One of the surest means to finance your business is by requesting for a loan from banks.
Borrowing from banks can be in two forms, Bank overdraft and bank loan.
Bank overdraft is a condition where a bank allow its costumers to make withdrawal above their credit balance in their account. The firm will be required to maintain current account with the bank before it can obtain the financing opportunity.
a limit will be placed on this facility, and the firm is free to obtain as much or as little cash within the overdraft limit. The bank charges interest on the amount overdrawn outstanding at anyone time. The interest charges vary with a bank base rate.
The amount of money above the rate will depend on how much the borrower worth. Banks grants unsecured overdraft to only high credit worthy business.
Which ever this turns to be, You can take out something from it to start up a new business but likely in a small scale except if your worth is worthy enough for banks to over you an overdraft that’s high enough.
Now let’s talk about taking a loan from the bank.
Well, am sure you understand what a loan means. A loan is a formal agreement between a bank and a person called the borrower that the bank will lend a specific amount of money for a specific period of time on a fixed interest rate. Interest is payable on the whole of this sum for duration of the loan. Interest charges and requirements for security are similar to an overdraft.
Banks will take the following into consideration before they give you a loan for your small scale business. Of course you wouldn’t expect any bank to give you any loan just like that, It’s a business venture,They would want to be sure you meet to their requirements before they grant your request.
Before I list the requirements, It is very expedient that you must be patient because the processes can sometimes be a very long one depending on the amount you’re requesting for.
Sometimes it could get frustrating as you maybe taken off balance because of their numerous requirements. Below are the requirement needed to take loan from any bank :
1.The purpose of the loan: This explains the ‘why’. Why you want to take the loan, You will need to explain to them explicitly the reason for the loan which is obviously for your small scale business venture.
2.The amount involved: Maybe you should bear in. Mind that the bank knows what you worth, and would not take a risk to give you beyond what you can pay back in return. For a small scale business, They bank can spare you over three hundred thousand depending on your worth. You will state clearly how much you’ll need to get from the bank.
3.The duration of the loan
The bank will want to know how long you will take the loan from them. This will help them to calculate their interest well and know when to expect the money from you back. There are different duration terms in different commercial banks, You’ll have to choose from the option to be able to have access to their loan. Most banks are much comfortable with short term loan from small scale business owners.
4.The character/record of the borrower:Because it is strictly business, no bank will like to take chances or take risk of doing any transaction with a thief or non-trustworthy or person. They will verify from people who knows you well enough. You may need to bring individuals in high position to ‘shortee’ for you before you get your loan approved for you.
5.The security of the loan: They will want to be sure they can get their money back when it’s time. There may be need you present something of value to stand as a collateral, if by chance you didn’t meet up to the expectations of paying back the bank. They will fall back to your collateral if you didn’t meet up to pay back. These collateral will be in form of a landed property, a car or any other thing of value.
Conclusively, it is easier to take a loan from any bank provided you can meet up to the criteria that’s cited above. If as an entrepreneur, you’re running short money for your business this could possibly be an opportunity for you to grow your business.