CBN, NIRSAL And Covid-19 Loans: Keep It Simple, Stupid!

The phrase, Keep It Simple, Stupid (KISS), comes from the world of design. Its underlying principle recommends that designs and/or systems should be kept simple. This requires that as far as practical, a design or system should be made simple rather than complex because simplicity remains the fast lane to securing the acceptance of its users.

The KISS principle readily comes to mind in the face of frustrations being experienced by potential beneficiaries trying to access the stimulus package introduced by the Central Bank of Nigeria (CBN) amid the Covid-19 pandemic, and being midwifed by NIRSAL Microfinance Bank (NMFB).

First, a brief recap of the scheme.

Small Business Owners, with going concerns interested in accessing the N50 billion CBN loans for Micro, Small and Medium Enterprises (MSMEs) affected by the Covid-19 pandemic, must do so with bankable plans that outline their capacity to utilise the fund profitably and repay the loans according to terms. The businesses must be active in agriculture, hospitality, health, airline service, manufacturing, trading or any other income generating activity as may be prescribed by the CBN. The facility extends a loan amount up to N25 million at an interest rate of Five percent per annum, all inclusive, up to February 28, 2021.

The collateral shall be as may be acceptable by NIRSAL MFB, and may include any one or more of the following: Moveable asset(s) duly registered on the National Collateral Registry (NCR); Simple deposit of title documents, in perfectible state; Deed of Debenture (for stocks), in perfectible state; Irrevocable domiciliation of proceeds; Two acceptable Guarantors; Personal Guarantee of the promoter of the business; Life Insurance of the Key-Man, with NMFB noted as the First Loss Payee; and Comprehensive Insurance over the asset.

The loan requests are submitted to NIRSAL Microfinance Bank with Bank Verification Number (BVN), business registration (where applicable) and business plan that includes evidence of the opportunity or adverse impact as a result of Covid-19 pandemic. NIRSAL Microfinance Bank appraises and conducts due diligence on the application and, upon satisfaction, forward it to the CBN which reviews and gives final approval for disbursement from the CBN’s Micro, Small and Medium Enterprises Development Fund (MSMEDF), to NMFB for on-lending to the end user.

The foregoing requirements are tough at the best of times. For a Small Business Owner whose business is eligible for the stimulus package, and can meet the terms and conditions of the loan, and proves that the business has been adversely affected by the Covid-19 pandemic, the application process can become complex at the point of interaction with NIRSAL Microfinance Bank.

The loan application process begins online. More than a few applicants desiring to sign up were unable to do so for long periods, a fact acknowledged in NIRSAL’s apology on its website, saying: ‘‘We are experiencing a downtime due to traffic on the nmfb.com.ng. Kindly use these links as alternative to accessing your application forms; tinyurl.com/r6yefgf (SME), tinyurl.com/sobmj7f (HOUSEHOLD).’’

While this alternative may have brought some relief, the real complexity (and frustration) in the loan application process comes with the opening of the NIRSAL website. It opens with the following sign-up options:

Click here for Mini SME Category

Click here for SME and SME Plus Category

For non-automated users, send Business Plan to TCF-busplan@nmfb.com.ng

In welcoming applicants to the optional Mini Business Plan development portal for access to the Covid-19 Relief Fund, it notes that the link should only be used by SMEs seeking funding of between N3 million and N10 million. It advises SMEs seeking funding between N10.1 million and N25 million to access Covid-19-Plus.

The Mini Business Plan offers the following support:

  • Evaluating the feasibility and sustainability of your business.
  • Access of micro and small enterprises to professional business development services at low costs.
  • Structure your operations, marketing and pricing appropriately towards sustainability and growth.

This basic plan, which is said to be a free option, is offered for ₦5,000!

The other plans add post-credit monitoring, management finance, etc. to the basic plan, with price ranges of N25,000 for a start-up and N45,000 for up to five businesses. Seamlessly, the sign-up moves from the NIRSAL website to www.simplifiedcredit.net. It is not clear if Simplified Credit is a subsidiary of NIRSAL or an independent service provider. This is confusing to a visitor.

More important, the website appears incomplete and dotted with missing links. Some of its cells are blank, without content, suggesting that the website is still under construction. The designer, seemingly aware of this, asks and answers the question: ‘‘Not sure which plan is right for you? Just pick up the phone and give us a call (+234 706 5000 835). We’ll help you choose the perfect plan to suit your needs.’’

It is worrying that small businesses are looking to get the help they sorely need from a set up that doesn’t seem to be executing a clearly-thought plan. Small businesses are most vulnerable to the Covid-19 stay-at-home order. They are struggling to keep staff and stay afloat at a time they don’t have customers that bring income. The CBN has done well to initiate the stimulus package of loans at below-market rates. Businesses applying for the loans should not be getting a hard time in accessing the funds. NIRSAL Microfinance Bank, charged with processing applications, deciding who meets the requirements and handing out the loans, must up its game and deliver on its assignment.

As it now stands, the chance of a Small Business Owner passing through the eye of a needle is about the same as that of signing up for the Covid-19 loan on the NIRSAL portal, which is the first step for accessing it. This should not be so. The CBN and NIRSAL must simplify the loan application process, to enable the stimulus package reach Small Business Owners in good time. Keep It Simple, Stupid!

If you are a Small Business Owner experiencing a challenge in accessing the Central Bank of Nigeria-funded and NIRSAL Microfinance Bank-managed Covid-19 loans, contact us at https://smefinance.org/thesmelab

CBN’s N50 Billion Covid-19 Stimulus Fund: Your Questions Answered

  • Are you a Small Business Owner interested in accessing the N50 billion Central Bank of Nigeria (CBN) stimulus package for micro, small and medium enterprises (MSMEs) affected by the COVID-19 pandemic? If you are, welcome to this Questions and Answers session.

