How to Access Loans from Microfinance Banks in Nigeria

Although there are now many loan companies in Nigeria, only a few actually cater for small businesses. If you want to get a loan to support your business, your best bet is a microfinance bank.

They are licensed by the Federal Government of Nigeria (FGN) and sometimes, when federal government plans to improve the economy, they do give microfinance banks money to distribute to small businesses in the form of loans.

There are many microfinance banks in Nigeria. Some operate within a state while some operate throughout Nigeria. Not that many do not know that this kind of bank exists in Nigeria, the problem is that they don’t know how to get loans from them. The target of this article is to show you how to obtain loans from microfinance banks in Nigeria.

Note after reading this article, you still need to go to a microfinance bank in your area to get more info.

What is a Microfinance Bank?

Microfinance bank is like any other bank in Nigeria, they also perform the functions of banks such as keeping money and processing transaction. And apart from these, they are known for loan disbursement. Their main business is to give loan to small business and for this reason, Federal Government use them a lot when they want to render help to small business.

They only deal with small businesses. Hence, if you manage or run a big business, such as a corporation or a tech start-up, you will not be given any loan.

How to Get Loans from Microfinance Banks in Nigeria

Get your business plan ready

Microfinance banks deal with business, you cannot obtain a personal loan from this bank. To get loan from microfinance banks, your first assignment is to write a business plan that will show what your business is all about and how you plan to deliver value and get value back.

In your business plan, they want to see your cost analysis, market analysis, technical analysis, and other important section. This will let them know whether your venture will be sustainable and profitable.

You need to write the plan well because it will be checked by professionals. Whatever business you are going for make sure you have experience in it, they might ask you to defend what you wrote in the plan.

Have an existing business

Microfinance banks are not start-up funders. You need to have an existing business before you should meet them. They believe you cannot start a business with a loan which is very true. There are a lot of challenges you will encounter when starting a business. In fact, your business has a high probability of failing, which is why they only give loan to a business that is already working, or a business that has a structure already.

In some situations, they can approve your application without having a business on ground, but it is very rare.

Have your documents ready

Your documents such as CAC (Corporate Affairs Commission) that will be given to you after business registration must be presented, this will serve as evidence that you have a business. If you are requesting for a huge loan, they might ask you to submit tax documents.

Have a bank account with them

As stated above microfinance companies are banks, they are also under CBN and they function just like any other bank, they can process transactions, and you can save with them and others.

You need to open a bank account with them before you can request for a loan. In fact, your account should span around 4 months before you will ask them for a loan. The reason they have this kind of requirement is that they want to see you as a loyal customer. When you have an account with them, they will have your data and this will determine the amount of loan you will be given.

Don’t just open a microfinance bank account and keep it idle. You need to use it to make transactions and save money.

Collateral

This is the most crucial part of a bank loan. After meeting up with the requirements, you need to present collateral in alignment with the amount of loan you want to obtain.

Make sure you have made up your mind on collateral to present before approaching them. Microfinance banks will not give you a loan without collateral, so prepare for it.

If you default, they will sell this collateral and use it to fill the money you owe. They do not joke with their money.

Walk to the bank

After this, you can go to the bank and make further inquiries. Most of what they will tell you is what is written above. Once they give you the needed info, you can proceed to ask for a loan.

The process takes time. It can take up to 2 months before you will secure a loan from a microfinance bank so you need to exercise patience.

Conclusion

Microfinance banks are like any other bank in Nigeria, they also process transactions, and you can also save with them. If the government wants to give financial aid to small businesses they are often the suitable medium.