One
of the most critical factors for the success of any business is access to
capital. Capital is critical and crucial to business success in any nation. It
is as indispensable to the growth of business as oxygen is to human existence.
Capital
is needed for the launch of a new business and the sustenance of an existing
one. For start-ups, the need for capital is more critical, because of items
required, which may range from rent to office furniture and equipments, to
utilities, working capital, living expenses, legal and accounting services,
supplies, taxes, home expenses etc.
In
summary, capital is needed for the start-up of a new business, existing
business expansion, working capital, contract execution, importation, supply,
delivery of items and many other purposes.
If
we are not economical with the truth, each one of us needs capital either for
business commencement or for the expansion of an existing one. How then can we
get access to this very important factor for the success of every venture
assuming we don’t have enough of it for the business of our choice?
MEANS OF RAISING CAPITAL FOR BUSINESS
v Personal savings-
v Sale
v Joint contribution
v Financial support from family members
v Partnerships
v Mobilizations from contracts
v Commissions
v Share sales
v Bank loans etc.
Personal savings are capital saved by a person who is financially disciplined. This
could either come from gifts or fervors by generous individuals or corporate
organizations. Personal savings can also be generated by every income earner
whether self employed or under the employment of another person who is
financially literate enough to know that there will always be (a) tomorrow and
rainy days in one’s life. This remains the cheapest source of finance. A great
reward for financial prudence.
Joint contribution is the third way to raise capital without borrowing. A group of
friends can join their resources together and assist one another from it by
giving out the sum total or part of it to a member in need.
Financial support from family members is yet another method of getting capital for
business. One with generous wealthy relations can get financial support from
them and that will serve as seed capital.
Mobilizations from contracts are means of raising capitals for those who have been
awarded one contract or the other. If you socialize a lot chances are that you
will be hooked up with the right people in government who could push a very
juicy contract your way.
Partnership
with a man or woman that has the means is yet another way of raising fund.
However, in such arrangement one should be weary of fraudsters will at the end
take home all the profits that accrue to the business.
Commissions
from freelance marketing, sales, holding briefs for others or serving as
proxies are still means of capital generation. You can write proposals to
various business owners to advertise or market their products or services over
an agreed commission rate.
Shares
remain another veritable means of fund generation. If you are a share holder you
can easily raise capital by selling some units of shares in you share
portfolio.
WHAT IF I CAN’T RAISE CAPITAL BY ANY
OF THE ABOVE MEANS?
Then
you go to the banks. That is my polite answer. Commercial banks will want to do
business with you because they all desire to triple every year their previous
year customer base. The bitter truth however is that they will do business with
you upon the fulfillment of many conditions. After satisfying every other
requirement, you will be asked to present collateral for the money the bank
will give out to you on loan. This is where discouragement sets in for most
people.
A BANK TO THE RESCUE
A
professor went to the rural areas in his country to gather the necessary
information for his project when he stumbled upon a bitter fact and an
avoidable situation: his people were gradually been devoured by one of man’s
greatest enemies- poverty.
He
was terribly surprised that the majority of his people could be suffering so
much when a minority are in the city wasting the country’ scarce resources
through ill-governance. He immediately set out to finding a method of
ameliorating their pain if at all he could not completely eradicate their
poverty. The ugly situation he met on ground led him to abandoning his project
(temporarily), and searching endlessly for the solution he positively believed
will enhance the living conditions of his people.
True
to the old saying that: whatever a man sets his mind to achieve he will
definitely achieve, he was
able to devise a scheme through which he assists the rural dwellers
financially. He would lend out money to individuals, groups and all who seek
for financial assistance for the purpose of investment. This he did without
demanding security for his money incase debtors are unable to pay at the
expiration of the loan tenure. The debtors when they invested those loans made
profits and then return the professor’s loan with the attendant little interest
on them. The professor gets back his money and gives it again to others who are
in need of it. That way poverty was drastically reduced among his people.
As
with every good idea the scheme began to gain national acceptance and gradually
metamorphosed into a bank of international prominence. Today the grammen micro
finance bank is the second largest bank in Bangladesh Bangladesh
Micro
finance bank was set up with a mandate to empower economically active persons,
deepen savings culture among the people, providing financial services to low
income earners, promote education, train people to be useful and productive,
helping to eradicate poverty by giving people free collateral loan to support
income generating businesses. As each loan is repaid, the money is
redistributed as loans to others thereby multiplying its impact.