Question: Is your business eligible?

Answer: To benefit from the funding opportunity arising from the Covid-19 pandemic, your business must meet the following criteria:

i. Your business must be a going concern; in existence, up and running, not a start-up.

ii. Your business must have a bankable plan, which outlines the capacity to utilise the fund profitably and prospect of repaying the loan according to terms.

iii. Your business must provide verifiable evidence that its activities have been adversely affected by the COVID-19 pandemic.

Question: What business activities are eligible for the scheme?

Answer: The following activities qualify for funding under the scheme:

i. Agricultural value chain activities.

ii. Hospitality, particularly accommodation and food services.

iii. Health, especially pharmaceuticals, hospital services and medical supplies.

iv. Airline service providers.

v. Manufacturing/value addition.

vi. Trading.

vii. Any other income generating activities as may be prescribed by the CBN.

Question: What is the loan amount that your business can apply for?

Answer: The loan amount shall be determined by the activity, cash flow and industry/segment size of your business, subject to a maximum of N25 million for Small and Medium Enterprises. Working capital shall be a maximum of 25 percent of the average of the preceding three years’ annual turnover. Where your business is not up to three years in operation, 25 percent of the previous year’s turnover will apply.

Question: What will be the interest rate for the loan?

Answer: Interest rate shall be Five percent per annum, all inclusive, up to February 28, 2021. Thereafter, it shall revert to Nine percent, all inclusive, with effect from March 1, 2021. Working capital shall be for a maximum period of one year, without option for rollover. Term loan shall have a maximum tenor of not more than three years with, at least, one-year moratorium.

Question: What will be the collateral for the loan?

Answer: The collateral shall be as may be acceptable by NIRSAL MFB, and may include any one or more of the following:

i. Moveable asset(s) duly registered on the National Collateral Registry (NCR).

ii. Simple deposit of title documents, in perfectible state.

iii. Deed of Debenture (for stocks), in perfectible state.

iv Irrevocable domiciliation of proceeds.

v. Two acceptable Guarantors.

vi. Personal Guarantee of the promoter of the business.

vii. Life Insurance of the Key-Man, with NMFB noted as the First Loss Payee.

viii. Comprehensive Insurance over the asset.

Repayment shall be on instalment basis, according to the nature of enterprise, and the repayment schedule/work plan provided at the application stage.

Question: Where should your business submit its loan application?

Answer: Application should be submitted to NIRSAL Microfinance Bank (NMFB) with, among others, BVN number, business registration (where applicable) and business plan that includes evidence of the opportunity or adverse impact as a result of COVID-19 pandemic. Thereafter:

i. NMFB shall appraise and conduct due diligence on the application.

ii. Upon satisfactory appraisal of the application, NMFB shall forward it to the CBN.

iii. The CBN shall review the application and, if successful, give final approval for disbursement to NMFB.

iv. The CBN shall provide the seed fund for the scheme, and release funds to NIRSAL MFB for disbursement to your business.

The Scheme is financed from the CBN’s Micro, Small and Medium Enterprises Development Fund (MSMEDF) and NIRSAL Microfinance Bank (NMFB) is the eligible participating financial institution.

Question: For how long will this fund be available to Micro, Small and Medium Enterprises?

Answer: The exit date of this intervention is December 31, 2024.

If you are a Small Business Owner, if your business is eligible for funding under the N50 billion Central Bank of Nigeria (CBN) stimulus package, if you and your business can meet the terms and conditions of the loan, if your business can provide proof that its activities have been adversely affected by the COVID-19 pandemic, get in touch with NIRSAL Microfinance Bank. Your business can get a N25 million loan, at Five percent interest rate, for the asking!

Contact Us Now if your business needs assistance in accessing this NIRSAL Microfinance Bank-managed facility.

How To Access N500m CBN Loan For Creative Industries

The Central Bank of Nigeria (CBN), working with the Bankers’ Committee, developed the Creative Industry Financing Initiative (CIFI), to create jobs and boost employment in Nigeria, particularly among the youths. The initiative targets four key areas, namely:

  • Fashion
  • Information Technology.
  • Movie Production and Distribution.
  • Music

Under the scheme, practising or aspiring Small Business Owners can get long-term and low-interest financing of up to N3 million as Software Engineering Students, N30 million as Movie Production outfits and N500 million for a Movie Distribution business. Proceeds of the loans can be used for rental or service fees for Fashion and Information Technology businesses, and equipment, training and rental or service fees for Music businesses.

A Student Software Developer can get N3 million at an interest rate of nine percent, repayable monthly in three years, with a moratorium of nine months, from date of disbursement. Equity contribution is not required and the loan is secured with University Degree and NYSC Certificate, a credible guarantor and personal guarantee of the borrower. There is preference for areas with low penetration of information technology.

A Movie Producer can get N50 million at an interest rate of nine percent, repayable quarterly in 10 years, with a moratorium of 24 months from date of disbursement. The loan requires a minimum equity contribution of 30 percent, secured by legal mortgage, all asset debenture, credible guarantor and the borrower’s personal guarantee. MA minimum of three years of relevant experience is essential and preference is for areas with low cinema penetration.

A Movie Distributor can get N500 million at an interest rate of nine percent, repayable quarterly in 10 years, with a moratorium of 24 months from date of disbursement. It requires a minimum equity contribution of 30 percent, secured by legal mortgage, all asset debenture, credible guarantor and personal guarantee of the borrower. A minimum of three years of relevant experience is essential. There is preference for areas with low cinema penetration.

