To secure loans you need a strong revenue base, business
longevity, proof of profit and good credit. Although there are many loan
providers, bank loans are the most affordable.
A bank term loan allows borrowing a set amount upfront
and interest payment. They are used to access large loans for longer terms.
The most common type of loan is line of credit. A line of
credit offered to assist in a cash flow emergency. New businesses encounter
problems accessing loans because of few customer, poor credit and competitors.
Sources
for External Finance
There are many sources for long term external finance for
SMEs. You have mortgage financing, loan facilities, savings and debentures.
Other strategies include hire purchase, leasing, shares and grants. Short term
sources are trade credit, factoring and overdrafts.
- mortgage financing
- loan facilities
- savings
- debentures
- hire purchase
- leasing
- offering shares
- grants
- trade credit
- factoring
- overdrafts
Why
Businesses need Finance
There are many reasons what businesses need funds. They
need financing for startup, working capital or expansion. Startup funding is sourced
for advertisement, equipment or securing a premises.
Others are working capital for staff wages, equipment
maintenance and supplies. Expansion involves opening more branches or adding
physical structures. More reasons are debt restructuring, growth funding and
starting a business.
Reasons
Businesses Seek Finance
- working capital
- asset purchase
- growth funding
- start a business
- debit restructuring
Types
of Credit
There are three types of credit offered by money lenders.
You have the secured lines of credit, unsecured lines of credit and short-term
lines of credit.
- secured lines of credit
- unsecured lines of credit
- short-term lines of credit
Types
of Business Loans
Before seeking loan facilities you need to know the type
of loan. There are a number of loans perfect for small medium enterprises.
You have loans for established companies, government
loans and online loans. Common types of business loans are short term loans and
term loans.
Short term loans are small loans serviced over a short
period not exceeding 3 to18 months. Micro finance banks and alternative lenders
prefer offering their clients short term loans.
Term loans a huge loans for capital projects or
expansion. The facility has a set term and payback period. Other types of loans
are business lines of credit, equipment loans and financing. More loan types
are merchant cash advances, invoice financing and business credit cards.
- short term loans
- term loans
- business lines of credit
- equipment financing
- merchant cash advances
- invoice financing
- business credit cards
Secured
Term Loans
To access secure term loans your business should have an
annual turnover of N500 million or less. The loan facility is especially made
for capital projects, asset management and acquiring new technology.
According to First Bank Nigeria you can apply for an
amount not exceeding N40 million naira. The facility is limited to 50% of last
six months turn over. You also have a maximum tenor of 3 years (36 months).
Loan
Features
- Company should have an annual turnover of N500 million or less
- Loan is made for capital projects
- The applicant can apply for an amount not exceeding N40 million naira
- limited to 50% of last six months turn over
- Loan facility has a maximum tenor of 36 months
Benefits of the Loan
The
loan facility aids businesses in cash flow management. The loan is paid in
installments and ideal for capital projects. It offers a convenient repayment
plan that accommodates quarterly or monthly payment over 36 months. You are
offered competitive rates.
Accompanying
Documents
To
access the loan you need the following accompanying documents. You need an
application letter and retail loan form.
Add
a proforma invoice, current utility bills and complete company profile. Other
requirements are latest audited account by a public accountant and KYC
requirement to open a corporate account. You are also required to include a six
6 months bank statement.
- application letter
- retail loan form
- proforma invoice
- current utility bills
- complete company profile
- latest audited account
- other KYC requirement to open a corporate account
- a six 6 months bank statement
Document for Business
Incorporation and Profile
To
access loans you need to present company incorporation documents. The documents
generally show business structure, assets, core business and management team.
The
document should include title of assets, proof of insurance, proof of tax
payment and six moths’ payment slips. Other documents are marketing plan, bill
of quantity (Builders), management profile and lease agreement. There might be
slight variation in documentation depending on the bank and type of loan.
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