Tips to get business loans in Nigeria

A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest. There are a number of different types of business loans in Nigeria including machine financing, asset-based financing, invoice financing, microloans, business cash advances and cash flow loans.

MEDIUM TERM BUSINESS LOANS

Setting up a business or expanding your current one can be expensive. Some people opt to fund it themselves but for many, this is impossible and chances are you’ll need financial support. The reason many business owners prefer a medium to long-term business loan is so they can be certain that they will have funding in place to support their enterprise for several years. In turn, this will help them plan and budget.

Advantages

A medium to long-term business loan can help with all the costs associated with setting up a business, from cash flow to expenses and paying staff.

LONG TERM BUSINESS LOANS

A medium to long-term business loan typically enables you to borrow money to help your business for one to five years. The loan is repaid in monthly installments, with interest added to the amount you owe. There are two types of business loan:

• Fixed rate of interest: Your payments won’t change over the term of the loan.
• Variable rate: The amount you owe could vary over the loan term.

Make sure you know which you are getting into as this could have a real impact on budgeting for your business.

Advantages

Taking out a business loan over a longer period may mean that your payments are lower than if you’d opted for a shorter term loan, but remember that ultimately this means you will pay more interest overall.

The longer the term of your loan, the lower your monthly payments will be, as you are spreading the cost over a longer period of time. This can be useful when you are trying to get your business off the ground, as it means you won’t have to make high monthly payments at a time when there will invariably be plenty of other set-up costs to consider.

INTEREST RATES FOR BUSINESS LOANS IN NIGERIA

It is not possible to give hard-and-fast rules about interest rates, as these vary considerably. The rate charged for a particular lending proposition will depend upon many factors. The most Important are the period of time for which the advance is required; the reputation and standing of the customer, the competitive situation; and the general level of interest rates in the country and each bank’s own Base Rate, to which all its interest rates for lending are related.

For example, a `blue chip’ company, well established on the stock exchange, may be granted a loan at, say, 1% over `base rate’, whereas a sole trader who has a day-to-day business, such as window-cleaning may have to pay 4% or 5% over base rate. Bank advance to first-class discount houses, finance houses, insurance companies and the like are at very `fine’ rates indeed.

The amount of interest you must pay on a business loan will depend on your individual circumstances, including how much you want to borrow and over what period of time. If your business is just starting out, the lender will usually want to look at your personal credit rating to give them an idea of how responsibly you manage your money. The higher your credit score, the more likely you are to be offered a loan at a competitive rate of interest.

PROVIDERS OF BUSINESS LOANS IN NIGERIA

• First Bank
• UBA
• Union
• Stanbic IBTC
• Access bank