For Fashion, Information Technology and Music enterprises, the loan is monetised for equipment purchase, and rental or service fees. Interest rate is nine percent, repayable quarterly in 10 years, with a moratorium of 36 months from date of loan disbursement. There is a minimum equity contribution of 20 percent. The loan is secured by mortgage debenture, legal mortgage, lien on stock of trade and equipment acquired with it. The borrower must also provide three referrals from recognised sponsors or bodies or organisations and must have three years of relevant experience.

Other requirements to access the creative industries loan are:

  • Comprehensive Business Plan.
  • Bank Verification Number.
  • Brief on Directors/Shareholding.
  • Credit Reports for the company and its Directors.
  • Proposed schedule of fund disbursement.
  • Proposed schedule of fund repayment.
  • Three years audited accounts for existing companies.
  • Statement of affairs for start-ups or businesses less than three years in existence.

Are you a Fashion Designer, Music Producer or Distributor, Movie Producer or Distributor, Information Technology Specialist or Student Software Developer? Is your existing or proposed business involved in fashion or music or movies or information technology? Is your business registered with the Corporate Affairs Commission? If you answer yes to foregoing questions, you are eligible for the creative industries loan. You are required to submit your application through your bank.

Contact Us or drop us a line at ted.iwere@smefinance.org if you need help to access the creative industries loan for your small business.

3 Sources Of Affordable Funds To Start Or Grow Your Business

single-digit loans

Accessing the funds that a Small Business Owner needs to start or grow a business is a challenging assignment. But the good news is that there are more options available now than in the past. A Small Business Owner looking for money to start or grow a business can now look up to a growing list of development finance institutions which disburse funds on concessionary terms for projects that meet specified criteria.

Here are three sources of affordable funds available for a Small Business Owner to start or grow or scale a business:

1. Central Bank of Nigeria MSME Fund: The Central Bank of Nigeria (CBN), in support of government’s policy to promote agricultural businesses, micro, small and medium enterprises (MSMEs) for economic development and employment generation, introduced the Agric-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS).

The scheme aims to improve access to affordable and sustainable finance by Agri-businesses, Micro, Small and Medium Enterprises (MSME). The sectors currently covered by the scheme include:

  • Businesses in the entire agriculture value chain, including production, inputs supply, storage, processing, logistics and marketing.
  • MSMEs in the real sector, including manufacturing, mining and petrochemicals.
  • MSMEs in the service sector, including Information and Communication Technology (ICT) and the creative industry.

The scheme advances funds for start-ups, business expansion or revival of ailing companies, on the following terms:

  • Loan limit: N10,000,000.
  • Interest rate: Five percent per annum.
  • Tenor: Up to Seven years, depending on the nature of the project.
  • Moratorium: Maximum of 18 months for principal and six months on interest.

Prospective beneficiaries are required to satisfy the following conditions:

  • Submission of duly completed application form.
  • Bank Verification Number (BVN).
  • Certificate of Training from a one-week CBN-approved Entrepreneurship Development Centre (EDC) or evidence of membership of an organised private sector association.
  • Letter of Introduction from a Clergy, Village Head, District Head, Traditional Ruler, Senior Civil Servant, in cases of individuals and micro enterprises.
  • Evidence of registration of Business Name or Certificate of Incorporation and, where applicable, filing of annual returns with the Corporate Affairs Commission (CAC), as prescribed by the Companies and Allied Matters Act (1990).
  • Tax Identification Number (TIN) and current Tax Clearance Certificate (TCC), where applicable.

2. Bank of Industry: The Bank of Industry (BOI) manages various funding initiatives, including the Cottage Agro-Processors (CAP) Fund, the Nollywood Fund and the Fashion and Beauty Fund.

The Cottage Agro-Processors Fund aims to finance not fewer than 1,000 projects, at interest rate of nine percent, management fee of one percent, tenor of five years, with six months moratorium.

Incorporated small and medium enterprises, and registered co-operative societies, engaged in production and/or processing of such agricultural products as cassava, rice, groundnut, cashew, oil palm, plantain, sorghum, yam, fisheries, livestock, cocoa, sheanut, maize, tomato, etc. can access the CAP Fund. Producers or processors of derivatives in the forms of raw materials or finished products for local industries or export can also access the Fund.

The N1 billion NollyFund targets enterprises engaged in the film production value chain from pre-production to post-production, and lends up to N50m to borrowers. The interest rate of 10 percent, payable monthly, includes processing and commitment fees of one percent each; plus quarterly monitoring fee of 0.125 percent of outstanding Principal.

Maximum tenor of the term loan is 12 months, from end of moratorium of six to nine months, after loan disbursement date. Collateral and funding requirements are:

  • Assignment of copyright to Bank of Industry.
  • Personal Guarantees of Producer and a reputable individual acceptable to Bank of Industry.
  • Minimum Guarantee of Distributor to cover value of project, plus interest on the loan amount.
  • Undertaking of Distributor to remit cinema proceeds of the film to designated bank, per agreed arrangement, with Bank of Industry as sole signatory on the account.
  • Security deposit of five percent of the loan amount by the Distributor.
  • Letter of Referral from a recognised organised private sector Association, Group or Guild.
  • Equity contribution of 20 percent of production cost by the Producer.

The Fashion Industry Fund is designed for registered enterprises and co-operatives in the fashion and beauty value chains, namely, Adire and Aso-Oke, Design and Production of Clothing, Fashion and Beauty Training Institutes, Distribution and Retailing, and Beauty Salons. The fund, to be used for acquisition of equipment, consumables and working capital, is disbursed according to these categories and amounts: Micro enterprises and Co-operatives (N10 million), Small enterprises (N50 million) and Medium enterprises (N200 million).  Interest rate is nine percent per annum, with one percent processing fee. Tenor is three to five years, with moratorium of up to 12 months from disbursement date.

