GETTING LOANS WITHOUT COLLATERAL From Microfinance Banks In Nigeria

One of the most critical factors for the success of any business is access to capital. Capital is critical and crucial to business success in any nation. It is as indispensable to the growth of business as oxygen is to human existence.

Capital is needed for the launch of a new business and the sustenance of an existing one. For start-ups, the need for capital is more critical, because of items required, which may range from rent to office furniture and equipments, to utilities, working capital, living expenses, legal and accounting services, supplies, taxes, home expenses etc.

In summary, capital is needed for the start-up of a new business, existing business expansion, working capital, contract execution, importation, supply, delivery of items and many other purposes.

If we are not economical with the truth, each one of us needs capital either for business commencement or for the expansion of an existing one. How then can we get access to this very important factor for the success of every venture assuming we don’t have enough of it for the business of our choice?

MEANS OF RAISING CAPITAL FOR BUSINESS

• Money Grants e.g. You Win program (www.youwin.org.ng)
• Personal savings
• Bank loans
• Sale of assets
• Joint contribution
• Financial support from family members
• Partnerships
• Mobilizations from contracts
• etc.

WHAT IF I CAN’T RAISE CAPITAL BY ANY OF THE ABOVE MEANS?

Then you go to the banks. Commercial banks will want to do business with you because they all desire to triple every year their previous year customer base. The bitter truth however is that they will do business with you upon the fulfilment of many conditions. After satisfying every other requirement, you will be asked to present collateral for the money the bank will give out to you on loan. This is where discouragement sets in for most people.

But, Micro finance banks was set up with a mandate to empower economically active persons, deepen savings culture among the people, providing financial services to low income earners, promote education, train people to be useful and productive, helping to eradicate poverty by giving people free collateral loan to support income generating businesses. As each loan is repaid, the money is redistributed as loans to others thereby multiplying its impact.

A lot of us look at micro finance banks with disdain. This is largely because of the name (micro). Of a truth the word micro does not suggest the financial capacity of the bank; rather it serves as a pointer to the target customer or client of the bank. Some micro finance banks are financially stronger than most of our so called commercial banks here in Nigeria. In addition, all micro finance banks are insured by Nigeria Deposit Insurance Corporation (NDIC). So the fear of loss of deposit in the event of liquidation is no longer there.

AVAILABLE LOANS FOR INTERESTED PERSONS 

1. Local purchase order (LPO) financing facility: This loan is available to individuals or groups who intend to finance contracts awarded to them by reputable institutions. 
2. Bridging loan: This is a kind of salary advance issued out to salary earners for a period of 90 days. 
3. Working and asset loan: Short term working capital for traders, businessmen, women, and small scale enterprises. 
4. Hire purchase: Advance for purchase of home appliances, electronic gadgets, and purchase of motorcycles, cars, etc. 
5. Group loan: Advances to members of clubs and co-operatives. 
6. Agricultural loan: Advances for agricultural loan. 

THE PROCEDURE TO ACQUIRING OF LOAN WITHOUT COLLATERAL 

Micro Finance Bank gives loan without demanding for collateral to only the economically active persons (working class) and the middle class (prospects with plans) on the following conditions: 

• Level of your Turn-Over: the amount of deposit and withdrawal you perform with the bank.
• Visibility Study 

If you belong to any of these two categories of people then you are qualified for a loan from the bank. I want to believe you are or else you will not be here today. You can apply for loan from micro finance bank as: 

1. An individual; 
2. A Company; 
3. Group of friends; 
4. Co-operative society.

FREE COLLATARAL LOAN REQUIREMENT (summary)

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. When this is achieved, you follow these processes 

1. Level of your Turn-Over after period of about 3 months. 
2. Application letter from prospective borrower stating every details about the usage of the loan. 
3. Acceptance letter from the bank in question. 
4. Presentation of two sureties either civil servant or established business men. 

GOOD BUSINESS PLAN 

1. Information about you. 
2. The identity of your business. 
3. A description of your production or services and target market. 
4. The pricing policy. 
5. The date of registration or incorporation if it is a registered company. 
6. Number of employees if any. 
7. Legal basic or requirements for your business. 
8. Profile of key management. 
9. Financial information. 
10. Program of action and date. 
11. Market segmentation.