5 Things To Ask Before Seeking For Loan In Nigeria

After you’ve come up with a brilliant business idea, done your research on the market into which you’re about to venture, and drafted the perfect business plan, you’ll need one of the most important metrics by which a company’s efficient operation and financial stability is measured: Capital. Financial capital to be specific. This article will show you 5 things to ask before seeking for loan.

5 Things To Ask Before Seeking For Loan In Nigeria

There are several sources through which capital can be raised for start-ups and they all have their respective requirements. They are, however, two main ways by which business capital can be raised.

The first is by giving part ownership or a percentage of shares of your business or company to investors after they invest. This is known as equity capital. The second way is by borrowing money and paying back with interest on a due date. It’s referred to as debt financing. Capital can also be raised by applying for business grants.

Start-ups and companies that have lasted and thrived are not just a product of luck or even sufficient funding. 80% of venture-based start-ups in Nigeria failed within the first five years. This is indicative of the fact that, too often, new entrepreneurs jump into  the market unprepared. That being said, here are 5 things to ask yourself before seeking for loan:

1. Does This Idea Have A Market?

In order to truly be successful, entrepreneurs seeking capital for a new idea must be willing to think outside the box and consult with people who can help them hone in on the “problem” their idea will help to solve. The number one reason why startups fail is misreading market demand — this is found in 42 percent of cases. You must do your research. Look up trends and data forecasting and consult experts who can give you insights that might not immediately come to mind.

2. Do I Have Mentors To Help Me?

Don’t isolate yourself in the development process. Mentored startups grow three-and-a-half times faster and raise seven times more money than those conceived alone. A mentor who can help you with your idea and guide you on how to focus and invest time wisely can make all the difference. That’s why fostering these kinds of relationships is one of the most important things you can do when seeking capital.

3. Can I Scale This Business In The Near Future?

Partnerships aren’t just important in a mentoring capacity; finding a partner who shares your passion for your idea increases the odds of scalable success. Startups with two co-founders, for example, typically garner 30 percent more investment, experience three times higher customer growth rates and have an increased likelihood of not scaling too quickly.

Once you identify a good partner, think through the future of your idea and build a timeline of goals. Some recommend outlining five years of growth, developmental steps and potential market changes, but the ultimate timeline hinges on your specific goals. Getting your idea off the ground takes the right combination of passion and strategy.

4. How Much Money Do I Need?

It is very important that you are very clear and precise when answering the question of how much  money you need for your small business loan. Collecting a higher amount than you need just because you are eligible may put you in more debt than you can handle. On the other hand, if you ask for a loan that is less than what you need for your business, it will affect your business negatively. For example, you will not be able to buy all the equipment you need to run your business. Plus most lenders will not give you another loan till you have paid off your initial loan.

Meticulously calculate everything you will need for your business before approaching the lender for a loan. If possible, increase the prices of everything you will purchase just a little. This is so that you will be able to makeup for any shortages when you purchase all you need. It is smarter to maintain discipline when you’ve calculated your exact requirements beforehand should in case your lender offers you more than you ask.

5. Is Money The Only Solution?

Let’s say that your provision shop isn’t doing as well as you’d like it to. Buying more provisions might seem like the solution but is it really what you need to grow your business, though? Maybe what you need is a marketing campaign or a better location with more foot traffic.

Before spending money to fix the challenge your business is facing, it would be beneficial to find other long-lasting solutions. This is to avoid getting into more debt. Are you seeking a loan for an immediate fix, or are there long-term benefits as well? Make sure you look at the problem from different perspectives first. Even if it turns out that a loan is your best option, the process of looking for other solutions is valuable in and of itself.

Bottom Line

It is said that every time you spend time planning you save a lot of time in execution. In this case, you not only save yourself time when you start the business but you will also save yourself from being in debt and making a lot of wrong business decisions.

Even if you’ve started your business already, you can still use these tips to restrategize and use future loans you might get optimally.

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