Microfinance Banks are institutions of credit created to help small and medium-sized businesses, as well as individuals looking to start or fund their businesses.
The industries that profit the most from loans provided by microfinance institutions are business, agriculture, asset acquisition, educational initiatives, programs to eradicate poverty, etc.
Depending on the amount sought, interest rates for micro finance might range from 5% to 6%.
Additionally, each financial institution has a certain loan type, and the loan’s term might range from;
1 to 3 months
4 to 6 months
3 to 12 months
The maximum maturity date for companies receiving loan facilities up to N5 million (N5,000,000) is 18 months.
ELIGIBILITY FOR LOANS
There are procedures that you as an individual or company owner must follow and adhere to if you want to get a loan from a microfinance bank in Nigeria.
Business Project or Plan
Before approaching any microfinance bank, make sure you have a strong business plan and a compelling case for why you need a loan. This raises the likelihood that the management of the microlending organization will approve your request. Also take notice that the majority of the loans they offer are to SMEs.
Evidence of a Licensed Business
The MFB will be more confident that you are not searching for money to waste or spend extravagantly if you have an established firm before asking for a loan.
Show the financial institution your company entity evidence, which has already been registered with the Corporate Affairs Commission, or CAC. They could also request bank statements or transaction receipts as proof.
Have an MFB Account
You won’t be approved for the loan even if you have completed all the stages and required paperwork unless you have an account with the microfinance bank you visited.
Get your data collected by opening an account with the microfinance institution. This further demonstrates your dedication to the bank.
Important Documents Required for Loan Applications
1. Loan Request Form
2. A strong business plan (for SMEs)
III. Individuals’ Letter of Application
4. A legitimate form of identification (a national identification card, a passport, or a driver’s license)
V. A recent electricity bill copy
VI. Four current passport photos
7. Verifiable Business Location
COLLATERAL
Collateral is not required when applying for microloans for individuals or small business owners.
The MFB requires a collateral, however, whose value must be equivalent to or more than the loan amount for big commercial loans, loans for agriculture, and loans for the purchase of assets.
GUARANTOR
You will be requested to provide guarantors rather than collateral if you are a small business owner, petty trader, or individual.
Microfinance Banks just demand two guarantors as a minimum.
Guarantors must have a solid financial standing and be 25 years or older.
The Guarantors are responsible for seeing that the loan is repaid by the deadline.
The person(s) you named as guarantor(s) will be responsible to reimburse the loan amount if you miss a payment.
On the day the loan is accepted, both the potential client and the guarantor(s) must be present since they will both sign the contract.
Documents Two current passport photos are required for the guarantor.
a recent electric bill copy
a legitimate form of identity (national identification card, passport, or driver’s license)
Conclusion
Try to be repaying a loan from a Microfinance Bank in Nigeria before the due date if you apply for one and your company makes the money back from the loan early enough. This shows that you are capable.
