Global Experience of African Banks
1. Nigeria Practice
1.1. YEN Micro Business Loan Scheme
YEN Micro Business Loan Scheme provides loans with no collateral to young
business men and women. We work with Microfinance, banks and MSME
Agencies in Nigeria to offer loans to prospective individuals. This loan is
processed via YEN Learning Centre Limited.
i. Loan Categories
Available loan amounts of Nira 10, 000 - Nira 2,000, 000
Methodology: Individual
ii. Loan Terms
Loan Tenor: 14days - 12 Months
Weekly / Monthly payment
All loan categories attracts an Interest rate between 3% - 10%
iii. What are the requirements?
Applicants must be between the ages of 21 - 55 years
Must be an entrepreneur or aspiring entrepreneur
Must own a business or a business Initiative
Must have a valid BVN
Must have a bank account of not less than 6months with valid ATM
Card
Must have a valid Identification card (Voters card, National ID card,
Driver’s license, International passport)
Must provide two contact persons details
Must have a verifiable residential address ( Business location is
additional advantage.)
Must reside in Nigeria
Duly completed application form
iv. Benefits of the loan
No collateral
Access to funds for business expansion
Access to other loan products
Flexible repayment structure
Training on basic financial management, business planning and
customer relations
Low interest rate
Expert financial advice available
1.2. Young Entrepreneurs Loan
The Young Entrepreneurs Loan offers credit facilities to young entrepreneurs
across Africa with vibrant and bankable business ideas and who require
capital to finance and grow their small and medium scale businesses.
Features
A loan package of up to $10 million (N3.05 billion) with a limit of N2
million and a maximum limit of N15.25 million.
– The loan term is for a maximum of 7 years for existing businesses
and a 6-month moratorium period for startups.
Requirements
The business must be duly registered.
Business can be a startup or development project
The major business account must be domiciled in UBA
Facility tenor must not exceed 84 months.
2. India practice
2.1. Startup Business Loan
2.1.1. Startup Business Loan Eligibility
Each lender has different eligibility criteria for startup loans, but here are
some generic requirements:
Indian citizen: The applicant must be an Indian citizen.
Age: The applicant’s age should be more than 21 years and less than
65 years.
Business plan: The lender will want to understand how you plan to
use the borrowed funds.
Registration: The business must be a registered entity, such as a sole
proprietor, partnership firm, limited liability partnership, or private or
public company.
Financial statements: Lenders will assess your financial prospects
based on revenue growth, operating profitability, and current capital
structure, among other things.
2.1.2. Startup Loan Requirements & Documentation
The requirements and documentation differ based on the lender you’re
dealing with, but it’s important to have the following documents handy:
Identity proof: PAN Card, Passport, Aadhar Card, Voter’s ID, Driving
License
Address proof: Passport, Aadhar Card, Voter’s ID, or Driving License
Photographs: Passport-size photographs
Business proof: Incorporation certificate, partnership deed, or any
other registration document
Bank statements: Last six months
Proof of income: Income tax returns
Signature proof: Bank-verified signature, PAN Card, Passport
Banking details: Canceled or scanned check, copy of your bank
account passbook’s front page
2.1.3. Interest Rates
The rate of interest depends on your credit score and the lender’s
perceived level of risk when lending funds to your company.
However, banks typically charge a minimum of 10% in the current
market. This may change whenever the repo rate (this is the rate at
which the Reserve Bank of India lends money to commercial banks)
changes.
This is exactly why you can raise funds at a lower rate from outside
India. Countries like the US may have a much lower interest rate,
which means lenders in the US can offer funds to Indian startups for a
significantly lower interest rate.
There’s no upper ceiling on interest rates, but lenders open to lending
to high-risk borrowers may charge rates from 35% and above.
2.1.4. Benefits of Startup Loans in India
Quick access to capital: Venture capital (VC) funding can take
months. If you’re looking for quick cash to support growth, a startup
loan is an excellent, hassle-free option. The best lenders can disburse
funds within 48 hours of approval - although some lenders such as
banks can take months.
Better control: VCs ask for a stake in your company in exchange for
capital. This dilutes your stake in your company, which translates to
lower control over the company. Startup loans don’t require selling any
stake—you will need to pay interest or a flat fee, but you will not lose
any of your equity.
Lower cost of capital: Debt funding is significantly cheaper than
raising funds through equity due to the high cost of diluting your
company. Indian banks charge upwards of 10% per year on startup
loans, but you can lower your interest expense considerably by going
to a US-based lender.
Tax benefits: Interest expense is a business expense for your
company. This reduces your taxable income, which means the net cash
outflow toward your loan repayment is lower than your amortization
schedule shows. For example, if you’re paying 30% income tax and
your loan charges 10% per year interest, your after-tax interest
expense will be net of loan charges.
