Post by Trade facilitator on Sept 17, 2021 11:31:48 GMT 1
The CBN gave a directive on the 3rd of July 2019 compelling Nigerian Banks to maintain a Loan to Deposit Ratio (LDR) of 60%, though there had been more increases since then; wherein SMEs, Retail, Mortgage and consumer lending would be assigned a 150% weight in the computation of this LDR.
This directive has since brought life back to the SMEs and other such enterprises in ways and methods they access funds from financial institutions in Nigeria.
In order to avoid sanctions from the CBN in case of non-compliance with the directive, more commercial banks are now focusing on retail and SMEs to meet up with the quota.
Since this directive came into effect, the mass market where the small scale businesses and the like play has been bombarded by the Nigeria’s financial institutions jostling with Microfinance Banks , Fintechs, looking for retail and SMEs customers.
They now try to outdo themselves with mouthwatering rates and easy to meet conditions for loans as others are ready to come into the deal at any time.
This is really good news for the mass market as these low ladder customers couldn’t have qualified for such loans if it were to be in the past.
However, we all know that banks and other financial institutions were established to make profit and to safeguard the interest of their stakeholders.
In order to achieve this, they need to apply best credit practices when giving out any amount of money to anybody as loans. Therefore, they can only extend credit or loan to only those whose financial records show green, which is safe for the bank to put their money in your hands.
Let us look at a few ways you can increase your chances of being considered or for you to qualify for loan from your bank.
The first step is to consolidate your banking activities.
It is a general belief among individuals running SMEs in Nigeria that it pays to have accounts in more than one bank. If you check some companies, you will discover that they have opened accounts in as much as 5 (five) banks.
They claim that these accounts serve different purposes, yes it may be true, but as far as those accounts relate to your business, it pays you better to consolidate your banking activities in your favorite bank.
When banks want to evaluate your financial records for the purpose of lending your company money, they will look at the turnover your business has generated over a period of time.
For simplicity sake, presenting one bank statement for evaluating your company’s turnover will make work easier for the bank officer going through your records; your turnover will be the best you can produce and your chances of landing that loan is higher.
What is your credit status with your banks or other financial institutions?
For you to qualify for any loan in Nigeria today, you must make sure that you do not have outstanding loans anywhere with any financial institution in Nigeria.
If you have, go and clear that loan first before you start making plans to apply for a new one. Go through all your records; obtain all your banks’ outstanding balances and be sure that there is no debit balance in any of them.
Financial institutions love customers with good character, those with the habit of settling their debit balances often.
Financial institutions do not forget loans, even if they have written them off, they will still remember when the time comes.
Pay attention to your turnover and average balance
When the bank is talking about turnover, what they mean is total amount that passes through a customer’s account within a period of time, say one year or one month. But the daily overnight balance is the total of all the daily overnight balances divided by the number of days under review.
It is true that credit officers usually dwell on turnover much, but a well-grounded credit officer knows that average balance is also important. Average daily balance shows your available capital daily and cannot be manipulated, it is built over time.
Separate your personal transactions from those of the company
Most owners of SMEs usually lump together personal and company transactions together, thereby confusing credit officers; you must show calculations of how you came about the balance in the statement you are presenting to the bank credit officer.
These are some of the basic issues you need to be aware of before making application for loan from your financial institution.
Stay with us as we are coming with more ways you can prepare yourself better to pre-qualify for loans from Nigerian Financial Institutions.
This directive has since brought life back to the SMEs and other such enterprises in ways and methods they access funds from financial institutions in Nigeria.
In order to avoid sanctions from the CBN in case of non-compliance with the directive, more commercial banks are now focusing on retail and SMEs to meet up with the quota.
Since this directive came into effect, the mass market where the small scale businesses and the like play has been bombarded by the Nigeria’s financial institutions jostling with Microfinance Banks , Fintechs, looking for retail and SMEs customers.
They now try to outdo themselves with mouthwatering rates and easy to meet conditions for loans as others are ready to come into the deal at any time.
This is really good news for the mass market as these low ladder customers couldn’t have qualified for such loans if it were to be in the past.
However, we all know that banks and other financial institutions were established to make profit and to safeguard the interest of their stakeholders.
In order to achieve this, they need to apply best credit practices when giving out any amount of money to anybody as loans. Therefore, they can only extend credit or loan to only those whose financial records show green, which is safe for the bank to put their money in your hands.
Let us look at a few ways you can increase your chances of being considered or for you to qualify for loan from your bank.
The first step is to consolidate your banking activities.
It is a general belief among individuals running SMEs in Nigeria that it pays to have accounts in more than one bank. If you check some companies, you will discover that they have opened accounts in as much as 5 (five) banks.
They claim that these accounts serve different purposes, yes it may be true, but as far as those accounts relate to your business, it pays you better to consolidate your banking activities in your favorite bank.
When banks want to evaluate your financial records for the purpose of lending your company money, they will look at the turnover your business has generated over a period of time.
For simplicity sake, presenting one bank statement for evaluating your company’s turnover will make work easier for the bank officer going through your records; your turnover will be the best you can produce and your chances of landing that loan is higher.
What is your credit status with your banks or other financial institutions?
For you to qualify for any loan in Nigeria today, you must make sure that you do not have outstanding loans anywhere with any financial institution in Nigeria.
If you have, go and clear that loan first before you start making plans to apply for a new one. Go through all your records; obtain all your banks’ outstanding balances and be sure that there is no debit balance in any of them.
Financial institutions love customers with good character, those with the habit of settling their debit balances often.
Financial institutions do not forget loans, even if they have written them off, they will still remember when the time comes.
Pay attention to your turnover and average balance
When the bank is talking about turnover, what they mean is total amount that passes through a customer’s account within a period of time, say one year or one month. But the daily overnight balance is the total of all the daily overnight balances divided by the number of days under review.
It is true that credit officers usually dwell on turnover much, but a well-grounded credit officer knows that average balance is also important. Average daily balance shows your available capital daily and cannot be manipulated, it is built over time.
Separate your personal transactions from those of the company
Most owners of SMEs usually lump together personal and company transactions together, thereby confusing credit officers; you must show calculations of how you came about the balance in the statement you are presenting to the bank credit officer.
These are some of the basic issues you need to be aware of before making application for loan from your financial institution.
Stay with us as we are coming with more ways you can prepare yourself better to pre-qualify for loans from Nigerian Financial Institutions.
