You’ve used up all of your resources in setting up your business and it is doing okay. But “okay” isn’t what you are going for. You want your business to thrive and you know it needs some extra cash injected into it. Hence, the need for a business loan. You need to know how to apply for small business loan in Nigeria.
So, where do you access a business loan? How? What do you have to do? Are you even eligible? These are the right questions and we’ve put together a guide for business owners who want to take out a business loan.
How to apply for small business loan in Nigeria
1. Confirm your business’ credit eligibility
Before you approach the lending company or financial institution, you should check to know your creditworthiness. This goes a long way to affect your eligibility to apply for a loan. You can access your Credit Information Report (CIR) from CRC Credit Bureau. The CIR is a statement of your credit transaction history, and provides information about loans you’ve accessed, loans you are currently repaying and your financial behaviour. Loan companies in Nigeria will always conduct this check before granting you a loan, why not save yourself some time and do the check yourself before going ahead with your loan application.
2. Put together all relevant business documents
Depending on the loan companies and financial institutions, you will be required to present certain business documents and disclosures. In order to get prepared ahead of time, you should start assembling these documents as soon as you make up your mind that you want to apply for a business loan. Do note that different banks and lending companies may require slightly different documents from you. However, here’s a list of documents you could make ready:
- Personal and business tax statement for 1 – 2 years.
- Bank account statement for the past year
- Business plan (especially if you are looking for funding for your business idea)
- Document showing income statement in the last 2 years
- CAC business registration documents, shareholders agreement document
- List of staff members on the payroll in the last year
- Proof of ownership or title documents for any asset owned. Most financial institutions and lending companies will require a collateral. However, some others like Direct Bridge Nigeria Ltd, offer unsecured, instant business loans to business owners.
3. Reach out to various lending companies and financial institutions
The next step would be for you to contact various loan companies in Lagos or any part of the country you reside in. This is necessary for you to get an idea of what their loan rates, loan terms and also repayment plans are. It is quite important at this point to make sure that you know and understand what you are getting into. Do your research, consult with professionals and experts in the business loan service to get advice and guidance. Choose the best type of loan for your business.
4. Fill out the loan application form
Get the loan application form and fill it. Also, take a look at the loan agreement before signing it. Be careful not to get roped into what you’re not ready for. Ask your loan officer about late payment penalties, hidden charges and for the breakdown of the monthly repayment of the loan. If you are not comfortable with certain parts of the agreement form, it is advisable that you seek legal counsel. The loan application form would often require information such as name, home and business address, previously owned businesses, phone number, email address, business history etc. After submitting the form, the lender will then conduct a credit check with the credit bureau.
5. Add extra documents
To make your application appear extra credible, you should consider writing a business or personal statement and attaching it to the loan application form. Some of the extra documents will be your personal and business background statements, your financial statement as well as a proper documentation of your business model and plan. This should aid in giving the lender more confidence in your ability to grow your business with the loan as well as pay back.
Remember, the best time to apply for a loan is before you actually need it. This is because the process can take quite some time and you don’t want to be in a bind causing you to desperately accept any offer presented to you without doing some fact checking. There are trusted and verified lenders on the Vconnect platform, who will be more than willing to offer advisory services to you on how to apply for small business loan in Nigeria.