Let’s talk about getting a small business loan from a bank. One of the
challenges of running and expanding a small business in Nigeria is
getting access to funds to finance the business. People usually start
their businesses with money they have saved and, sometimes, donations or
loans from friends and family. Sometimes, money from these sources is
not enough to really grow a business, and so the business owner
starts
looking for other ways to finance his ventures.
Some business owners say that banks are not willing to lend money to
small businesses. This is not the case. The issue, many times, is that business
owners do not know how to organize and present their businesses in a way that
will help them get money from banks.
Here are five simple ways through which you can increase your chances
of getting a loan from a bank, and grow your business.
·
Number
one, you must understand why banks give
out loans in the first place. Banks give out loans because they expect to
be paid back. They will therefore only lend to a business purpose that they
think is sound. A bank will not lend you money unless you can show that bank
that you have a good business plan and that you will use the money that you are
given as your business plan says.
·
The
second thing is your reputation. Do
you have a record of borrowing from banks and repaying what you borrowed? Or
have you borrowed from other banks and not paid back? If you have a track
record of not paying loans you have taken or issuing cheques which bounce, most
banks will not be willing to lend you money.
·
Number
three; do you have a good accounting
system in place for your business? Many banks will only lend to businesses
that have a good and accurate accounting system. The accounting system must
show that the owner’s accounts and the accounts of the business are separate.
The accounting documents which banks like to see before they lend you money for
your business are the profit and loss account of the business, the balance
sheet, the cash flow statement and etc.
·
Four,
are you familiar with your industry?
It is easier to convince a bank to lend to you if you are able to show that you
understand the industry that you do business in and, that you understand the
value that you bring to that industry. Do you know who your major competitions
are? What do you offer that they do not or cannot? How do you intend to win a
bigger market share over time? If you can show that you understand your
competition and how to get ahead of them, banks may consider your business a
good one to support.
·
Finally,
be persistent. Many small business
owners try just one of two banks and then give up on their goal of getting a
loan because they have been rejected. It is important to know that banks have
different business areas in which they focus. They also have different areas of
knowledge. Some banks prefer to lend to really big companies while others
prefer to lend to small or medium sized ones. If you really need a loan, don’t
give up after trying just one or two banks.
If you have a good business plan, keep the right accounts and find the
right bank, chances are that you will get the loan that you are looking for to
grow your business.
This has been courtesy Wema Bank as part of The Bankers Committee
Financial Literacy Public Enlightenment Programme brought to you by The Bankers
Committee, comprising all the commercial Banks in Nigeria and the Central Bank
of Nigeria, CBN.
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