Every business at some point in its operating cycle will require some form of finance to pay its short term indebtedness or to fund new projects or business plans, or to acquire operating assets. Individuals at some point in their life may also need bank loans to help fund the purchase of a car, mortgage for a house or buy house hold appliances.
1. You need to formally apply to a bank for a loan – When most people think of approaching a bank for a loan, they commonly ask for a business plan. However, not all businesses require a business plan. But all loans must require that you apply to the bank formally as such it is important that you are able to articulate your needs in your application letter.
2. Banks charge interest on a per annum basis and they are not fixed– Banks do not charge interest rates per month but per annum. What this means is that when a bank offer a 20% interest on a loan it is per annum and not per month. For example, when you apply for a loan of N1million for a 3 month tenor at an interest rate of 20%, your interest will be N50,000. Which is 20% of N1million apportioned for just 3 months out of the 12. However, it can actually be lower depending on how often you repay the principal. Meaning if you repay N300,000 at the end of the first and second month and N400,000 for the third month your interest will be 20% of N1m for the first month =N16,667. Second month will be 20% on N700k for one month= N11,667 and finally N20% on N400k for one month = N6,667. The total is now N35k. The interest rates offered to you is also not cast in stone as banks often have a caveat in the offer letter that allows them to increase the rate whenever they feel the market conditions require it.
3. Different banks offer different interest rates and terms and conditions – Just the way the price of goods and services differ in the market so does the interest rates and terms and condition banks offer. Whilst some might favour you in terms of lower interest rates they might offer shorter repayment period. This takes me to the next point;
4. Never ignore the terms and conditions – When gives you an offer letter they aways include a set of “Other Terms and Conditions” or “OTC”. Usually, they differ from the conditions like collateral, interest rate, tenor (Terms and Conditions or TC) that most people prefer to look at. The issue however, is that when a loan goes bad and a bank takes you to court it is not the TC that often matter. The OTC is probably more important as it typically contains those issues that determine what the bank can do in the event of a default.
5. Banks always ask for a collateral or some form of security – Banks no matter the type of loan you ask for will ask for some form of collateral. It could be a landed property, asset or even your personal guarantee. Sometimes they remember to register claim to these collateral in the court and sometimes they don’t. When they don’t they are at risk to loosing claim to the asset in times of default. But don’t be fooled the court may still recognize an encumbrance even if it isn’t registered.
6. Defaulting on repaying your bank loans when their due doesn’t mean the bank will take over your business – Yes, banks like to avoid the court as much as you do and quite frankly want you to succeed because your success and theirs is directly proportional. If you can’t pay back all of your loans, it is better to pay a portion of it that you are able to than not pay at all. Judges often take cognizance of that which positively helps your case. So when you default in repaying any portion of your loans endeavor to approach the bank and seek a new deal
7. You can always attempt to refinance or restructure your loan – Following from above, you can always approach your bank to restructure your loans if you think the current terms are not favorable to you. And it is not also when your loan is bad that you can approach a bank. You can also approach them when your business is doing well and your are servicing your loans promptly. Business are such that the owners must constantly seek ways to improve its operational conditions you cannot just rest on your oars. Refinancing your loan involves approaching another bank to take over your existing loan as a new lender. You should utilize this option when the new bank offers your better T&C.
8. You can ask your bank for a moratorium – A moratorium is simply a bank permission to a borrower to suspend repayment of principal for a period of time. Because some business ideas require time to start making money despite borrowing from a bank, it makes sense to give the business some time and not burden it with huge cash outflows that it could better use in growing the business. Banks recognize that and will often allow borrowers a period of grace (one month, three months, one year etc) where they only pay interest and resume paying interest and principal at the end of the moratorium.
9. The biggest threat to defaulting is not your interest rate but your Debt Service Coverage Ratio (DSCR)- Imagine two guys Mr A and B each borrow N1million but with Mr A told to repay over one year and Mr B over N3 years.They both get charged 20% per annum interest rates and will repay principal and interest at equal installments. Mr A will have to pay a total of N92k every month for one year till the loan is repaid whilst Mr B pays N37.1k every month for the next three years. Now assuming they both generate cash of N100,000 every month in their business who do you think will go default sooner should there be a sudden drop in revenue within the first year? Certainly it is Mr A, even though he pays less interest (total of N111.6k) compared to Mr B (N337.8k) over three years. This is because Mr A has a DSCR of 1.09x compared to Mr B with 2.7X. Provided Mr B’s business earns a return on his investments that is over 20% he almost sure to make a profit despite paying higher interests.
10. Banks have hidden charges – Apart from the interest rate bank charge, they also charge you fees and C.O.T. But off course we are familiar with these. However, banks also have other cost which they mostly do not tell you when you apply for a loan. For example, they deduct taxes whenever they charge you C.O.T or WHT when they are paying you an interest. They also charge you punitive interest rates whenever you default in payments even though your loan agreement provides a less punitive rates for such. It is important to always ask your accountant to conduct a monthly spot check on charges when they prepare bank reconciliation reports.
