Criteria for accessing development fund through financial institutions 123

ByRonald Olusegun Olaiya

Managing Consultant/CEOBestride Consulting Limited

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Bestride Consulting Limited:Criteria For Accessing Development Fund Through Financial Institutions

Development Funds

Through many initiatives of the government, various funds were established for SMEs. The lending rates under the funds are lower than market rates (3.75%-5% p.a.).

These funds are channeled through the following financial institutions (FIs):

- Commercial banks, finance companies, Islamic banks, development financial institutions, etc

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Objectives

To ensure that the specific economic sectors get access to financing at reasonable cost; and

To increase the productive capacity of the specific economic sectors

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Loan Processing

• Financing is granted in the form of loan, not grant.

• FIs bear the credit risk. • Normal credit assessment of the FIs is based on

applicant’s risk profile.• Main criterion is viability of business / project. • Other factors. (not exhaustive)

- Character of the applicant, Ability to pay back the loan, capital commitment, business condition, etc.

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SME Special Funds

Fund Objective

1. Funds for Small & Medium Industries

To promote SME activities in both the export and domestic sectors

2. Funds for Food

To increase food production

3. New Entrepreneurs Funds

To help stimulate the growth of small and medium-sized enterprises.

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SME Special Funds Cont’dFund Objective

4. Rehabilitation Funds for Small Businesses

To provide assistance to viable SMEs that are constrained financially to revive their facilities, plants, machines, equipments ,etc

5. Entrepreneur Project Funds (EPF)

To provide financing to entrepreneurs who have been awarded contracts/ projects by the Governments or Government related agencies, statutory bodies and reputable private/ public companies.

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Credit Enhancement

Credit Guarantee by government or its relevant agency provides guarantee for SMEs with little or no collateral.

Borrowers are subjected to loan agreement

With the scheduled repayment by borrowers, it will enable the Government to assist other eligible borrowers

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Client Charter of FIsFIs are required to display their client charters on the SME loans. The client charters include:

Documents and information required from SMEs;

Eligibility criteria; and

Loan processing time. Normally, the processing time for loan application is 30 days from the date of complete submission.

FIs are also required to inform the applicants on reasons for rejection of loan applications.

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Complaint Units at FIs

All FIs have established complaint units as an avenue for customers to lodge complaints:

FIs have to settle the complaints within reasonable period of time.

Customers of FIs could also forward their complaints to:

SME Special Unit of the relevant supervisory agency

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Eligibility Criteria

Ranking of Criteria used in assessing SME borrowers are as follows:

• Intended purpose of loan

• Repayment of previous loan

• Repayment schedule

• Type of business activity

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Eligibility Criteria Cont’d

• Size of loan relative to size of business

• Availability of collateral • Liquidity ratio

• Net profit to sales

• Existing profitability

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Eligibility Criteria Cont’d

Projected income

Loan activity at other banks

Equity stake in business

Trading experience

Trade debtors

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Eligibility Criteria Cont’dTrade creditors

Length of time doing business with bank

Charges on assets

Gearing

Government guarantee of loan

Cvs of clients

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Supporting Documents

• Company information

• Management information

• Financial information

• Security information

• Business operation information

• Other information04/07/23 14


SME Units at FIs

• All FIs have established dedicated SME Units.

• The roles and functions include:

Identifying SME financing needs;

Organizing training, courses and seminars;

Providing cash management services; and

Advisory services i.e. financial management.

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SME Special Units at FIsThey are established to assist viable SMEs by:

• Providing information on the various sources of financing available to the SMEs;

• Facilitating SMEs in their loan application process;

• Addressing the difficulties faced by viable SMEs in securing financing; and

• Providing advisory services on other SMEs’ financial requirements.

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The Inescapable Reality

Reality - No matter what, it’s not everybody that can afford to access development funds/loans despite their inherent benefits. Reasons? Answer – Stringent conditions

Way out – All those who cannot access development loans are advised to opt for network marketing or MLM that is usually cheaper, at least to start with

Those who have successfully accessed them are also advised to take advantage of network marketing or MLM to add to their streams of income

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Alternative Lines of Business

Listed below are links for alternative businesses that can be pursued by interested persons:

http://www.sfi4.com/12058229/FREE

http://www.tripleclicks.com/12058229/wave

http://www.profitclicking.com/?r=56cKwzXTq0&p=opp

https://www.profitablesunrise.com/?upline=olusegunolaiya1

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ConclusionThe Government has introduced various initiatives and promotedvarious financing schemes to assist the SMEs. However, to ensure success SMEs should also:

Enhance competitive edge, business viability and quality of product or services offered.

Implement effective strategies to enhance accessibility to technologies, innovation, technical expertise including finance and skills in business management.

All entrepreneurs are also advised to explore the opportunities being offered through network marketing or multi-level marketing

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About the Author

Ronald Olusegun Olaiya is a Management Consultant, Online Marketer & Entrepreneur. For enquiries on this write up and other business interests, please contact him via [email protected]; [email protected] or Mobile Phone +2348184559437

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Thank You

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TagsDevelopment Fund, Criteria for Accessing Development Fund, SMEs, Network Marketing, MLM, Multi-Level Marketing, SFIMG, Triple Clicks, Profit Clicking, Profitable Sunrise

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Bestride Consulting Limited:Criteria For Accessing Development Fund Through Financial Institutions 22

Criteria for accessing development fund through financial institutions 123

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