At some point, businesses need capital to start or run, and when the money is low, getting a loan is the second-best option, in this articles we will look at how to get a business loan in Africa.
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You can get a business loan in Africa by following the loan application process of a given lender. Some lenders offer online applications, while for some, you must present all the required paperwork.
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How to Get a Business Loan in Africa
If you don’t get a lender that matches with your money need and has a flexible repayment plan, you may struggle to pay back your business loan.
Getting a loan is easy but repayment is often a big challenge
So there is a need to do a thorough background check on the lender or financial institution you want to get a loan from. You need to know their application process and the repayment plan, you need to understand the penalty for defaulting and their grace period. This initial research is very vital as it will help you factor in the repayment plan into your business plan before even applying for the loan.
After a thorough background check on the lender or financial institution you want to get a loan from, you can then present your request to apply for a loan. But first, you need to look at the requirements needed before applying for the loan. There are reasons why a business loan can be declined. However, a good knowledge of loan requirements is key to possible loan application approval and even speeding up the application process.
What Qualifies You to Get a Business Loan in Africa?
As requirements vary from lender to lender, the following rule of thumb remains constant on how to get a business loan in Africa. It is key to benchmark the lender you want to borrow from to learn about any other requirements you may need to provide. Many banks need to check on your business performance, including:
1. History of Your Credit Score
Banks and financial institutions will always want to know about your credit score, both personal and business. A credit score for a business ranges from zero to 100, and a personal credit score from 300 to 850. A higher credit score guarantees higher chances of securing better potential lenders. You need to have at least a credit score of 670 for a personal credit score and 80 for a business credit score to secure yourself a loan.
2. There is No History of Bankruptcy or Sequestration
A bankruptcy record can kick you out of the loan application process. You have to clear your debt completely or have a mechanism in place that is servicing any outstanding debts. Some banks will require you to be fully rehabilitated for sequestration, and you can also be denied a loan.
3. The Consistency of Business Cash Flow
This may vary among lenders, and some may even not be one of their requirements. Your lenders may evaluate the possibility of your business making monthly loan repayments. Consistency in your monthly income ensures that your loan will be approved. Your lender will require you to present at least a 6-month bank statement that shows your track record and business cash flow.
4. Scope of Your Business
You may denied a loan if your business is a high-risk business, i.e., seasonal businesses, non-renewable energy, or hospitality industries. The industries have challenges that banks or financial institutions may find risky to offer a loan.
5. Certificate of Registration
Every government’s legal requirement for business people is to register their business. Therefore, your bank or financial institution will ask you to provide your business registration number or Value Added Tax (VAT) number.
Requirements for Applying for a Business Loan in Africa
There are two types of application processes. It can be done online or in person. You must create an account on the website and follow the procedure.
An example is Standard Bank, which enables you to apply for a loan online by entering your information in the comfort of your home in any African country. Some banks and financial institutions may want to see your business performance. You need to present the following documents:
1. Loan Application Document
You are presented with a formal document that you fill in your details and submit to begin processing your loan. The form will require you to fill in your personal information, the scope of your business, the proposed loan amount, and the purpose of the loan. Depending on your bank or financial institution, you may be required to submit the form in person. Others offer an online application experience, while others need to contact you to proceed with your loan application.
2. Your Government Identification Documents
The banks or financial institutions will always ask for some government identification documents. Your National Identification Card (ID) is one of the most required items. This is to confirm that you are 18 or older and your nationality. Other identification documents include
- A Drivers’ License
- Certificate of citizenship
- Military ID
- A birth certificate or other government-issued ID.
3. Documents to Prove Your Address
You need to provide proof of your business address as a process of how to get a business loan in Africa. You can provide your utility bills as documents. You can provide any other document that lists your address, such as a copy of your lease, additional rental agreement, trade license, or similar documents.
Business Loan Application Process
1. Perform Benchmarks on Your Bank or Financial Institutions.
Remember when you went to other high schools for benchmarking back in high school simply because they performed better? Please go through the banks and compare and study the business loans they offer, interest rates, and even payment periods.
2. Visit the bank or Financial Institutions or Look Up Their Websites.
You can get more information from the lender’s websites and familiarize yourself with who they are. You can also visit their offices for more assistance on any unclear details.
3. Understand Their Eligibility and Requirement.
Security is key when it comes to money and even worse when it’s a loan. You must ensure that your lenders are well known and respected in their field of business. Check the reviews left behind by their previous customers on their website. You can also ask around at their neighboring businesses.
4. Understand the Types of Documents You Need To Present
When you have met your lender’s requirements, you now need to prepare the necessary documents. Keep the documents ready for easy access when you decide to apply for a loan.
5. Filling in the Loan Application Form
You can do this either online or by visiting in person. When you choose the financial institution you want to get a loan from and have the proper documents, you can now complete the loan. After filing the loan, submit your form, depending on where you applied (online or offline). Remember to attach the required documents.
6. Waiting for Approval
Having provided your contact details, mainly your telephone number, you will receive a confirmation of your loan approval. Some financial institutions take less time to process loan requests, primarily online. Then you can wait for your loan disbursement.
A business loan is taken to start or run a given business. To secure a loan, you have to meet the above requirements and follow them keenly. You need to benchmark your banks and financial institutions to know their eligibility, experience, and expertise in their field of business.
High personal and business credit scores and submitting the required documents are ways to get a business loan in Africa.
To apply for a business loan in Africa, you must provide your government-issued identification documents.