Shoprite to leave Nigeria After 15 years
South African retailer, Shoprite International Limited says it will consider the potential sale of the majority stake of its Nigerian holdings, Retail Supermarkets Nigeria Limited.
This was disclosed in the company’s operational and voluntary trading update that was published this morning.
more details later
Gold prices soars following resurging COVID-19 caseloads
Gold futures gained 0.46% to trade at $1983 at about 6.41 am GMT.
Gold started the first trading week on a bullish note at London’s trading session. This is coming on the heels of growing concerns about the ravaging Coronavirus pandemic, triggering gold traders to increase their bullish bet.
Gold futures gained 0.46% to trade at $1983 at about 6.41 am GMT
Spot bullion surged 11% in July, the biggest monthly gain since 2012, as investors weighed a weaker dollar and record low U.S. real yields.
Why the sudden rush for gold?
The current global health crisis has prompted unprecedented amounts of stimulus being unleashed by the central banks in most emerged markets. There have also been other dovish monetary policies, including lower rates. All of these have combined to boost gold bulls in solidifying their bullish position on the short term.
In addition, Stephen Innes, the Chief Global Market Strategist at AxiCorp in a note to Nairametrics buttressed the macros supporting the yellow metal’s bullish run he said
“Investors will continue to have a favorable view of gold partly on ongoing Covid-19 concerns.
“While gold demand shows few signs of retracing, the yellow metal could face fierce short-term resistance at $2000 given the growing view we could be at the end of the runway for the US yields to fall further. And the US Treasury is running out of the exorbitant privilege of the stronger dollar and safe haven flow.”
Gold has moved through its all-time highs as the story continues to be the Federal Reserve’s money-printing coupled with the potential USD1 trillion fiscal stimulus packages for pandemic relief. Real rates continue to trend lower, and the dollar continues to weaken. Therefore, the environment should remain supportive of gold.
Data war: MTN takes over, gains 1.7 million subscribers, as Glo outshines Airtel in June
MTN gained 1.74 million data subscribers in June against the 882,458 it recorded in May 2020.
Although competition in the Nigerian telecommunication space has always been stiff, latest data seen by Nairametrics indicated that the competition is getting stiffer.
Telecommunications operators, especially in the data section, are giving each other a hot chase. Gone are the days when the biggest telecommunication firm automatically retains the top position. Recently, companies that were once described as fringe players are catching up really fast in terms of attracting new subscribers every month.
For instance, in May 2020, Glo took other operators by surprise, dwarfing them to lead the chart as the telco with the highest number of subscribers in a month when it gained 8.302 million data subscribers. The indigenous telco grew from 28.934 million in December 2019 to 37.236 million by the end of May 2020, while MTN gained 4.75 million data subscribers. Airtel, which used to be the second-highest in subscriber growth after MTN, recorded 2.795 million. Unfortunately, 9mobile lost 812,827 subscribers within the same period.
MTN regains top position
According to data released by the Nigerian Communication Commission for the period ending June 2020, Nigeria’s largest mobile telecommunication company, MTN, gained 1.74 million data subscribers against the 882,458 it recorded in May 2020.
Also, at the end of June 2020, the total number of data subscribers on MTN data network rose to 60.60 million from the 58.86 million it recorded in May. This means the telco added 1.74 million data subscribers.
Glo attracted more subscribers, outshining Airtel (subscribers base) for the first time in years
Despite a challenging year for Globacom in terms of its data subscriber base, the telco took industry watchers by surprise, as its subscriber base chased, met and overtook Airtel’s In June 2020.
For the first time in years, the once second largest telco (subscribers base) lost its position to the indigenous company as the latter increased its base from 34.24 million in May to 37.97 by the end of June 2020. The Indian-owned telco only managed to increase its base from 37.32 million to 37.57 million within the same period.
On the other hand, 9mobile ended the month without attracting any data subscriber. According to the NCC data, 9mobile continues its steady decline, as a total of 16,000 subscribers dumped the network for others when it fell from 7.26 million subscribers to 7.10 million within the same period.
In terms of market share, Glo is now trailing behind MTN, as the latter expanded its overall market share in June.
At the end of June 2020, MTN’s total data market share rose further to 60.60 million subscribers. On the other hand, Glo had 37.97 million, followed by Airtel’s 37.57 million and 9mobile’s 7.10 million.
Internet remains slow in Nigeria despite the advent of 4G network
The advent of 4G/LTE in the global telecom industry was accompanied by the expectation of fast internet speed. The 4G is the fourth generation of wireless mobile telecommunications technology, succeeding 3G. Potential and current applications include amended mobile web access, IP telephony, gaming services, high-definition mobile TV, video conferencing, and 3D television.
While GSM companies continue to jostle for market share, it has often come at the expense of poor service and lack of accountability. Quite frankly, as an average internet user in Nigeria, one is usually left at the mercy of poor mobile internet services which frustrate one to seek limited alternatives.
Nigeria’s internet download speed remains among the slowest in the world, and while the telcos continue to rake in heavy gains from data sales, consumers continue to groan for lack of fast and affordable internet services.