There are different ways to get a loan in Nigeria to finance your business. This is a very important step in growing and expanding your business operations. However, accessing finance can be challenging, especially for small and medium-sized business enterprises (SMEs) in Nigeria.

With the economy of the country now, you need to be able to get a financial boost that can help you take your business to the level you want to.

This article, therefore, provides a step-by-step guide on how to get a loan in Nigeria to finance your business.

How to Get A Loan in Nigeria

Getting a loan in Nigeria can be difficult, especially if you don’t have a good credit score.

A credit score is a numerical value of your creditworthiness. This simply shows how likely you are to repay a loan.

Therefore, we will be looking at a few ways you can actually get a loan in Nigeria.

1. Determine your business needs.

Before asking for funds, you need to clearly define what your business needs. This helps you to know how much capital you need and when exactly you can be able to pay back.

For instance, Do you need a loan to get more goods, expand your business, hire new employees or to run marketing campaigns?

Answering these questions will help you to understand exactly the kind of loan you will be applying for.

2. Research and choose a lender

A lender is the person who borrows the loan to you. There are different types of lenders like:

• Traditional banks: These are our regular banks like First bank, Sterling bank etc.
• Microfinance institutions: These specialise in giving out small loans. An example of a microfinance institution is LAPO.
• Online lenders: Companies like FairMoney, Quick check, Branch, that provide their quick loan through mobile apps.

When researching lenders, you should compare certain factors like interest rates, their repayment flexibility and their customer reviews.

3. Gather your Required Documents

You need to get your documents ready before applying for a loan. You need documents such as:

• National ID, driver’s license or international passport.
• Payslip
• Proof of income
• Bank statement
• Tax returns
• Utility bills or rental agreement

4. Build a Strong Credit History

A credit history is a financial report card that a lender uses to access your creditworthiness. This shows how well you’ve managed your credit accounts overtime.

Therefore, improve your chances of getting a loan by building a good credit score.

5. Apply for the loan

When applying for a loan, you should be able to write and include a cover letter, a detailed repayment plan and other financial documents that can help you meet the loan obligations.

After that, visit a bank branch or microfinance institutions to submit your application and required document.

Additionally, you can apply through the lenders web or mobile app.

6. Waiting for loan approval.

The approval may take a few days or weeks depending on the lender and the complexity of your application.

Therefore, stay active and respond to any additional inquires promptly.

7. Sign loan agreement

Once approved, you’ll need to sign a loan agreement outlining the weeks and conditions, including interest, rate, repayment and any fees.

However, read the loan terms and conditions carefully before signing.

Different Types of Loans in Nigeria.

There are three basic types of loans:

• The short term loan.
• The medium term loan.
• The long term loan.

In essence, any loan collected from a lender has to be either short, medium or long term.

Therefore, let’s look at the other different types of loans.

Personal Loan

A personal loan is a loan used for different purposes. Just like the name goes, this loan can be used for personal stuff such as going on vacation to more important things like paying medical expenses.

This type of loan is usually a short term loan and is repaid in regular installments overtime.

However, not all loan lenders give out personal loans especially for expenses they don’t think you can pay back at the fixed time. For instance, taking a loan for college tuition.

Business loan

A business loan is a loan offered to business owners for different business expenses. It can be used for expanding your business to other states, buying new equipment or even hiring employees.

A business loan can be received from banks or online lenders. Also repaid with regular installment that includes interest.

Microfinance loans.

This kind of loan is given out by micro finance institutions.
However, the size of this loan is always smaller than those gotten from banks. These lenders tend to borrow to low-income individuals. Example of a micro finance institution is LAPO.

SME loans

SME stands for Small medium enterprise. These loans serve small and medium sized businesses and it mostly doesn’t require a collateral. The loan is normally short-term business loans.

Asset-based loans

This is a type of loan where the borrower uses an asset as a collateral to secure the loan. The asset used has to be one of value. This is done incase if the borrower defaults, the lender can take over the asset.
Moreover, this type of loan helps businesses to access emergency capital.

This type of loan can be short term or long term depending on what the borrower needs the money for.

Invoice Financing

This is usually a short term loan where the business owner uses an unpaid invoice as collateral. Here, the lender assesses the invoice to be certain of its creditworthiness.

When assessed and found worthy, the lender goes ahead to give up to 80-90% of the invoice value to the business owner. When the invoice is paid, the business owner repays the loan to the lender along with interests.

Eligibility Criteria to Get a Loan in Nigeria.

To qualify for a loan in Nigeria, you must meet the following eligibility criteria:

• Registered business with CAC
• Valid TIN (Tax Identification Number).
• Business plan and financial projections.
• Good credit history.
• Collateral for secured loan
• Age gap of 21-60 years.
• Income; minimum of 50k monthly.

Documents Required in order to Get a Loan in Nigeria.

To apply for a loan, you’ll need to provide the following documents:

• Business plan
• Registration documents (CAC, TIN)
• Financial statements (Balance sheet, income statement)
• Tax clearance certificate.
• Credit report.
• Collateral documents(if required)
• Identification documents (passport, driver’s license)
• Loan application form

Conclusion

You can get a loan when you need to finance your business and move it to the next level.

However, you have to make sure you follow due process in order to have your loan approved. Carefully read the article above to understand how to get a loan in Nigeria.