How to get Micro Loans to Grow Your Business

How to get Micro Loans to Grow Your Business

Why do you need microfinance bank?

One key factor responsible for the growth of any nation’s economy is industrialization. At the core of industrialization are startups creating micro, medium and small-scale businesses. Check out any developed country or one whose economy is growing rapidly, they have put up structures to support the growth of small businesses.

We touched on various practical sources of funds for startups to grow their businesses in Nigeria under this topic: 5 Sources of Funds for Nigerian Startups.

This post will delve deeper by looking into how startups can secure micro-loans to grow their businesses from Microfinance banks in Nigeria.

A Microfinance bank is any company licensed by the Central Bank of Nigeria (CBN) to carry on business of providing microfinance services such as savings, loans, domestic funds transfer, and other financial services that are needed by the economically active poor, micro, small and medium enterprises to conduct or expand their businesses as defined in the guideline for MFB in Nigeria.

What are the roles of Microfinance banks?

Micro Loans

The procedure for securing loans from commercial banks are obviously tedious. And in most cases, startups and small businesses are denied these facilities partly because they do not meet the stringent requirements set by the banks.

Sometimes, collateral, documentation, trustee, business model or plan, how profitable a startup looks are some reasons banks deny startups access to loans.

But with micro-loans, MFBs are empowered to provide more flexible requirements to access funds though them. They are the grass-root kind-of bank. They find it easier to foster relationships with startups and small business owners. While some requirement that you must have been saving with them for some months you can access loan from them, some don’t make it compulsory.

What are the requirements by Microfinance banks?

For instance, AB Microfinance Bank grants micro loans between N15k to N2m with benefits such as:

  • No mandatory deposits/savings and no cash collateral required.
  • No audited financial statements required.
  • Flexible collateral arrangements depending on loan size (household goods, business equipment, goods in stock, vehicles, property etc.)
  • Flexible documentation requirements.
  • Long-standing clients with impeccable repayment record qualify for successive interest rate discounts and even faster loan processing.
  • No borrower groups – you are responsible only for your own loan.
  • Free SMS Reminder for your Monthly Repayments

How to get Micro Loans to Grow Your BusinessHowever, for those startup owners who still keep their day jobs while they grow their businesses, Page MFB offers micro loans based on salary of the beneficiary.

With them, collateral is not a big deal for obtaining facilities.

Most importantly, you have evidence of monthly pay from an employer for the past six months and you can guarantee you can maintain the installment set for your re-payment plan.

Developing Small Businesses

Apart from providing micro loans to individuals and startups, MFBs help develop skills among business owners and enhance the growth of local trade unions. For instance, farmers in a particular community could come together to form a cooperative society. It is one of the roles of a nearby microfinance bank to provide support for this cooperative society and partner with such society on development training programs and access to sophisticated pieces of equipment.

What these farmers can’t do as individuals, an MFB can support their union to achieve in turn for growth of the community at large.

Startup owners can come together based on common interest. When you approach MFBs as a legally-recognized group of business owners or experts, you command more attention than appearing as one passionate guy who just needs some funds to grow his business. Your union can always be used to track you and that brings some level confidence that investments made in your business could be recovered.

Grass-root banking

Some basic banking services can be brought to a locality by microfinance banks due to nearness. An MFB that is close to market could provide custom banking solutions other than regular ATM machines and mobile banking services made available by commercial banks.

The microfinance bank knows the level of literacy in such locality, they have relationships with traders and professionals around such market. Such bank can develop custom solutions that will make businesses around their locality run smoothly.

Likewise, a microfinance bank that is close a co-creation hub will be more relevant if they can come up with technology-driven solutions that will benefit the bank and the tech startups around.

As microfinance banks are here to help you grow your business, VoguePay has more services than to receive and make payments, we offer business support solutions that are already made.

All you need to do is choose which of our content management that is suitable for the tool used to develop your online business platform. Kindly check out our suite of business support solutions here.

 

1 Comment

  1. Glen Dhineros

    thank you for sharing very helpful for making a business grow with ideas.

Leave A Comment?

CommentLuv badge