What Every Nigerian Thinks About Loans And Why It Should Change? By Pelumi Olowoyeye

Getting loans are often a difficult decision to make and are usually decided on as a last resort to either settle unexpected bills and payments which weren’t planned, this is the dilemma of the Nigerian man “getting a loan or not”.

The fact however remains that loan should not be seen as a burden or a “get out of debt” option, but as an important alternative for small-scale Nigerian businesses, entrepreneurs and tech start-ups to grow and thrive in the already extremely tough Nigerian economic atmosphere.

Nigerian-owned businesses are getting absorbed or completely bought by top international companies, because of the fewer opportunities for business-oriented loans and the Nigerian psychology that loans are bad for business, the reverse is the case in first world countries where loans and credit systems have been developed to ensure that young innovators, new business start-ups and entrepreneurs can have unimpeded access to government-facilitated business development loans.

Nigerian businesses are already facing a harrowing season on reduced profits as a result of the COVID 19 pandemic, businesses have folded up, some like Paystack Payment Limited, which is the leading online payment gateway in Nigeria, have sold out and cut their losses. The downside of this is that the more Nigerian-owned businesses are sold out, small-scale business ownership and entrepreneurship among Nigerians would surely continue to decline.

Above and beyond, the reasons for getting a business loan can never be overemphasized, one of the key reasons why a much needed, psychological mind shift for Nigerian business owners has to happen is basically because all good businesses with well-designed plans need first and foremost “financial funds”.

Nigerian business owners and entrepreneurs as well as the government need to come to terms with this basic reality of business development. The only way for Nigerian entrepreneurs to break this mental brick wall of “loans are bad” is to understand “the business factors and loan factors” related to their proposed business plan.

Quick simple factors for getting a business loan.

1. Why you need a loan

This is the most important question every business owner or entrepreneur must be clear about so as to
make better loan decisions for short term business growth or long term projections. This decision should
be informed by the business outline, cash inflow projection, and business market analysis so as to make
definite realistic business decisions.

2. Length of loan and ability to pay.

Knowing and projecting for the time frame of the loan is also important as it would help to inform you on
the kinds of loans that would be most beneficial for your business as well as striking a balance between
profit projections and loan repayment.

3. Your Cashflow

Cashflow analysis are essential before making the decision to get any loans, calculating and analyzing
properly, the profit margins and losses of the business might make or mar the business and the
entrepreneur, this is why it is important to understand the indices of profit and loss so as to make
informed loan decisions.

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4. Interest Rates and Terms

This is extremely important, as business owners have to strike a balance between their profit margins and
loan interest rates, being clearly informed about the terms and conditions of a loan would help in
adjustment or redrafting the business plan to suit your preferred loan.

Conclusion: Above it all, it is important to do due diligence whenever necessary, ignorance for a long time has been the sole reason why small scale business suffers a lot and eventually fold, but with a proper business plan in sight, loans and credit fund programs are integral to developing and sustaining businesses for continued
growth.

Nigerian business owners don’t need to be afraid of getting loans, they just need to be better-informed when taking loans.