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CBN Loans for SME owners in Nigeria

by Samuel Moore

September 3, 2020 6

What better time to discuss CBN loans for SMEs in Nigeria than now? Many businesses have been shaken by the effects of COVID-19 and are seeking funds to rebuild. The truth is that even before the pandemic, it has never been easy to raise funds for business purposes.

The Central Bank of Nigeria understands the perils of SMEs in the country. It has several loan packages that SMEs can take advantage of finance and grow their businesses. This news must be music to your ears.

Without further ado, let’s show you some of the CBN loans you can apply for to raise capital for your business.

Reasons why SMEs in Nigeria need business loans

It is no secret that some business owners run away from taking loans. For many of them, it is one way to kill the business. In reality, loans are one of the best ways to finance your business. Of course, this doesn’t mean that taking loans cannot harm your business if you don’t get your management right.

Here are some of the top reasons why SMEs in Nigeria need loans:

a.      Acquisition of additional equipment.

b.      Acquisition of more modern inventory.

c.       Physical expansion.

d.      Exploration of new business ideas.

e.      Attraction of fresh talent.

f.        Building credit score.

g.      Cushion the effects of COVID-19.

Without explaining these reasons, you must have gotten the gist. With this out the way, here are some of the CBN loan offerings for SMEs in Nigeria.

CBN Loans without collateral for SMEs in Nigeria

The Central Bank of Nigeria (CBN) is the apex monetary authority in Nigeria. This means that it regulates all the other banks such as commercial banks, microfinance banks, and development banks.

Because of its position, the CBN runs with several functions and mandates. One of these is ensuring that the different sectors of the economy gain access to the funds they need to develop. The key sectors it focuses on are the agricultural, industrial, and financial sectors.

The CBN has a variety of loan facilities that it presents to the different tiers of businesses in Nigeria. It achieves this aim by working with several other organizations within and outside the country. Here are some of the loan facilities the CBN offers to SMEs in Nigeria.

SMEDAN Loan

SMEDAN stands for Small and Medium Enterprises Development Agency of Nigeria. The Federal Government of Nigeria set up this body in 2003. The aim was to promote the growth of MSMEs in the country through mentorship and funding.

This body works in partnership with the CBN to provide loans to small businesses. It acts as an intermediary that links businesses with CBN and its partners to get loans.

Accessing a SMEDAN Loan

Follow these steps to access a loan from SMEDAN:

a.      Go to the SMEDAN information portal to check your credit information.

b.      Select the loan you are interested in. When you visit the website, click on the Access Loans button in the top menu. From here, you will see four different loans that you can pick from. They include:

§  Personal loan

§  Business loan

§  Mortgage loan

§  Credit card loan

c.       Submit the information required which includes full name, age, loan purpose, and the amount.

d.      Check if the loan is available. When you do, you will see a list of the available options.

e.      Submit your loan application. Make use of the information from the previous step to pick the right loan amount.

Note that the interest rates for SMEDAN loans are SME-friendly. They are low and affordable for small businesses.

AGSMEIS Loan

This body was established in 2017 by the CBN in conjunction with the Banker’s committee. You can get up to N10 million from AGSMEIS. By the way, AGSMEIS stands for Agric Small and Medium Enterprise Scheme.

Who can access the AGSMEIS loan?

As the name implies, this loan is mostly targeted at assisting Agri-businesses. However, businesses from other sectors can apply. These include:

a.      Education

b.      ICT

c.       Services (hospitality, restaurants, services, and catering)

d.      Creative industry (crafts, fashion, design, entertainment, etc.)

e.      Mining

f.        Manufacturing and production

Accessing the AGSMEIS Loan

Just like other loans, there a procedure to access loans from AGSMEIS. They are:

a.      Attendance and completion of training with any of the registered EDIs.

b.      Submission of loan application through the EDI.

c.       The EDI, in turn, forwards the application on behalf of the applicant to the CBN.

d.      Appearance for an interview/screening.

e.      Applicants that have qualified for the loan are contacted.

Required Documents

a.      Business registration certification from the Corporate Affairs Commission.

b.      BVN.

c.       Tax receipts.

d.      Guarantee letter.

e.      Introductory letter.

f.        Valid ID card.

g.      Passport photographs (of both the applicant and guarantor).

h.      Certificate from the EDI.

Click here to learn more about getting a loan from AGSMEIS.

COVID-19 Loans

Due to the effects of the new coronavirus, the CBN set up a N50 Billion Targeted Credit Facility to help SMEs. It is no secret that SMEs make up about 90% of the businesses in Nigeria.

These are the objectives of the scheme:

a.      To help households and MSMEs cushion the effects of COVID-19.

b.      Make support available to businesses suffering from the effects of the virus.

c.       Provide credit facilities to businesses to ensure that their production capacity increases. The credit facility is to assist with equipment upgrades and research and development.

COVID-19 Loan Eligibility

a.      Households with clear evidence of the effect of the pandemic on their source of livelihood.

b.      Existing businesses with clear evidence of COVID-19 stopping their activities.

c.       Enterprises with a clear bankable plan for new business ideas.

COVID-19 Loan Limit

SMEs can access a maximum of N25 million while households have a cap of N3 million. The funds are to be released based on activities, cash flow, and the industry. The loan rate for the first year (until February 2021) is 5% per year. After this period, it rises to 9% per year. Get more information about the COVID-19 loan from CBN here.

Conclusion

It isn’t so difficult for SMEs to access CBN loans in Nigeria. We have shown you some of the loans you can access from the CBN in this post. Each of these loans comes with special advantages to businesses. Share your thoughts with us in the comments section.