Saturday, October 05, 2019

How to get a loan from a Bank

Preparing a good feasibility report is one of the most important steps you should take if you need your banker to finance your proposed business. The same is true if you are planning to expand your existing business. Presenting a good feasibility report to your banker will make a good impression and can facilitate your getting a loan.
Generally,if you need a loan from your bank to help finance an existing or new business, it's most likely your bank will require the following information.
  1. A clear statement of the amount of the loan required.
  2. A clear statement of the purpose of the loan.
  3. The period or term of the loan.
  4. Your feasibility report (if is a new enterprise or expansion of an existing one) plus an authentic financial report of the performance of your business, if is an already existing one.
  5. Your management background and competence. The bank is very much interested in learning about your management background, because without competence management background the business will run into trouble and the repayment of the loan becomes difficult.
  6. Your repayment arrangement: The bank will be keenly interested in knowing how you plan to repay the loan. Hence, they will like to evaluate your cash flow forecast.
  7. Any security you can pledge. Bank in general, and in Nigeria in particular, want all sorts of security. You are required to find out from your account officer what kind of security will be required before filling your proposal.
Banks generally prefer a security that can be quickly turned into cash. Examples of such security are Government Bonds, share certificates and insurance policies. Other kind of securities that can be pledged to a bank are equipment, real estate like building, and other property of value.
The examples given above do not exhaust the list of securities that can be offered to your bank to enable you obtain a loan for business. Likewise, the list does not exhaust all options open to a borrower in obtaining a loan. You may still be able to obtain a loan even without security,if you can get a guarantor acceptable to be bank. Members of your family, friends and relations can also be of assistance in raising loans for you. You can also raise finance through the popular esusu or through thirft and co- operative societies.
It's not likely, however, that any financial institution will be willing to provide more than two- thirds of the cost of your proposed project. In other words, banks and other financiars watch the debt equity ratio in appropriate cases in deciding whether to approve a loan or deny it.
Banks usually require high Credit Standards in order to be able to get back their money. They do not actually own the monies they lend to borrowers. They give from the monies deposited with them by other customers, meaning that they are entrusted with public money. A bank or any other financial institution acting in this capacity of trust must, therefore, jealousy guard the money so entrusted to it. If it must maintain it's reputation.
Bank in Nigeria are under the supervision of the central Bank of Nigeria. Thus, a banker's decision on a loan application will be influenced by the following factors.
  • Government policy
  • Bank policy
  • Customer's interest.
Important Notice: To be updated very soon.

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