Banks Device New Appraisal Strategy for Small Businesses

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By Abiodun Oyetunji




There are indications that some banks are now latching on to the credit appraisal platforms of the Bank of Industry, BoI, in determining credible and bankable small businesses to advance loans to.

 

SME Reports gathered that at least three banks now prospect for SMEs who are already approved by BoI for credit finance of their manufacturing equipment under the various real sector loan packages.

BoI, usually do not give cash loans or working capital for some categories of loan seekers, but they rather provide funds for purchase of production equipment.

 

Also the loan would not be released in cash to the beneficiary, rather the bank would pay directly to the equipment supplier whether in Nigeria or abroad.

 

The equipment would be purchased with BoI assuming ownership until the loan is repaid by the beneficiary.
However, some of the beneficiaries have complained to SME Reports that they often face problem of working capital which constrained their ability to fully utilise the equipment and get adequate returns to guaranty loan repayments.
On the other hand most banks had found it difficult appraising SMEs for the purpose of working capital loan since they are not structured enough to guaranty sound business practice and financial management required to ensure loan repayments.
 




Consequently the banks that are now selecting their SME loan beneficiaries from those that have scaled through BoI loan appraisal hurdle and accessed the equipment loans feel safer with such SMEs.

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