A
lot of us look at micro finance banks with disdain. This is largely because of
the name (micro). Of a truth the word micro does not suggest the financial
capacity of the bank; rather it serves as a pointer to the target customer or
client of the bank. Some micro finance banks are financially stronger than most
of our so called commercial banks here in Nigeria
For a
better appreciation of the class of people micro finance bank is meant to cater
for, let’s look at this pyramid.
The upper class is the apex of the financial ladder. Here you
find wealthy business men and women, politicians and professionals with very
high level income. This class definitely doesn’t need financial
empowerment rather they render it. Micro finance bank is not for them.
UPPER
CLASS
In the middle class is the MIDDLE CLASS
well paid employees in the public and
private sectors of the Nigerian
economy. Here you see also the well to do tra-
ders.
This class needs only little financial push on the journey to financial
security. So Micro Fin. Banks concentrate
only 40percent of their loan to this class.
Here we see people with
active minds. Always on the look out for opportunities.
When it comes they make the most of it. In this
class is every one who is a go -getter, a dreamer,
a person who believes that with GOD by his
side the sky will be his starting point. With
the right financial push this class sooner or later out
performs the members of the
middle class and begins to compete with the
upper class. We can call them entrepreneurs.
Here we find artisans, students, the unemployed and petty
traders. This class is also closer
to the grass root than any of the above classes. They render
assistance better
to their dependents in the village. When this
class is
empowered financially, you discover
that the
lives of helpless grand parents,
parents, uncles, aunties,
brothers and
sisters have been positively affected.
This class is the target of micro fin. Banks.
The banks give 60 percent of their loans to this class.
ECONOMICALLY
ACTIVE
This class is not
the target of micro fin. Bank.
They are the concerns of
charity org. govt, NGO, etc.
Here you see the very old,
the mentally retarded and
the seriously sick persons. Any loan given
to this class can not be repaid.
Any
attempt here will defeat
the aim of the bank. These people
just live on the mercies of others.
THE
POOREST OF THE
POOR
AVAILABLE LOANS FOR INTERESTED PERSONS
1. Local
purchase order (LPO) financing facility:
This loan is available to individuals or
groups who intend to finance contracts awarded to them by reputable
institutions.
2. Bridging
loan:
This
is a kind of salary advance issued out to salary earners for a period of 90
days.
3. Working
and asset loan:
Short
term working capital for traders, businessmen, women, and small scale
enterprises.
4. Hire
purchase:
Advance
for purchase of home appliances, electronic gadgets, and purchase of
motorcycles, cars, etc.
5. Group
loan:
Advances
to members of clubs and co-operatives.
6. Agricultural
loan:
Advances
for agricultural loan.
7. Leasing
facility:
For
purchase of capital equipment such as vulcanizing machines, power generating
sets, hair-dressing and barbing saloon equipments.
LOAN WITHOUT COLLATERAL
(THE PROCEDURE)
Micro
finance bank gives loan without demanding for collateral to only the
economically active persons and the middle class. If you belong to any of these
two categories of people then you are qualified for a loan from the bank. I
want to believe you are or else you will not be here today. You can apply for
loan from micro finance bank as:
1.
An individual;
2.
Group of friends, or;
3. Co-operative society.
CURRENT ACCOUNT REQUIREMENT
1.
3 Pass port photograph.
2.
Int. ID card, driver’s license, reputable
organization’s ID card or PHCN bill receipt.
3.
#4 or 5,000 naira which can be withdrawn after the
account is registered.
#4 or 5,000 naira which can be withdrawn after the
account is registered.
4. a photocopy of the id card, or driver’s
license,
FREE COLLATARAL LOAN REQUIREMENT
1.
Application letter from prospective borrower.
2.
Acceptance letter from the bank in question.
3.
Presentation of two sureties either civil servant or
established business men.
DEDUCTION
ON THE LOAN
1.
5% Processing fee for #500,000 = 25,000
2.
#500 structural fee 500
3.
#1,000 legal fee 1,000
4.
#500 for the application form 500
Total
27,000
GOOD BUSINESS PLAN
Information about you.
The identity of your business
A description of your production or
services and target market
The pricing policy
The date of registration or
incorporation if it is a registered company
Number of employees if any
Legal basic or requirements for your
business
Profile of key management
Financial information
Program of action and date
Market segmentation
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