For a co-operative society, the requirements are: Joint and several guarantees of members of the co-operative society; Personal guarantees of the President and Secretary of the co-operative society; Personal guarantees of the President and Secretary of the co-operative society; and two guarantors who are not members of the co-operative society and acceptable to Bank of Industry. Other conditions are 10 percent contribution of the loan amount, lien over present and future stock of trade and asset debenture on equipment finance.

The requirements for Micro and Small Enterprises are asset debenture over financed equipment, irrevocable personal guarantee of Chief Promoter (s) of the business and two guarantors who are not shareholders of the business and are acceptable to Bank of Industry.

Medium enterprises must provide legal mortgage on pledged property or bank guarantee from commercial banks acceptable to Bank of Industry and irrevocable personal guarantee of chief promoter of the business or debenture on assets of the business.

A start-up business is expected to contribute a minimum of 30 percent of the loan amount while assets of existing businesses may count as equity contribution of the borrower.

While the requirements for application vary according to the fund to be accessed, the process includes providing the following:

  • Letter of application.
  • Copy of certificate of incorporation or registration.
  • Business Plan.
  • Proof of collateral for the loan.
  • Passport photograph of sponsor(s).

3. Development Bank of Nigeria: The Development Bank of Nigeria (DBN) makes wholesale lending to primary financial institutions, for medium to long-term on-lending to Micro, Small and Medium Enterprises (MSME). A DBN loan must be accessed through a Primary Financial Institution (PFI) registered to participate as an intermediary in the scheme. Not fewer than 29 financial institutions now process DBN loans.

DBN offers varying loan amounts at interest rates, based on tenure and market rates. Depending on the nature of the business and purpose of the loan, a Small Business Owner could get up to 18 months moratorium on repayment of principal for an investment project and working capital, and a repayment period of up to 10 years.

A start-up or operating MSME in any sector of the economy can submit an application for a DBN loan at a participating commercial bank, microfinance bank, or similar financial institution. The receiving institution will conduct its due diligence on the applicant’s business and proposal and, upon approval, will forward the application to DBN which, on approval, will disburse the money to the applicant through the primary financial institution.

These are some of the sources of funding for the Small Business Owner wishing to start or grow or scale a business. The type of business to be started, grown or expanded will determine the best option for the situation.

Do you need help in finding money to start or grow or expand your small business? Contact Us Now or email me at ted.iwere@smefinance.org.

Looking For Bank Of Industry Loan? Take Your Choice!

The Bank of Industry (BOI), Nigeria’s oldest and highly successful development financial bank, is owned by Ministry of Finance (94.80%), Central Bank of Nigeria (5.19%) and private investors (0.01%). BOI emerged from the re-organisation of the Nigerian Industrial Development Bank Limited in 2001.

BOI has the Bank of Industry Trust Company, Bank of Industry Microfinance Bank, Bank of Industry Insurance Brokers Limited and LECON Limited as its subsidiaries. Funding options available to practising and aspiring entrepreneurs include, but are not limited to the following:

1. Youth Entrepreneurship Support Programme: The Youth Entrepreneurship Support (YES) Programme is BOI’s effort to address youth unemployment by equipping young people who have innovative ideas with the skills, knowledge and funding to start and manage their own businesses. The programme targets aspiring entrepreneurs who are between ages 18 and 35 years, and have a minimum educational qualification of Ordinary National Diploma (OND).
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Participants undergo eight weeks and five days of online and in-class entrepreneurship and business management training covering business idea, business model, sales and marketing, financial planning and running a successful business.

The scheme seeks to develop participants’ bankable business plans that fit the BOI small and medium enterprise clusters or expand their existing businesses, with options of equity contribution from BOI and/or loans of up to N5 million. Interest rate is nine percent per annum with one percent processing fee. The tenor of three to five years allows six months moratorium from date of disbursement. The loan is secured by the following:

  1. Debenture over the assets of the business or specific charges over its present and future equipment.
  2. Deposit of originals of NYSC certificate and Ordinary National Diploma, Higher National Diploma or University Degree with Bank of Industry.

iii. Two guarantors acceptable to Bank of Industry.

2. Cottage Agro-Processors (CAP) Fund: BOI created the Cottage Agro-Processors (CAP) Fund to boost the capacity of cottage agro processing plants to produce food products and industrial raw material for industries within and outside the Staple Crop Processing Zones (SCPZ) across Nigeria.

The Cottage Agro-Processors Fund aims to finance not fewer than 1,000 projects, by advancing credit at interest rate of nine percent, management fee of one percent, with a tenor of five years and six months moratorium.

Incorporated small and medium enterprises, and registered co-operative societies engaged in production and/or processing of such agricultural products as cassava, rice, groundnut, cashew, oil palm, plantain, sorghum, yam, fisheries, livestock, cocoa, shea nut, maize, tomato, etc. can access the CAP Fund. Producers or processors of derivatives in the forms of raw materials or finished products for local industries or export can also access the Fund.

3. Nollywood Fund: Nollywood, adjudged by contents production as ranking third in the world, after Hollywood in the United States and Bollywood in India, is a key contributor to the nation’s Gross Domestic Product. BOI, recognising access to finance and distribution channels like cinemas and DVD/CD as challenges for the Nigerian Creative Industry, established the Nollywood Fund to deepen credit to the sector.

The N1 billion NollyFund targets enterprises engaged in the film production value chain from pre-production to post-production, and lends up to N50m to borrowers. The interest rate of 10 percent, payable monthly, includes processing and commitment fees of one percent each; plus quarterly monitoring fee of 0.125% of outstanding Principal.

