1. Single digit interest rate (9%)
2. 5 year loan tenor
3. 6-month moratorium
4. Guaranteed working capital
5. Speedy processing
To qualify for the CAP fund, you will need to get a guarantor who will undertake to pay off your liability if you default. Let us assume you need N5m for a business, who will guarantee to pay back the N5m if something happens to your business?
Let me give you an approach to bank loans. First, use your own money to run a micro-model of the business. Use this opportunity to learn the ins and outs of your business. Commit all the blunders and learn from it. I will advise you read FarmTech's thread on his poultry farm. It is a classical story of how someone started a micro-business model and learnt a lot of stuff he never knew about poultry. All the glamour that has been painted about poultry business was stripped bare and he saw firsthand what is involved.
It is only when you have produced a profitable model which can then be scaled up that you should now endeavour to approach a bank for a loan. So if you are new in the business, I would advise you to forget about any loans. Get a profitable model which can be scaled up. Then you can approach a bank to give you finance.
The CAP fund comes with 9% interest, which means if you borrow N5m, you are going to pay back a total of N5,450,000 in 60 months (not counting admin charges), or about N91,000 every month for 5 years. Does your business have such cash flow? If it does not, will it have it by the time the 6 months of grace is over?
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