Five Tips to Get an SME Loan in Africa
Are you looking for an SME loan in Africa? This post provides you with five important tips to increase your chances.
Loans are amounts of money borrowed out by banks and other financial institutions for a set period of time. This financial support can be used for business or personal purposes, giving us the freedom to achieve our dreams.
Small businesses mostly take commercial bank loans to help them establish, run, and grow their business ventures. Loans can come from sources other than banks, such as credit unions, public funds, or private investors. These small businesses can use inventory or accounts receivable as collateral.
SME Loan
Loans can assist in making financial decisions and endeavors easier. However, if they are not planned for appropriately, businesses could incur huge losses and debt.
To avoid this, preemptively account for the possibility of taking out a loan when you can. For example, when buying a small vehicle or starting a new business. This means being prepared to keep up with monthly payments along with interest. Taking out loans against ongoing expenses is not advisable, as it causes you to fall into a cycle of payments.
Loans can also be secured against assets of your business or your personal possessions. Although these interest rates may be lower, you risk losing your assets if you cannot repay consistently.
Tips to Help You Get an SME Loan in Africa
The tips below will help you get an SME loan in Africa with ease:
Present an Effective Business Plan
You don’t just apply for a loan overnight; it requires adequate registration. One way to prepare yourself is to prepare a business plan. Business plans do more than just assist you to get loans. They help you steer your company in the right direction from day one.
If you are not sure how to write a business plan, you can take some time to research the internet. Look for business plan samples for similar SMEs to yours. Alternatively, you can employ the services of a business plan writer. They will write at a cost, but you are sure that you will get a high-quality business plan.
Invest in your Economy
Before you apply for a small business loan, you need to be clear on the purpose of the loan. Is it for expansion? New acquisition? Or working capital requirements?
Cash flow is always a challenge for a small business. It can continue to be a problem when you’re dealing with customers who don’t pay for services or when you have unsold inventory. These issues are even more problematic when you factor in the regular costs of your inventory, staff, utilities, and rent or mortgage.
A short-term loan provides money to be used for your regular operational costs and can help your business stay afloat when profits are low. By keeping money flowing through your business, you can continue to bring in new customers to drive revenue while making up for other losses.
When applying for a small business loan, the lenders look at your personal finance and business profits. So, before you reach out to lenders for loans, make sure you:
- Improve your credit score.
- Keep all your documents handy.
- Pay off previous debts.
- Organize your accounting records.
- Be ready to show your financial history and plans for business growth.
- Being prepared helps your business appear professional and thus increases your chances of getting loan approvals.
- Understand the loan metrics and business purpose.
Understand your Productivity, Business interests, and Cash Flows
Weigh the pros and cons of each type of business loan and whether it meets your business needs and objectives. After doing this, you can make an informed decision. Business loan interest rates, loan terms, and fees associated with it vary greatly from lender to lender. When you know your options, you can make smart and informed decisions. Particularly Cash Flows and productivity are essential.
You sometimes have to pay fees on loans. The types of fees you might have to pay can vary, depending on the lender. These are some common types of fees:
- Application fee: Pays for the process of approving a loan.
- Late fee: What the lender charges you for late payments.
- Prepayment fee: The cost of paying a loan off early (most common for home and car loans)
Lenders set their loan terms based on the total interest they’ll earn over the life of a loan. When you pay your loan off early, they lose the amount of income for the number of years you will not be paying. The prepayment fee is designed to compensate them for not receiving all the interest income they would have made if you hadn’t paid it off. It’s important to understand the requirements and benefits surrounding your loan intake.
Investigate Legitimate Online Loan Platforms
There are several legitimate online loan platforms in Nigeria. Some of them include Lendigo, SMEDAN Carbon, Quick Check, Kiakia.co, etc. They provide several benefits to business owners. One of the biggest benefits is that they do not require any collateral before lending.
As a business owner, all you need to do is download their app and register. Another benefit is that the loans are easily accessible and take between a few minutes to hours for processing. However, you must ensure that you pay up these loans on or before the due dates. This is necessary to avoid unnecessary embarrassment. Also, be careful not to choose the wrong loan platform as there are several that have very high-interest rates.
Explore Loan offers from Commercial Banks
Multinational banks, GTBANK, and Access Bank offer business owners a wide array of loans. This includes overdrafts, asset financing, imports and exports, and so much more. Their vast business loan services make them a very attractive option for business owners though you’d have to qualify first.
For example, GTB Bank loans are accessible to all kinds of businesses across different industries across Nigeria. However, as an SME, it would be difficult to access certain amounts as the bank requires some sort of guarantee for that. Research online and be updated with the metrics on loan packages from commercial banks. Choose wisely and follow procedures.
Conclusion
This post has shown you five essential tips to help you get SME loans in Africa. Do you have any questions? Kindly drop them in the comments section. Also, spend some time reading up on other posts on how to improve your business and access funding on SME360.