Maximum tenor of the term loan is 12 months, from end of moratorium of six to nine months, after loan disbursement date. Collateral and funding requirements are:

  • Assignment of copyright to Bank of Industry.
  • Personal Guarantees of Producer and a reputable individual acceptable to Bank of Industry.
  • Minimum Guarantee of Distributor to cover value of project, plus interest on the loan amount.
  • Undertaking of Distributor to remit cinema proceeds of the film to designated bank, per agreed arrangement, with Bank of Industry as sole signatory on the account.
  • Security deposit of five percent of the loan amount by the Distributor.
  • Letter of Referral from a recognised organised private sector Association, Group or Guild.
  • Equity contribution of 20 percent of production cost by the Producer.

4. Fashion and Beauty Fund: The fashion industry runs along two broad lines: Design and production, and sale and distribution. While there is a shortage of sales platforms, the creative side is robust with designers producing ready-made and mass produced clothes.

The Bank of Industry Fund is designed for registered enterprises and co-operatives in the fashion and beauty value chains, namely:

  • Adire and Aso-Oke.
  • Design and Production of Clothing.
  • Fashion and Beauty Training Institutes.
  • Distribution and Retailing.
  • Beauty Salons.

The fund, to be used for acquisition of equipment, consumables and working capital, is disbursed not to exceed the following categories and amounts: Micro enterprises and Co-operatives (N10 million), Small enterprises (N50 million) and Medium enterprises (N200 million).

Interest rate is nine percent per annum, with one percent processing fee. Tenor is three to five years, with moratorium of up to 12 months from disbursement date. The loans, depending on the borrowing entity, will be secured as follows:

  1. Co-operative Society
  • Joint and several guarantees of members of the Co-operative society.
  • Personal guarantees of the President and Secretary of the Co-operative Society.
  • Personal guarantees of the President and Secretary of the Co-operative Society.
  • Two guarantors who are not members of the Co-operative Society and acceptable to Bank of Industry.
  • iv.10 percent contribution of the loan amount.
  • Lien over present and future stock of trade.
  • Asset debenture on equipment finance.
  1. Micro and Small Enterprises
  • Asset debenture over financed equipment.
  • Irrevocable Personal Guarantee of Chief Promoter (s) of the business.
  • Two guarantors who are not shareholders of the business and are acceptable to Bank of Industry.
  1. Medium Enterprises
  • Legal mortgage on pledged property or bank guarantee from commercial banks acceptable to Bank of Industry.
  • Irrevocable Personal Guarantee of Chief Promoter of the business or debenture on assets of the business.

A start-up business is expected to contribute a minimum of 30 percent of the loan amount while assets of existing businesses may count as equity contribution of the borrower.

A Micro, Small, Medium Enterprise, Co-operative, Graduate or Youth Corps Member wishing to access a loan at Bank of Industry must register at https://www.boi.ng/apply/register.

The requirements for application for Bank of Industry loans vary according to the fund to be accessed. However, the basic procedure includes providing the following:

  • Letter of application.
  • Copy of certificate of incorporation or registration.
  • Business Plan.
  • Proof of collateral for the loan.
  • Passport photograph of sponsor(s).

The funds available at BOI uniquely position it to realise its mandate of promoting industrialisation, through capacity building for entrepreneurs, support of their businesses with loans and working capital, and creating employment opportunities.

Do you need help to access Bank of Industry funding for your business? Contact Us Now or email ted.iwere@smefinance.org

How To Get N10m CBN Collateral-Free Loan

The Central Bank of Nigeria (CBN), in support of government’s policy to promote agricultural businesses, micro, small and medium enterprises (MSMEs) for economic development and employment generation, introduced the Agric-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS).

The objectives of the scheme, which gives collateral free loans of up to N10,000,000 to small businesses, are as follows:

  • To improve access to affordable and sustainable finance by Agri-businesses, Micro, Small and Medium Enterprises (MSMEs).
  • Create employment opportunities.
  • Boost managerial capacity in agri-businesses and MSMEs, and grow them in line with the Federal Government agenda to develop the real sector and promote inclusive growth.

The sectors currently covered by the scheme include:

  • Businesses in the entire agriculture value chain, including production, inputs supply, storage, processing, logistics and marketing.
  • MSMEs in the real sector, including manufacturing, mining and petrochemicals.
  • MSMEs in the service sector, including information and communication technology (ICT) and the creative industry.

The scheme provides financing for start-ups, business expansion or revival of ailing companies. The terms of its loans are as follows:

  • Loan limit: N10,000,000.
  • Interest rate: Five percent per annum.
  • Tenor: Up to Seven years, depending on the nature of the project.
  • Moratorium: Maximum of 18 months for principal and Six months on interest.

Applicants for loans under the scheme are required to satisfy the following conditions:

  • Submission of duly completed application form.
  • Bank Verification Number (BVN).
  • Certificate of Training from a CBN-approved Entrepreneurship Development Centre (EDC) or evidence of membership of an organised private sector association.
  • Letter of Introduction from a Clergy, Village Head, District Head, Traditional Ruler, Senior Civil Servant, in cases of individuals and micro enterprises.
  • Evidence of registration of Business Name or Certificate of Incorporation and, where applicable, filing of annual returns with the Corporate Affairs Commission (CAC), as prescribed by the Companies and Allied Matters Act (1990).
  • Tax Identification Number (TIN) and current Tax Clearance Certificate (TCC), where applicable.

