One major challenge you are likely to face when starting a business is Capital. Your business idea may be out of this world, and your business plan may be the best, but if you don’t have the capital to implement them, your idea remains a mere concept.
You may decide to take a loan from friends or family, but there is no guarantee that they will provide the loan for you, after all, they too may be having their own financial commitments. The last resort for you may be to approach any financial institutions such as microfinance banks to give you a loan.
In order to get the best advice on whether this is the best decision for you to raise capital, we sample people’s opinion on what they think about taking a loan from microfinance banks to start a business. This is what they say:
“I think it’s not good to do so, starting and running a business has some risk and uncertainty, it’s better not to start with a microfinance loan.”
“It depends on the business and options of loan available to you. If that’s the only one you can get, then it’s worth trying. If it can at least leave you with money to pay back the loan and little gains, then it’s a sure way to start.”
“Do a very good risk analysis. If the business has a high risk of failing, abeg, don’t give yourself heart attack.”
“It’s not bad. As long as your projected ROI is more than their interest rate.”
“If it’s a business you’re already running and it’s already profitable, it’s ok to take their money for expansion. If you have a second regular income from which you can meet the repayment conditions, then you can take their money and use it to start abusiness from scratch. In any business, the risk factor is high when starting and mistakes will surely be made, so in taking a loan, there must be a backup plan for the possible scenario of not turning a profit for a considerable amount of time.”
“If the person has no choice, I don’t think it’s a bad idea. The person should just make sure the business is one that can afford him to pay as at when due.”
“Starting business with loan is a no no. There’s this kind of anxiety I have knowing the money I am using for a particular business is not mine.”
“Not a good idea. Their interest rate is over the roof..perhaps, start up businesses are known to struggle in the first few months or even years. Except you have existing cliental base and demands from them..you dont use loans to finance a business, especially loans from micro-finance banks.”
“Please don’t start business with any kind of loan. Reason is because you don’t know if the business will fail or succeed. If it fails, how will you pay the loan back? You can only use loans when you want to expand an existing business and the returns is certain to an extent.”
“If you can repay the loans as you make profit. Otherwise don’t take loan to start your business. Rather try selling your ideas to family members before reaching out to banks or loan sharks.”
“Don’t! I worked with a Microfinance Bank before joining First Bank now. As a Portfolio Manager then, I don’t give out loans to startups. It is a high-risk portfolio. Once again, from a professional point of view, DON’T!”
“Ahhh! The only legitimate business that comes to mind is Petroleum. Unless you don’t mind dealing in cannabis business or smuggling. Otherwise, one is on a long thing o!”
“If you want to raise capital for a business, raise capital from personal savings. So, you need to save. People think that banks don’t give loans, but banks give loans if you understand the banking industry. Banks are desperately looking for people to give money to because banks won’t make money except they give out loans. The only thing is that you start your business with equity. That word capital stands for owner’s equity. Banks don’t give you capital, banks bring debt into the business. You start your business with your own equity, as the business begins to expand, you gradually begin to introduce debt into the business, to help you grow the business. You know, when you go to the bank and the bank says go and give me your one year bank statement, what the banker wants to see is you’ve been trading with N5 million; what have you done with N5 million? So, for the past one year, what is your credit and debit in your account? You go to the bank and say I’ve been dealing with N5 million, but in the past one year, I have been able to make extra N5 million, then I now have N10 million; if only you can give me N10 million, I can make N30 million. You don’t just walk into the bank from day one and say give me loan, I want to start a business. It’s difficult.
Another one, of course, is investors. You can raise capital through investors. You can get people to come and invest in your business. If you have a wonderful business idea, you can sell it to investors, if you are able to convince them. Of course, they can put money in your business. Another one is family and friends. Typically, if you want to start a business, the first person you sell your business idea to is your wife or spouse or siblings. If you don’t get support from your immediate family, then you have a very long way to go.
Excerpts from RUNNING A SUCCESSFUL BUSINESS IN NIGERIA: MY EXPERIENCE By Gabriel Ogbechie