This article is focusing on business loan, different from other loans such as personal or consumer loans, mortgage loan, etc.
Getting a loan from banks in Nigeria is not as difficult as most people think, especially those that have issues attempting to do so. The problem is largely that of huge communication gap (knowledge gap) between the lender and the borrower, than unavailability of loanable funds or unwillingness of banks to lend. Also it is not all about borrowers’ shortcomings as has been overstretched in some quarters.
If only we note that banks have excess funds which are ready for lending and at same time the banks are not ready to throw away depositors’ money simply because somebody wants loan, the borrower-lender field would become even.
Let’s examine a cross-section of a selected few for the purpose of presenting a representative case on this issue.
Below are some of the things one must have in mind before going for a bank loan:
First, the bank has a duty to protect itself or its depositors’ funds from any loan that may go bad. Hence, the bank will have to examine and appraise any credit facility being requested properly after which the request may be granted or rejected. Some basic conditions must be met before a customer can apply for loan in the first instance:
· Opening and operating of current account for about six months (some banks have relaxed this condition for small borrowers recently);
· The account must be satisfactorily operated, i.e deposits and withdrawals must be reasonably stable and regular;
· Customer must have unquestionable character and good health;
· Company under which the loan request is being made must have and provide its registration, or incorporation details
· The owner of the company must make a convincing Business Case for the loan, rationale behind it;
· The loan application must be accompanied with a credible Company Business Plan
· It must be accompanied with your business financial statements including an income statement, balance sheet and cash flow statement;
· Also Statements of assets and liabilities of all the business partners, members of the Board of Directors (may not be required for small scale businesses)
· A 12 months cash flow statement of your company.
This list is not exhaustible as most banks have some item peculiar to them while banks also add some items specifically for a particular applicant. But the above list covers over 90 per cent of what may be required for a start.
Note that a satisfactory presentation of all the above listed requirements does not still qualify an application for loan to be granted automatically. Next week we shall be examining other considerations for a successful loan transaction between a bank and its customer. We shall also be examining some cobwebs embedded in a typical bank loan transaction in Nigeria.