For any start-up idea to move from the idea stage to realization, it requires a lot of resources, and one thing that can quickly take a great idea from a hobby to a full-blown business is money. Unfortunately, raising funds, particularly, getting a loan for a start-up can be an ordeal for anyone, especially Nigerians.
We share 4 ways Nigerian founders can boost their chances for start-up loans.
Ensure your personal capital is substantial
It may come as a surprise, but lenders actually want to see that you have some “skin in the game” before they can consider your application or request. For instance, some banks will typically want you to have at least a 20% down payment on a conventional loan for a new business. Ensure you save up as much money as you can when you are planning to launch a start-up, and be ready to show documents confirming your personal income and investments.
Prepare a business plan
Business plans are very essential for any founder who is looking to get a loan. Lenders want to see a solid, well-thought-out business plan, as they believe that a business plan is a roadmap for how the business will fare in the next few years. Work towards discussing at least the following in your business plan: description of the service or product your startup will provide, experience and qualifications for you and (if applicable) your management team, market analysis, marketing plan, financial projections, and basically, other information that you know the lender may require.
Emphasize prior industry and management experience
From any lender’s perspective, experience is considered the true teacher of all things. When searching for startup financing, your past experience is essentially predictive of your potential for success as a business owner, hence the likelihood that you will pay back the loan. Therefore, when submitting a resume with your loan application, it is essential that you highlight relevant industry and business management experience. For instance, if you want to open an online book store, it really helps to have a few years under your belt as a librarian at a leading institution.
Consider putting up a collateral
Collateral basically includes home equity, stock, cash savings or deposits, equipment, business inventory, or other hard assets. To increase your chances of getting a loan, take out time and closely peruse your personal assets, then decide on which of your assets you are willing to put up as collateral. If you are able to provide 100% collateral for the loan amount you are requesting for, your chances of acquiring a business loan will automatically be higher than those who could not. Keep in mind however that when you pledge the asset as collateral and your business goes under, the bank has the right to confisticate the asset and sell it to recoup its money.