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Written by Kehinde

5 Reasons to Take a Business Loan in Nigeria

Just before we get into the reasons why you might want to take advantage of business loans in Nigeria, we’d like to assure you that taking out a loan, either for personal or business purposes, is perfectly fine. Because, if the uptick in Nigeria’s Private Sector Credit in 2021, according to data from the CBN, reveals anything; it is that Nigerians are increasingly warming up to credit, and Nigerian banks and other lenders are willing to extend loan offers to individuals and businesses. Now is the time to leverage this economic advantage!

What are business loans?

A business loan is capital borrowed from banks and other lending institutions by a business to cover costs of business operations that they are unable to pay for themselves. The business pays it back at an agreed-upon time and with an agreed-upon amount of interest. It is a loan that companies apply toward expenses that they don't have money on hand to pay for.

It is common knowledge that your business will barely survive without enough capital. But the funds you need to get your business off the ground or keep it afloat won't always be on hand. So business loans, accessible through banks and other lenders, give you the money you need to help support your business and turn a profit.

How to apply for a loan in Nigeria
Small Business Loan Application. Getty Images.

5 important reasons to take a business loan in Nigeria

Taking a small business loan in Nigeria might sometimes be expensive and even risky, depending on the loan terms and the capacity of your business. However, loans are generally safe and can be the one thing you need to turn your small business's fortune around. That said, here are five smart reasons why taking a business loan might be worth the risk.

1) To expand business operations

As your business booms and operations expand, the cost of running your business surges with it. At this point, you may be thinking of opening a new store or expanding to a new market. You could also be thinking of adding new staff and increasing your physical office space. These require capital you’re unlikely to have easily at hand.

A business loan provides capital for all of these without wiping out your operational funds. However, exercise caution before taking on business debts. Ensure your revenue forecast is robust enough to pay back your principal and the interest.

5 smart reasons to take advantage of a business loan
Small businesses can take advantage of loans for business expansion. Getty Images

2) To purchase inventory

Inventory purchase is perhaps one of the more obvious reasons to take out a business loan in Nigeria because of how capital-intensive it is. You have to purchase and update your products constantly to keep up with trends, meet growing demands, and provide more options to your customers. A seasonal business, for instance, would sometimes need to purchase inventory in advance. By taking out a loan to offset inventory costs, your business can stay ahead of the curve and have a better chance of success.

3) To procure equipment

Your business, whether it’s just starting or growing, will need to procure new equipment or upgrade old items. IT solutions, machinery, and even office stationery are a few of the things your business can take advantage of small business loans to buy.

Loans can help you manage the costs of buying, upgrading, or repairing your business equipment, and allow you to maximize the potential of your business for success.

4) To increase working capital

Managing your business's day-to-day operations may be costly, and there are times that you might not have money to hand to pay staff, suppliers and settle other operational expenses. Your business may take out a loan to cover the day-to-day running of your business. This way, you can free up cash for investments into other areas of your business.

It is useful, however, that you build good business credit to increase the lending opportunities available to your business. We will dive into that shortly.

5) To hire more talent

Did you know you can take out a business loan in Nigeria for new staff recruitment? Yup! You can take on business debts to hire new talent and expand your workforce.

As a small business owner in Nigeria, your plans are probably big and your business is moving fast. The workload on existing staff is telling on them and as you have accepted that you can’t do marketing, sales, operations, engineering, and logistics management on your own, you’ve decided you need new talent to give your business a competitive advantage and take it to the next level.

But there's one problem - insufficient capital! Your business hasn't yet experienced the growth it needs to pay the new hires. Here, you have a good reason to use business loans. If your business credit is good and you're confident of paying back on time, it makes sense to take advantage of a business loan.

Company hiring in Nigeria
You can use small business loans to hire new talent. Getty Images

Why business credit is important for small businesses in Nigeria

Now you know what your business can achieve with business loans in Nigeria. You’re probably already wondering how to apply for a small business loan to supercharge your business’ growth. But slow down – because there is something potentially more important than the business loan you need to first consider: business credit!

Business credit shows lenders, suppliers, and other vendors how financially risky your business is. This helps them assess whether or not your business should receive financial credit. Business credit tells banks and other lenders if they can trust your company by its financial management conduct.

Having a good business credit provides a lifeline for your business. With it, banks and other lenders can trust your company enough to extend loans to cover costs of day-to-day expenses, purchase inventory, recruit more staff, provide capital for business expansion when needed, and enable you to save the money on hand for investment in other areas of your business.

Final thought: Taking out a business loan in Nigeria is perfectly normal and you can smartly apply it to solve pressing needs for your business. More importantly, however, you need to build business credit to allow lenders to trust you and ease your path to lending opportunities for your business in Nigeria.

Check your business credit to see how eligible your business is for lending opportunities in Nigeria. Tap here or email [email protected] today.

Article written by Kehinde

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