Prior to accessing the facility, owners of Micro, Small and Medium Enterprises are required to successfully complete a one-week training with a CBN-approved EDC, which will receive their loan applications. The EDCs will collate, appraise and submit the applications to the CBN, which will invite applicants for interviews, approve and disburse the loans through applicable financial institutions.

The training by the EDCs under the AGSMEIS scheme are in the following areas:

  1. Agriculture and Agro-allied Processing.
  2. Art and Entertainment.
  3. Automobile Services.
  4. Fashion and Dressmaking.
  5. Catering and Event Management.
  6. Courier and Delivery Services.
  7. Creative Industry.
  8. Apparels and Textiles.
  9. Information Communication Technology.
  10. Cottage Industry.
  11. Media.
  12. Publishing.
  13. Telecommunications.
  14. Hospitality.
  15. Health Services.
  16. Welding and Fabrication.
  17. Animal Husbandry.
  18. Cosmetics, Beauty and Makeup Artistry.
  19. Electrical and Electronics.
  20. POP and Tiling.
  21. Carpentry.
  22. Masonry.
  23. Kerbs and Electric Pole Making.
  24. General Management (in above areas).
CBN-approved EDCs, with their addresses, include the following:

 

1. CBN-EDC, Ibadan (South West)

Oodua Skill Acquisition Centre

Samonda, Sango-UI Road,

Ibadan, Oyo State.

2 CBN-EDC, Port Harcourt (South South)

30 Trans-Woji Road, Grace Plaza

By Slaughter Bridge, Woji Town,

Port Harcourt, Rivers State.

3. CBN-EDC, Maiduguri (North East)

Old Informatics Institute

Njimtillo, Kano Road

Maiduguri, Borno State.

4. CBN-EDC, Kano (North West)

Murtala Muhammed Library Complex

Kano, Kano State.

5. CBN-EDC, Makurdi (North Central)

Off Jonah Jang Crescent

Near Federal Secretariat

Makurdi, Benue State.

6. CBN-EDC, Minna (North Central)

Minna Innovation Institute

Behind Niger State Sharia Commission

Justice Ndajiwo Drive

Minna, Niger State.

7. CBN-EDC, Enugu (South East)

Ebenezer Villa Suite

8, Ogenyi Close, Off Cornerstone Avenue

Off Nike Lake Resort Road

Enugu, Enugu State.

8. Centre for Entrepreneurial Development

36, Murtala Mohammed International

Airport Road

Lagos.

9. Lagos Business School

Pan Atlantic University

Lekki-Epe Expressway

Ajah, Lagos.

10. Fate Foundation

Lagos State Water Corporation

Water House HQ,

Ijora Causeway

Lagos.

 

11. House of Tara

13a Onikepo Akande Street

Lekki Phase I

Lagos.

Do you need help to access the AGSMEIS fund for your business? Contact Us Now or email ted.iwere@smefinance.org

7 Hurdles To Clear When Applying For A Business Loan

One of the first things that overly-optimistic Small Business Owners realise when seeking funding for their businesses is that banks do not fund business plans.

So, as a general rule, and barring the occasional exceptions, here is a short list of the hurdles a Small Business Owner must clear when he or she is applying for loan for a business from a commercial bank:

1. Collateral: Your business must have hard assets it can pledge to back its application for a business loan. The banks, on their part, will carefully examine the pledged assets to be sure that they are of sufficient value that will reduce their risk in lending to your business.

Where a business pledges its accounts receivable to support its request for a loan, the bank will exercise its due diligence of double-checking the solvency of the companies that are owing the receivables accounts. It is also noteworthy that when the bank accepts to back its loan advance with the accounts receivable of the borrower, the bank is not likely to exceed 50 to 75 percent of the borrower’s receivables.

As mentioned above, the need for collateral may also require the business owner to pledge his or her personal assets, like a personal house, as additional security for a loan to the business.

2. Business Plan: Except in rare cases, a lending bank will require a business plan document in support of a loan application. While it may be in a short form, like a one-page business plan, the bank will almost always ask for a snapshot of the company, its product or service, the market it serves, the managing team, and its financials.

3. Financials Of The Business: These cover current and past loans and debts incurred; bank and investment accounts; and such supporting information like Tax Identification Number and contact address.

4. Accounts Receivable: Comprehensive details of accounts receivable, including account-by-account status, aging analysis, and sales and payment history.

5. Accounts Payable: Complete details of accounts payable, including account-by-account status and aging analysis according to credit terms extended to the business.

6. Audited Or Reviewed Financial Statements: This should contain the latest Balance Sheet of the business, with a listing of assets, liabilities and capital. The Profit and Loss statements should be for between 12 months and three years.

Some banks may waive the requirement for audited or reviewed financial statements. When they do, do not let your guard down. Such banks would often compensate and  over-provide for this by insisting on assets, as collateral, with values that are far higher in value relative to the loan amount for which they are pledged.

7. Owner(s) Personal Finances: The bank must obtain financial statements of owner(s) with significant shareholding(s) in the business, which could include signing personal guarantee(s) as part of the loan process.

Personal financial information that the bank may request from owner(s) of the business could include, and may not be limited to, banking details, assets such as real estate, vehicles, etc. and liabilities like loans.

What the foregoing implies is that when a bank insists that a Small Business Owner must add a personal guarantee to the collateral provided by the business, the business owner wonders why. A usual refrain of the bank runs like this: If you, the owner of the business, cannot demonstrate that you believe in the business, by supporting the loan application of the business with your personal guarantee, why should the bank believe in the business by lending money to it?

The Small Business Owner will have a tough task in countering this argument!

Do you need help in navigating the twists and turns of finding money to grow or scale your business? Contact Us Now or email ted.iwere@smefinance.org.

