Many small and medium scale business owners have many challenges in accessing loans from commercial banks. In its radio programme, smedigest on Inspiration 92.3 FM, Access Bank Plc outlines briefly the what it takes for SMEs to access business loans from the bank. The bank’s Group Head, Emerging Businesses, Mrs Ayo Olojede, and her colleagues, Olakunle Ajilabu and Tamunotonye Onianwah, fielded questions.

Diamond Banks’ Head, Emerging Businesses, Ayodele Olojede

Excerpts.

What options of SME funding are available at Access Bank?

We have equity financing and debt financing. Equity financing is where the business owner gives up some part of his/ her ownership of the business to an investor in exchange for money or expertise. The investor loses money when the business loses money, and makes money when the business makes money. A lot of SMEs operators don’t like to give up a share of their business ownership to an investor. They would rather own the entire 100% of the business but they want to take a loan from the bank. That loan they take from the bank is what is known as debt financing.

What does Access Bank look out for before lending to an SME?

One of the first things we look out for in an SME is what we call the 5-Cs of lending, which are: Character, Condition, Collateral, Capacity, Capital.

Character: This is when the bank embarks on a journey into your credit history and business relationships. Have you taken money before that you did not payback? Have you given a dude cheque before? Do you pay your suppliers on the agreed time? What do your account officers and those in relationship with you within the bank have to say about you? We may also look into your other business relationships for credibility. All these are some of the things the bank will check as regards your character. (SMEs)

Capacity: When we talk about capacity, we are talking about your competence and expertise in doing that business. It also means, ascertaining the level of cash flow that your business is generating. Then your own cash in the business, how much have you invested in your business? The bank wouldn’t want to give you a loan beyond what you yourself have invested in your dream.

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Condition: What are the operating conditions and environment of your business? Is your business highly regulated? Are you complying with the required regulations? Is your business seasonal?

Collateral: Knowing that the money in the bank is other people’s money, are you able to provide the securities that the bank will require for the creditor is your cash flow strong enough for collateral?

Capital: When you are asked to make an equity contribution which is 30% of the amount you want as a loan, can you raise the capital?

These are just the basics of our 5-Cs of credit. But one thing you must also note is that, when you are strong in some of the Cs, Access Bank can work with you to help you achieve the others. For instance, when you have four of the Cs and you don’t have collateral, Access Bank has an opinion to help you access loan without collateral. This option requires that the business generates the cash flow that can repay the loan. It also requires that the SME entrepreneur has the character to repay the loan and is skillfully committed to making the business grow. SMEs

What plans do you have for SMEs without structure?

We have a capacity-building programme for SMEs where we focus on financial services for SMEs that help with invoicing, tax calculations, statements, automated financial reporting at a discounted rate. Even better, new customers don’t have to run an account for any length of time to qualify for our loans of up to N5million. As soon as you open a Diamond Business Advantage account and we are sure of other necessary things, you can access our loan.

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