If you are a small or medium business owner, establishing a relationship with a bank by opening an account can help boost your personal business.
Banks are the major lending institutions to individuals and organisations in the society. However, to access loans from banks, the borrower needs to understand what they require in order to qualify for any credit facility.
It is relevant to know that banks do not just give out loans to anybody that approaches them. The lender needs enough evidence from the borrower on his ability to repay the facility that he is asking for.
Banks usually tie their approval of loans to specific projects or purposes such as meeting urgent exigencies or supporting business plans.
Generally, it is easier for employees who work in well established organisations to get loans in banks where they domicile their salaries. This is because the banks can always deduct a certain percentage of their monthly salaries until the total money borrowed is repaid.
When the borrower does not have a salary account with the bank, the lender usually asks for collateral before granting loans.
However, without collateral, some banks can still give you loans if you meet the following conditions.
Register your business: Do not wait until you need a loan before you start your business. Have your business current account domiciled in your bank. When you already have an established relationship with your bank, it will be easy to get a credit facility because banks will only relate with their customers and not strangers.
Be specific on why you need the money: You have to be able to convince the bank that you will use the money for your business and not divert it to other things. The money may be needed to acquire new machines or pay for goods among other things. The bank wants to be convinced that you will be able to pay back.
How much do you need: Be specific on how much you want to borrow from your bank and when to repay. Loans for small and medium businesses do not usually exceed N1m.
You may also try and borrow some money from relatives and friends who will not ask for interest. This will reduce the loan you want to take from the bank because the bank will determine the interest rate you have to pay back on the money.
Also, keep proper account of your income, expenses and profit. Have a well researched financial projection that you can present to the bank to show your current financial flow and ability to repay the loan.
Guarantor: Because the bank is not requesting you to produce collateral, in most cases, it will demand for a guarantor in case your business plan fails and you are unable to repay the loan. Your guarantor is usually required to be working in a corporate organisation and he will show evidence of his financial worth in the form he will fill for you.
Bank statement: You may be required to present recent bank statements to show your business is still operating.