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Money, Money Everywhere; Banks Can’t Find Borrowers

We recall that the Central Bank of Nigeria in July 2019 advised Deposit Money Banks to maintain a minimum Loan to Deposit Ratio of 60 percent by September 2019.

The CBN set the penalty for non-compliance as a levy of additional Cash Reserve Requirement equal to 50 percent of the lending shortfall of the target ratio. The apex bank gave bite to this policy on September 30, 2019 when it deducted N499 billion from12 banks for failing to meet the 60 percent minimum Loan to Deposit Ratio.

The affected institutions are Zenith Bank (N135.6 billion), Citibank (N100 billion), United Bank for Africa (N99.7 billion), First Bank (N74.7 billion), Standard Chartered Bank (N30 billion), Guaranty Trust Bank (N25 billion), First City Monument Bank (N14.4 billion), JAIZ Bank (N7.5 billion), Keystone Bank (N4 billion), Rand Bank (N2.8 billion), FBNQuest (N2.7 billion) and SunTrust Bank (N1.7 billion).

The CBN did not stop there. It raised the bar by requiring Deposit Money Banks to maintain a minimum Loan to Deposit Ratio of 65 percent, effective December 2019.

Last week, the CBN further directed banks to cancel requests from their customers for purchase of treasury bills at primary or open market auctions, if such customers are carrying credits of such banks or other banks. The directive also affects customers enjoying CBN intervention loans.

The new order is an apparent extension of the CBN’s efforts at promoting lending to the real sector by commercial banks.

The net effect of these developments is that the CBN has turned the table in favour of small businesses. Unlike before, the banks are now forced to actively look for viable projects they can lend money to. They will now have to match their marketing drive for customers they can collect deposits from, with an even more vigorous strive to acquire customers they can advance loans to in order to meet the CBN-prescribed Loan to Deposit Ratio.

The banks are now constrained to increase the tenure and lower the interest rates of their loans to small businesses, with a view to making their loans more attractive to this segment of the credit market. These have become inevitable, if the banks are to safely balance a loosening of their purse strings without losing their monies to the CBN or being forced to underwrite non-performing loans.

The fact that the banks have money to advance as credit and are looking for borrowers, as exemplified by the 12 banks already penalised for not lending enough, should not be read as a signal that their treasuries are open for all-comers. The banks are not poised to literally stand at every traffic light and roundabout, handing bags of their hard-earned money to every bystander.

What should you do, as a Small Business Owner, to take advantage of this CBN-inspired lending initiative? Asked differently, what would your bank consider when evaluating the credit-worthiness of your business?

Banks generally consider applications for business loans on the basis of what is commonly referred to as the Five Cs of lending: Character, Cash Flow, Collateral, Capitalisation and Conditions.

1. Character: Your bank expects you to demonstrate strength of character. It will want to know if you or your business are, or have been, involved in lawsuits or bankruptcy. It will want to be reasonably certain that you and your business can be counted on taking your financial obligations seriously.

Your education, training and experience in your line of work, as they relate to the business for which you are applying for a loan will also be considered.

2. Cash Flow: Your bank needs to know that your business can generate enough cash to service the loan while meeting the other cash flow needs of the business. The bank will want to see a reasonable surplus of the income of the business over its expenses over time.

Your bank will consider the debt to income ratio of your business. A high ratio will be a red flag to your bank not to lend money to your business.

The financial statements of your business will reveal this to your banker at a glance.

3. Collateral: Your bank will want a lien on an asset in the event that the business is unable to repay the loan. This would be an asset of the business or a personal asset of the owner where that of the business is inadequate or unavailable.

The lien of the bank on an asset belonging to the business or the owner empowers the bank to dispose of it to cover its outstanding credit in case of default.

The National Collateral Registry, another initiative of the Central Bank of Nigeria, now makes it possible for small businesses to access loans by using such moveable assets as motor vehicles, farm produce, consumer goods, household items and inventory as collateral.

4. Capitalisation: This is represented by the cash and equity in the business, including such resources as fixed assets, retained earnings, less debt. The level of capitalisation shows the business as a going concern or otherwise.

Your commitment of business and personal cash tells your bank that you are invested in the business. It makes the point that you have a skin in the game.

The bank is encouraged to put its money in the business when it sees that you also have your money in the business. The bank can only be vested in the business when you are equally or more vested in it.

5. Conditions: These are external factors that can affect the performance of the business; like market conditions, the competition and industry trends. Your bank will want to know how your business will survive and thrive against the backdrop of market forces, your competitors and industry trends.

The rating of your business, measured by the Five Cs, enables your bank to make an informed guess on the ability of your business to repay the loan. So, be sure to rank well on the Five Cs.

The banks, particularly the ones recently penalised for not meeting their Loan to Deposit Ratio, are now motivated to underwrite more loans. Prepare your loan proposal, and go see your account officer.

Are you looking for money to grow or scale your business? Contact Us Now or email ted.iwere@smefinance.org.

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How To Get The N5m FCMB SME Quick Loan

FCMB SME Quick Loan

Does your business need a loan to keep it going? Have you exhausted other means of raising fund for your business? Are you tired of the complicated and frustrating lending process you experience when you approach financiers for money?

Welcome to the growing rank of players in Nigeria’s financial technology space where some banks are now hopping on the bandwagon of online lending platforms that are helping Small Business Owners with quick loans for their businesses.

Enters FCMB SME Quick Loan.

First City Monument Bank (FCMB) Limited, a member of FCMB Group Plc, with subsidiaries in wealth management and retail banking, is offering the FCMB SME Quick Loan to Small Business Owners in need of instant cash. This facility gives eligible businesses access to credit of Five Million Naira or lower. The amount the bank will approve is determined by the history of the business, with particular reference to its transactions with FCMB.

