3 Nigerian Banks & Microfinance Banks That Offer Loans without Collateral

Many individuals and businesses have great ideas for new and expansionist business ideas, but they are often incapable of turning their ideas into realities. The major reason which often kill the dreams of Nigerian entrepreneurs is their inability to meet the often stringent requirements of obtaining a bank loan.

However, the fact remains that banks are in the business of making money or preserving their initial capital in the worst-case scenario. Hence, banks use those stringent loan requirements to ensure that they are not pouring money down the drain. Nonetheless, some Nigerian banks have awakened to the reality that some entrepreneurs have only a solid idea and the clothes on their backs; hence, they are willing to offer you loans without collateral. Here are 3 Nigerian Banks and 3 Microfinances banks that you can approach if you are looking for a loan.

First Bank Nigeria Plc

First Bank of Nigeria has made plans to provide non-collateral loans for Small and Medium Enterprises as part of the bank's initiative to power growth in the SME sub-sector. The loans are offered to SMEs in different sectors of the economy; hence, there are no favorites.

The non-collateral loans offered by First Bank do not require collateral. The only thing you need to do is to go through a psychometric test, pass the test and provide the bank with your business plan and financial projections.

Quoting Mr. Oluwafemi Akinfolarin, First Bank's Head of SME Banking “Getting loans without collateral is part of our contribution towards boosting the growth of the SME segment." Most SMEs don’t have collateral to secure loans. With this now, all a prospective borrower is asked to do is to go through a psychometric test. Once the SME passes it, we advance the loan. That is a cutting edge innovation."

The great thing about First Bank's unsecured loans is that it is designed to be easily accessible to entrepreneurs irrespective of the type or size of your business.

Diamond Bank Plc

Diamond Bank Plc offers entrepreneurs an opportunity to obtain loans without securing the loan against collateral. The non-collateral loans are designed to stimulate growth for Micro Small and Medium Enterprises (MSME).

Diamond Bank has about 5 SME friendly accounts but if you want a loan without collaterals, you'll most likely to looking at the bank's SME loans. Diamond Bank's SME loans can be accessed in the form of; Revolving Credit, Installment Loan, Local Purchase Order (LPO) Finance and Contract Finance.

According to Mr. Chima Nnadozie, Head, MSME Propositions, "presentation of a collateral security is no longer a bid deal for it to consider applications for, and grant loans to prospective and existing entrepreneurs in Nigeria’s micro, small and medium scale enterprises (MSME) sector."

However, you'll need to open a corporate bank account with Diamond Bank before you can apply for its SME loans.

Stanbic IBTC Bank

Stanbic IBTC Bank offers Nigerian entrepreneurs a great opportunity to obtain business loans without providing collateral. The loans are designed to help SMEs buy assets, but the asset only become yours when you make the last payment on the loan.

To apply for a non-collateral loan with Stanbic IBTC, you should be prepared to provide the bank with the following information:

    The full names and capacities of those who will sign
    CV of each member of the management team.
    The reason why you need the finance.
    Your business' financial statements, including an income statement, balance sheet and cash flow statements.
    Personal statements of assets and liabilities of all the partners, members or directors.
    A 12-month cash flow forecast.
    The amount of your own contribution and the source of the funds.
    If you do not have a business account with Stanbic IBTC Bank, you must provide the business' bank statements for the past six months.

Bonus Points

Before you approach any of the listed banks for a non-collateral loan, it would be in your best interests to open, run and maintain an account (corporate preferred) for a period of 3 to 6 months. You should also be armed with a sound business plan and a solid repayment plan for the loan.

 3 Ways to Obtain Loans Without Collateral (Not Banks)

 

Since non-collateral loans from banks are not designed to be utilized by all classes of business, you might need to borrow a relatively small amount of money "say N50,000" and it might be sheer wickedness to ask you to open a corporate bank account and manage the account for 3 months before you apply for a N50,000 loan. In addition, you might need to access the cash urgently and the bank's typical processing time might just be too long for you.

Hence,  if you need access to business (and occasionally personal) non-collateral loans, without having to go through the typical bank hassle, then you may consider;

The Advent of Microfinance Banks

Prior to 2005, most Micro Small and Medium Scale Enterprises MSMEs in Nigeria were practically unserved and underserved financially when it comes to raising business credit. For one, they borrow small amounts and traditional banks consider them high-risk debtors.

Hence, most MSMEs had to rely on thrifts, cooperative societies and moneylenders among others to raise business funding. However, the fact that the government did not regulate these thrift cooperative societies meant that Nigerian MSMEs were mostly at their mercies.

Hence, the government through the Central Bank of Nigeria organized the Microfinance Policy Framework of 2005 to assist micro-entrepreneurs have better access to business credit. This piece is by no means an exhaustive piece on Microfinance Banks that offers loans without collateral, but it offers a starting pointy to get you in the right direction.

LAPO Microfinance Bank Limited

LAPO (Lift Above Poverty Organization) runs a microfinance bank that is aimed at assisting the Nigerian micro-entrepreneur obtain access to credit, savings instruments and other financial services. The major advantage of obtaining loans from LAPO is that the repayment plan is in small installments. In addition, transaction costs are minimal, collateral is not required and you don't need to fill up a mountain of paperwork.

To obtain credit from LAPO, you'll be required to fill a registration form, open an account with 10% of the amount you intend to borrow, get two guarantors who will be visited by a LAPO liaison officer. The repayment plan for the typical LAPO loan is up to tenure of 8 months, an interest rate of 2.2% and a 1% monthly contribution of the loan that will be available to you for withdrawal when you repay the loan.

AB Microfinance Bank Nigeria

AB Microfinance Bank Nigeria makes it easy for Nigerian entrepreneurs to obtain loans in a quick, transparent and efficient environment. The major benefit of obtaining loans from AB Microfinance is that you can obtain up to N1.5 million in loans from its Maxiplus loan plans.

To obtain loans from AB Microfinance, you don't need to provide a mandatory deposit/savings account; in fact, you need not provide audited financial statements. Depending on the size of the loan, the repayment plan can run from 5 to 18 months, but you should be prepared to pay interests of up to 6% on declining balance.

Mainstreet Bank Microfinance Bank Ltd

Mainstreet Bank Micro Finance Bank (MFB) is child-company of Mainstreet Bank and it is licensed by the Central Bank of Nigeria to provide Nigerians with micro-financial services. Since starting operations in 2009, Mainstreet MFB has given out more than N1.3 billion in loans and the average loan per customer stands at about N257,000.

To obtain loans from Mainstreet MFB, you'll need to visit the bank's office at 94, Broad Street, Lagos or make inquiries at the closest Mainstreet Bank. Alternatively, you can call: 234--01-2137072, 234--01-2137079 or email info@mainstreetbanklimited.com for more information.  

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