Criteria for accessing development fund through financial institutions 123

By
Ronald Olusegun Olaiya
Managing Consultant/CEO
Bestride Consulting Limited

Bestride Consulting Limited:Criteria For
Accessing Development Fund Through Financial
02/23/13 Institutions 1

Development Funds

 Through many initiatives of the government, various funds were
established for SMEs. The lending rates under the funds are
lower than market rates (3.75%-5% p.a.).

 These funds are channeled through the following financial
institutions (FIs):
- Commercial banks, finance companies, Islamic banks,
development financial institutions, etc


Objectives

 To ensure that the specific economic sectors get access to
financing at reasonable cost; and

 To increase the productive capacity of the specific economic
sectors


Loan Processing

• Financing is granted in the form of loan, not
grant.
• FIs bear the credit risk.
• Normal credit assessment of the FIs is based on
applicant’s risk profile.
• Main criterion is viability of business / project.
• Other factors. (not exhaustive)
- Character of the applicant, Ability to pay back the loan,
capital commitment, business condition, etc.

SME Special Funds
Fund Objective

1. Funds for Small & To promote SME activities in both the
Medium Industries export and domestic sectors

2. Funds for Food To increase food production

3. New Entrepreneurs To help stimulate the growth of small
Funds and medium-sized enterprises.


SME Special Funds Cont’d
Fund Objective

4. Rehabilitation To provide assistance to viable SMEs that
Funds for Small are constrained financially to revive their
Businesses facilities, plants, machines, equipments ,etc

5. Entrepreneur To provide financing to entrepreneurs who
Project Funds have been awarded contracts/ projects by
(EPF) the Governments or Government related
agencies, statutory bodies and reputable
private/ public companies.


Credit Enhancement

 Credit Guarantee by government or its relevant agency
provides guarantee for SMEs with little or no collateral.

 Borrowers are subjected to loan agreement

 With the scheduled repayment by borrowers, it will enable the
Government to assist other eligible borrowers


Client Charter of FIs
FIs are required to display their client charters on the SME
loans. The client charters include:

 Documents and information required from SMEs;

 Eligibility criteria; and

 Loan processing time. Normally, the processing time for loan
application is 30 days from the date of complete submission.

 FIs are also required to inform the applicants on reasons for
rejection of loan applications.


Complaint Units at FIs

 All FIs have established complaint units as an avenue for
customers to lodge complaints:

 FIs have to settle the complaints within reasonable period of
time.

 Customers of FIs could also forward their complaints to:

 SME Special Unit of the relevant supervisory agency


Eligibility Criteria

Ranking of Criteria used in assessing SME borrowers are as
follows:

• Intended purpose of loan

• Repayment of previous loan

• Repayment schedule

• Type of business activity

Eligibility Criteria Cont’d

• Size of loan relative to size of business

• Availability of collateral

• Liquidity ratio

• Net profit to sales

• Existing profitability


 Projected income

 Loan activity at other banks

 Equity stake in business

 Trading experience

 Trade debtors


 Trade creditors

 Length of time doing business with bank

 Charges on assets

 Gearing

 Government guarantee of loan

 Cvs of clients

Supporting Documents

• Company information

• Management information

• Financial information

• Security information

• Business operation information

• Other information

SME Units at FIs
• All FIs have established dedicated SME Units.

• The roles and functions include:

 Identifying SME financing needs;

 Organizing training, courses and seminars;

 Providing cash management services; and

 Advisory services i.e. financial management.


SME Special Units at FIs
They are established to assist viable SMEs by:

• Providing information on the various sources of financing
available to the SMEs;

• Facilitating SMEs in their loan application process;

• Addressing the difficulties faced by viable SMEs in securing
financing; and

• Providing advisory services on other SMEs’ financial
requirements.

The Inescapable Reality

 Reality - No matter what, it’s not everybody that can afford to
access development funds/loans despite their inherent benefits.
Reasons? Answer – Stringent conditions

 Way out – All those who cannot access development loans are
advised to opt for network marketing or MLM that is usually
cheaper, at least to start with

 Those who have successfully accessed them are also advised
to take advantage of network marketing or MLM to add to their
streams of income

Alternative Lines of Business

Listed below are links for alternative businesses that can be
pursued by interested persons:

 http://www.sfi4.com/12058229/FREE

 http://www.tripleclicks.com/12058229/wave

 http://www.profitclicking.com/?r=56cKwzXTq0&p=opp

 https://www.profitablesunrise.com/?upline=olusegunolaiya1


Conclusion
The Government has introduced various initiatives and promoted
various financing schemes to assist the SMEs.
However, to ensure success SMEs should also:

 Enhance competitive edge, business viability and quality of
product or services offered.

 Implement effective strategies to enhance accessibility to
technologies, innovation, technical expertise including finance
and skills in business management.

 All entrepreneurs are also advised to explore the opportunities
being offered through network marketing or multi-level
marketing Bestride Consulting Limited:Criteria For

About the Author

Ronald Olusegun Olaiya is a Management Consultant, Online
Marketer & Entrepreneur. For enquiries on this write up and
other business interests, please contact him via
bestrideconsulting@gmail.com; roolaiya@gmail.com or Mobile
Phone +2348184559437


Thank You


Tags
Development Fund, Criteria for Accessing
Development Fund, SMEs, Network Marketing, MLM,
Multi-Level Marketing, SFIMG, Triple Clicks, Profit
Clicking, Profitable Sunrise


Criteria for accessing development fund through financial institutions 123

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