Subject to checking the credit and appraising the business of the borrower, an eligible business receives an approval within five minutes of submitting an application. The bank then credits the account of the recipient with the agreed sum within two business days. The borrower does not need to provide a collateral to secure the loan.

For customers who open accounts in order to qualify for this loan, FCMB offers the following benefits for the first three months of operating their accounts:

  • Zero account maintenance fee.
  • Zero cost for cheque book and counter cheques.
  • Zero charge on bank drafts.
  • Zero cost for printing of account statements.
  • 75 percent discount on local transfers with FCMBOnline Business Version and Business App.
  • 50 percent discount on charge for use of Business Debit Card.

What are the minimum conditions a Small Business Owner and his or her business must meet to access this loan? The primary requirements are that the applying business must be an FCMB Business Banking customer and must have maintained a banking relationship with FCMB for at least six months. In addition, the Small Business Owner and/or his or her business must:

  • Demonstrate experience in their line of business.
  • Have a business registered with Corporate Affairs Commission.
  • Own a legal business at a verifiable address.
  • Be signed up on FCMBOnline Business Version or FCMB Business App.

The interest rate for the loan is 2.5 percent per month, which translates to 30 percent per annum. Depending on the business cycle of the applicant, the loan could be repaid in 30, 60 or 90 days or 12 months.

What is the application process for this loan? To apply for this loan, the Small Business Owner would login at the FCMB Online Business platform via https://ibank.fcmb.com/corporate/BbgLoginScreenUI.aspx or the FCMB Business App at www.fcmb.com/FCMB-business-app.

After clicking on the SME Quick Loan link, and answering a set of questions relating to the loan application, the applicant will receive a quick reply on eligibility and the approved amount.

The Small Business Owner, in considering the FCMB offer as a solution to the financial need of his or her business, should consider the pros and cons of opting for the FCMB SME Quick Loan.

One advantage is the ease of application as FCMB web portal enables the business to fill and submit an application online, which is immediately moved to assessment. With the bank instantly notifying an applicant of its decision, the quick approval serves the purpose of the loan, which is to assist the business with the emergency funds. As an unsecured loan, the business enjoys the benefit of a fast turnaround without bureaucratic and time-wasting paperwork.

On the other hand, while the loan receives quick approval and is collateral-free, its short tenure and high interest rate require close examination by potential borrowers. Its tenors of 30, 60, 90 days to 12 months could be challenging to small businesses.

Furthermore, while the interest rate of 2.5 percent per month appears low and attractive, it aggregates to 30 percent per year, which is high, and not small business-friendly. This annual interest rate could drop if the business has the capacity to fast track its repayment, and the interest payment is calculated on a reducing balance basis.

The FCMB SME Quick Loan is inviting but, given its short tenor and high interest rate, it may not be best option for a small business with low income and weak cash flow.

Would the FCMB SME Quick Loan breathe life into your business? You be the judge!

Contact Us Now or email me at ted.iwere@smefinance.org if you need help to access funding to start, grow or scale your business.

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Women, Arise! N10b Up For Grabs, Courtesy LASG, Access Bank

LSETF W-INITIATIVE

Lagos State Governor, Babajide Sanwo-Olu, on Wednesday Septeber 4, 2019, launched the LSETF W-INITIATIVE.

The initiative, a special intervention fund created by the Lagos State Employment Trust Fund (LSETF) and Access Bank Plc, aims to provide affordable finance for female-owned businesses in Lagos State.

The Lagos State Government envisions the scheme to drive financial inclusion among women, create financial access for Small and Medium Enterprises (SME) and create employment and wealth for its growing youth population.

Access Bank Plc pursues this initiative in expression of its commitment to support women as they grapple with the challenge of implementing their business ideas. Which is why the bank has indicated its readiness to increase the size of the fund from its initial N4 billion to N10 billion.

Access Bank and LSETF are quick to showcase their credentials in providing assistance to women entrepreneurs and their capabilities to deliver on the W-INITIATIVE mandate.

Since 2018, according to its Group Managing Director, Herbert Wigwe, Access Bank has empowered women with 8,000 personal loans valued at N10.6 billion and 330 business loans valued at N16.6 billion.

The LSETF Board of Trustees Chairman, Ifueko Omoigui-Okauru, says the W INITIATIVE aligns with the Fund’s strategic goal to actualise the desire of Lagos State Government that not fewer than 50 per cent of LSETF beneficiaries should be women. Omoigui-Okauru adds that women represent 5,263 (or 50 per cent) of the Fund’s loan beneficiaries, and account for 43.54 per cent of the Fund’s current loan portfolio of N3.07 billion.

Furthermore, LSETF has reportedly supported 16 women-owned start-ups with workspace as part of its Lagos Innovates Programme which seeks to make Lagos State the tech-hub of Africa.

The W-INITIATIVE targets 5,000 to 10,000 beneficiaries.

How do aspiring and practising female entrepreneurs access this N4 billion to N10 billion Fund?

The loan scheme disburses up to N5,000,000 per beneficiary and attracts an interest rate of five (5) percent per annum.

An applicant must satisfy or possess the following requirements:

* Residency in Lagos.

*  Lagos State Residents Registration Agency (LASRRA) Identification Number.

* Federal Government-issued Identity Card.

* Company registered with Corporate Affairs Commission (CAC).

* Personal Registration as a taxpayer in Lagos State.

* Two guarantors for the loan.

Applications must be submitted online at www.lsetf.ng.

Contact Us Now or send your inquiry to ted.iwere@smefinance.org if you have questions about this or similar loan to start, grow or scale your small business.

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