Loan without collateral

GETTING LOAN WITHOUT COLLATERAL

                                           (AN INTRODUCTION)

One of the most critical factors for the success of any business is access to capital. Capital is critical and crucial to business success in any nation. It is as indispensable to the growth of business as oxygen is to human existence.

Capital is needed for the launch of a new business and the sustenance of an existing one. For start-ups, the need for capital is more critical, because of items required, which may range from rent to office furniture and equipments, to utilities, working capital, living expenses, legal and accounting services, supplies, taxes, home expenses etc.

In summary, capital is needed for the start-up of a new business, existing business expansion, working capital, contract execution, importation, supply, delivery of items and many other purposes.

If we are not economical with the truth, each one of us needs capital either for business commencement or for the expansion of an existing one. How then can we get access to this very important factor for the success of every venture assuming we don’t have enough of it for the business of our choice?

                                        MEANS OF RAISING CAPITAL FOR BUSINESS

v Personal savings-

v Sale of assets-

v Joint contribution

v Financial support from family members

v Partnerships

v Mobilizations from contracts

v Commissions

v Share sales

v Bank loans etc.

Personal savings are capital saved by a person who is financially disciplined. This could either come from gifts or fervors by generous individuals or corporate organizations. Personal savings can also be generated by every income earner whether self employed or under the employment of another person who is financially literate enough to know that there will always be (a) tomorrow and rainy days in one’s life. This remains the cheapest source of finance. A great reward for financial prudence.

Sale of assets is another way of raising capital for business. A lot of people are so financially intelligent that they don’t buy things that will end up as liabilities. In this class are people who never buy unless they are convinced beyond all reasonable doubt that what they are about to buy will turn out to be a great investment in the future. If you are one of them all you need is to sell one or some of the assets to raise capital. You as well raise great fund if you are from the forest areas. For instance you can sell trees, vegetable seeds, landed property, idle land or your vehicle if you have one with second hand value.

Joint contribution is the third way to raise capital without borrowing. A group of friends can join their resources together and assist one another from it by giving out the sum total or part of it to a member in need.

Financial support from family members is yet another method of getting capital for business. One with generous wealthy relations can get financial support from them and that will serve as seed capital.

Mobilizations from contracts are means of raising capitals for those who have been awarded one contract or the other. If you socialize a lot chances are that you will be hooked up with the right people in government who could push a very juicy contract your way.

Partnership with a man or woman that has the means is yet another way of raising fund. However, in such arrangement one should be weary of fraudsters will at the end take home all the profits that accrue to the business.   

   

Commissions from freelance marketing, sales, holding briefs for others or serving as proxies are still means of capital generation. You can write proposals to various business owners to advertise or market their products or services over an agreed commission rate.

Shares remain another veritable means of fund generation. If you are a share holder you can easily raise capital by selling some units of shares in you share portfolio. 

           WHAT IF I CAN’T RAISE CAPITAL BY ANY OF THE ABOVE MEANS?

Then you go to the banks. That is my polite answer. Commercial banks will want to do business with you because they all desire to triple every year their previous year customer base. The bitter truth however is that they will do business with you upon the fulfillment of many conditions. After satisfying every other requirement, you will be asked to present collateral for the money the bank will give out to you on loan. This is where discouragement sets in for most people.

                                   A BANK TO THE RESCUE

 A professor went to the rural areas in his country to gather the necessary information for his project when he stumbled upon a bitter fact and an avoidable situation: his people were gradually been devoured by one of man’s greatest enemies- poverty.

He was terribly surprised that the majority of his people could be suffering so much when a minority are in the city wasting the country’ scarce resources through ill-governance. He immediately set out to finding a method of ameliorating their pain if at all he could not completely eradicate their poverty. The ugly situation he met on ground led him to abandoning his project (temporarily), and searching endlessly for the solution he positively believed will enhance the living conditions of his people.

True to the old saying that: whatever a man sets his mind to achieve he will definitely achieve, he               was able to devise a scheme through which he assists the rural dwellers financially. He would lend out money to individuals, groups and all who seek for financial assistance for the purpose of investment. This he did without demanding security for his money incase debtors are unable to pay at the expiration of the loan tenure. The debtors when they invested those loans made profits and then return the professor’s loan with the attendant little interest on them. The professor gets back his money and gives it again to others who are in need of it. That way poverty was drastically reduced among his people.

As with every good idea the scheme began to gain national acceptance and gradually metamorphosed into a bank of international prominence. Today the grammen micro finance bank is the second largest bank in Bangladesh with 2.4 million customer base. The origin of micro finance bank is accurately traced to Bangladesh. It all started from the idea of one man, Dr. Mohammed Yunis, a professor of economics.

Micro finance bank was set up with a mandate to empower economically active persons, deepen savings culture among the people, providing financial services to low income earners, promote education, train people to be useful and productive, helping to eradicate poverty by giving people free collateral loan to support income generating businesses. As each loan is repaid, the money is redistributed as loans to others thereby multiplying its impact.

A lot of us look at micro finance banks with disdain. This is largely because of the name (micro). Of a truth the word micro does not suggest the financial capacity of the bank; rather it serves as a pointer to the target customer or client of the bank. Some micro finance banks are financially stronger than most of our so called commercial banks here in Nigeria. In addition, all micro finance banks are insured by NDIC. So the fear of loss of deposit in the event of liquidation is no longer there.

For a better appreciation of the class of people micro finance bank is meant to cater for, let’s look at this pyramid.