay your debt.
The kind of credit facility that most microfinance banks grant are loans for business purposes, asset procurement, agriculture, educational purposes and loans for salary earners. No microfinance bank will give you loan if there is no money back guaranty.
Document It
You can further facilitate access to loan from a microfinance bank by presenting a document in respect of your reason for applying for that loan. It could be in form of a document concerning a project you are working on, for which you need financial assistance.
For instance, if you are a contractor needing financial assistance to complete a project for which you have been paid in part, in which you will not be given the balance of your payment until the project is completed. All you need to do is present the proposal for the contract, acceptance of your proposal, payment agreement and all other relevant document. This will stand as a proof that your purpose for applying for the loan is genuine. It will also serve as a reference.
Open An Account With The Bank
The first thing you will be asked to do when you go to apply for a loan in a microfinance bank is to open an account with the bank. This is to show that you are serious and you are willing to be committed to the bank.
Service The Account For A Period Of Time
It does not just stop at you opening an account with the microfinance bank, you need to actively service the account i.e paying and withdrawing money from the account constantly, before you can be qualified to apply for a loan.
This will help them to build trust in you. It will also assure the bank that you will repay the loan if it is granted.
Present A Collateral Or Its Documents
You also need to present a collateral when applying for a loan in a microfinance bank. This may not apply to small business loans for petty traders and individuals. In fact, some microfinance banks do not require collateral e.g Lift Above Poverty Level (LAPO). But, it will be necessary for business loans that fall into the category of assets acquisition, agriculture and other loans of a larger amount.
Your collateral must equate the amount of loan you are applying for or supersede it, but it cannot be lesser in money value to the loaned amount.
These are the basic steps to acquiring a loan from microfinance banks. It may vary from country to country, but this process is peculiar to Nigeria.
