The COVID-19 pandemic is affecting Nigerian businesses across the hospitality, tourism, entertainment sectors, including small and medium enterprises (SMEs).
As the world continues to battle the COVID-19 pandemic, businesses are continually looking for ways to boost their business through funding opportunities like grants and loans finances, Nigeria’s FCMB bank has organized a seminar which addressed how businesses affected by the pandemic could access funding.
Why borrow and how much?
Facilitators of the FCMB bank webinar advised participants on the need to borrow to adjust to covid-19 realities, plan for the future, plan business expansion, bridge cash flow gap and invest in technology.
To borrow, the facilitators advised business owners to have an accurate idea of how much they need to start or upgrade their business. Underestimation of the funds a business needs hamper business progress, while hyper-estimation can lead to frivolous spending, bearing in mind that loans must be returned to the bank at expiration date, the facilitator advises.
“Ensure you add up contingencies while calculating the capital you need. To know your required capital, you must be able to know business targets, know if you are hiring employees or not, have an idea on cost of equipment, know your initial start-up capital and have some idea about your running expenses,” the facilitators add.
Sources of funding
The facilitators also advised business owners on other sources of sourcing for funds for their business.
Every business owner or potential business owner should cultivate the habit of saving. Funding your own business is a dignifying exercise because you don’t have to beg anyone for a loan.
Friends and Family
Your friends might be of help when you need funding, approach them. If they are your friends and they have the money you need, they might help. As the popular saying goes ‘A friend in need is a friend indeed’.
Good rapport with Suppliers.
Having a good rapport with your suppliers can be a good advantage for business owners seeking funding. This usually goes with no interest. It is based on trust.
For banks, the facilitators said, funding depends on the bank.
Commercial banks can give maximum loans to businesses compared to a microfinance bank because of differences in financial base. Also, interest rates are not uniform, they differ from one bank to the other.
What banks consider before granting you a loan (the 5c’s of credit)
At the webinar, the facilitators explained the factors banks consider before giving out loans.
Character: The loan seeker must be responsible and trustworthy. Your loan application will be assessed based on your creditworthiness, your income level, business credentials and reputation
Capacity: do you have the ability to repay the loan? Your business worth and cash flow matter.
Capital: Banks give preference to business owners who have invested their own money in their businesses. This brings us back to the habit of saving and obtaining funds from friends and family. So, when approaching a bank for a loan ensure your personal investment in your business is well documented.
Conditions: Banks prefer business operating under favorable conditions. One should remember that they are also investing their money. They will want to know if your business has prospects so that their investment and returns are well protected.
Collateral: Business should have assets that can be used to secure a loan so when the loanee defaults, the assets will be taken by the bank.
The facilitators also discussed the different loans FCMB offer to businesses with competitive interest rates:
- SMEs Development Finance Facility
This loan is for SMEs with the ease of long-term repayment to assist them in acquiring office spaces, shopping centers, industrial warehouses, and apartment complexes. The minimum funding is N500,000 and the maximum repayment period is 36 months
- SME Asset Finance Facility
Created to assist SMEs (retailers, contractors, wholesalers, distributors, manufacturers, importers etc.) to acquire machinery or equipment. Minimum amount one can get is N500,000 and the repayment period is between 1-4years
- SMEs Working Capital Facility
A short-term loan (1-36 months) or overdraft loan (1-3 months) with tenure of to support businesses regarding running expenses and contingencies. The minimum one can get is N500,000.
- Quick loan
Meant for SMEs (agribusiness, trading, power and utilities and creative industry) who are FCMB account holders with a fast turnover cycle. Range of 20,000 naira -10 million naira can be obtained and the repayment period is within 180 days
- SME Invoice Discounting Finance Facility
Meant for SMEs (contractors, manufacturers, and traders) operating within the service industry with diversified sources of income. It allows a business to get prompt payment while its invoice is discounted by FCMB. Minimum amount one can get is 500,000 and it can be repaid within 1-180 days
- SME Local Purchase order (LPO) finance Facility
Meant to finance Local Purchase Order (LPO) issued to SMEs (contractors and manufacturers) operating within the service industry with diversified sources of income. It is a short-term (1-180 days) financial option that provides a business with capital to pay suppliers upfront for verified purchase orders. The minimum one can get is N500,000
- Zero Percentage Interest Loan For Women
Meant for enterprising women form access to capital (maximum of 5million) to run and expand their businesses. Repayment period is within 3 months.
FCMB’s Covid-19 interventions
Collaborated with Central Bank Nigeria (CBN) in the on-lending of the New N100billion Health sector intervention funds.
Reduction of interest rate on all applicable Central Bank of Nigeria (CBN) intervention funds from 9% to 5% for 1 year effective from March 1, 2020.
Worked with the Development Bank of Nigeria (DBN) to offer customers moratorium on principal and interest for 90 days and rate reduction on new facilities.
Pointed customers to the new N50 billion SME facility of Central Bank of Nigeria (CBN) availed through Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL) Microfinance Bank at 5%
International Finance Corporation (IFC) lent $50miillion to FCMB to support SMEs during the pandemic . for more information, please visit https://businesszone.fcmb.com/ OR send an email to SMEHelpdesk@fcmb.com