Guide To Securing A Small Business Loan In Nigeria

Securing a small business loan in Nigeria is one of the most stressful processes you can go through. Thankfully, in this article, we will walk you through the step-by-step process of successfully securing a business loan in Nigeria with ease.

From understanding the different types of loans available to requirements for business loans and tips for preparing a strong application, we’ve got you covered.

Types of Small Business Loans Available in Nigeria

When it comes to securing a small business loan in Nigeria, it’s essential to understand the different types of loans available. This knowledge will help you choose the most appropriate loan for your business needs.

Here are some of the most popular business loan types available to businesses in Nigeria:

1. Working Capital Loans

These loans are designed to provide businesses with the necessary funds to cover day-to-day operational expenses. Working capital loans can help you manage cash flow, purchase inventory, pay wages, or meet other short-term financial obligations.

2. Equipment Financing

If your business requires specific equipment or machinery to operate effectively, you can opt for equipment financing. This type of loan allows you to purchase or lease equipment while spreading the cost over time.

3. Business Expansion Loans

If you’re looking to expand your business, whether by opening new branches, entering new markets, or launching new products/services, a business expansion loan can provide the necessary capital. These loans usually have longer repayment terms and can help fuel growth.

4. Trade Finance

Trade finance loans are specifically designed for businesses involved in international trade. They can help cover the costs associated with importing goods or facilitate export activities by providing the necessary working capital.

Read More – The SMART Way To Manage Your Small Business

5. Microloans

Microloans are small loans typically offered to micro and small enterprises. These loans are often used to fund startup costs, purchase equipment or inventory, or provide working capital. Microloans are usually easier to secure and have more flexible repayment terms.

Requirements For Securing A Small Business Loan

Before applying for a small business loan in Nigeria, you need to ensure that you meet the lender’s requirements. While specific requirements may vary depending on the small business lender and the type of loan you’re seeking, here are some common prerequisites you’re most likely to encounter when applying for a business loan in Nigeria:

1. Business Registration

You must have a legally registered business entity, such as a sole proprietorship, partnership, or limited liability company (LLC). Small business lenders typically require proof of registration and may ask for supporting documents like your Certificate of Incorporation or Business Name Registration. So make sure your business is registered with the Corporate Affairs Commission and you have all your documents ready in soft and hard copies.

2. Business Plan

A well-prepared business plan is crucial when seeking a loan. It should outline your business goals, market analysis, financial projections, and how you plan to utilise the loan funds. A comprehensive and realistic business plan demonstrates your commitment and increases your chances of loan approval.

3. Financial Statements

Business lenders will review your financial statements to assess your business’s financial health and repayment capacity. These statements include income statements, balance sheets, and cash flow statements. Ensure your financial statements are accurate and up-to-date.

4. Collateral

Depending on the size of the loan you’re seeking, some small business lenders may require collateral to secure the loan. Collateral can be in the form of property, equipment, inventory, or other assets. Make sure you have a clear understanding of the lender’s collateral requirements before applying for the loan.

5. Credit/Banking History

Lenders will evaluate your credit history to assess your creditworthiness and repayment track record. When you’re seeking microloans, banks might settle for reviewing banking history and relationship your business has had with them and other banks. This includes reviewing your personal and business credit scores, payment history, and any past defaults or bankruptcies.

Tips For Preparing A Strong Loan Application

Once you have gathered all the necessary documents and fulfilled the requirements, it’s time to prepare a strong loan application. A well-prepared application increases your chances of loan approval and favourable terms.

Here are some key tips to follow:

1. Highlight Your Business’s Strengths

When completing the loan application, showcase your business’s awesomeness by highlighting its unique strengths, market share, and loyal customer base, etc. To further demonstrate your reliability, provide evidence of consistent cash flow and the ability to make timely loan repayments. Use historical financial records, customer contracts, and your solid track record to inspire confidence in lenders, increasing your chances of securing the loan your business needs.

2. Include A Solid Business Plan

Your business plan should clearly outline your vision, mission, marketing strategies, and financial projections. Be realistic and provide supporting data and market research to substantiate your claims. A well-structured business plan demonstrates your professionalism and increases your credibility as a borrower.

Read More – 5 Ways To Use Financial Statements To Make Smarter Decisions

3. Seek Professional Assistance

If you’re unsure about how to prepare a strong loan application, consider seeking professional assistance. Business consultants, accountants, or financial advisors can provide valuable guidance and help you present your case effectively.

Where To Get Small Business Loans In Nigeria

Here are some of the sources of small business loans in Nigeria:

1. Fidelity Bank Commercial Support Overdraft

This overdraft facility offers business owners a convenient way to finance their short-term cash flow and working capital needs, which can help them expand their business. Customers can receive up to ₦10 million, which can be paid back over three months. Additionally, women-owned businesses are eligible for a special discounted interest rate on this loan.

Here’s how what is required to get the Fidelity Bank Support loan:

• Applicant’s formal letter of request for the loan
• At least 3-months banking relationship with Fidelity Bank or other banks
• Applying businesses must be registered
• Visit any Fidelity Bank branch close to you to apply

2. Moniepoint Business Loan

Moniepoint Microfinance Bank is one of the leading fintech companies in Nigeria, providing working capital loans to small businesses. The Moniepoint loan is a low-interest loan, ranging from 24% to 40% per annum, and requires low collateral. You can get up to 1 million naira without the need for any collateral. Additionally, they offer fast loan approval within 1 to 3 days.

Here is how to access the Moniepoint Loan:

• Download the Moniepoint App from your store and register your business account (it is free)
• Confirm eligibility and choose the loan offer that suits your business needs
• And wait for approval

Click here to apply for the Moniepoint Loan 

3. SMEDAN/Sterling Business Loan

SMEDAN has partnered with Sterling Bank to provide single-digit interest loans to Nano, Small and Medium-sized businesses in Nigeria. The loan is entirely digital, which means you can apply for it without visiting a bank branch. It is also collateral-free and provides flexible repayment terms. Additionally, you can receive expert guidance and support to help you make the most of the loan.

Here is how to qualify/access the SMEDAN/Sterling Bank loan:

• Be an SME with a clean credit record
• Be a registered business with ongoing operations
• To access the loan, the customer would need to sign up on the SME Databanc platform powered by SMEDAN to generate a Promoter and Business ID.
• Then download the Banca by Sterling mobile app from Google Play or AppStore, sign up and apply.

Click here to apply for the SMEDAN/Sterling Bank Loan

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