How To Access Bank Loans For SMEs In The Fashion Industry
Building a fashion business can be very exciting and challenging in many ways. Right from the start of the business to the end, many factors come into play. While you might want to start your fashion business with no money, along the way you will need some form of funds if the business has to grow.
Funding can come in the form of grants or loans. And more often than not, loans are the most common ways fashion entrepreneurs access funds. So, what is the process like when it comes to accessing loans and are there any loans specific to SMEs in the fashion industry?
This week, we spoke with a staff member of Guarantee Trust Bank (GTBank), who wishes to remain anonymous, about the types of loans fashion entrepreneurs can access, the process involved in accessing these loans, and loan repayment details.
What is a Loan?
For her, "A loan is a buffer in times of need. It is a commitment on the part of the borrower to pay back the total money received from the lender, with agreed interest and tenure. The terms of the loan are usually provided by the lender."
Loans Available to Fashion Entrepreneurs
The Fashion Industry Credit Loan is a loan that was specifically designed for Small and Medium Entreprises in the African fashion industry. It is a straight-through process type of loan that involves no hassle and has an easy application process.
This loan is best suited for SMEs in the fashion industry because as opposed to the high-interest rate charged on regular loans, the fashion credit loan has a significantly lower interest rate attached to it.
What is the Process Involved in Accessing this Loan?
As mentioned earlier, it is a straight-through process loan and, therefore, hasslefree. All you, as a fashion entrepreneur, have to do to access this loan is to meet all the eligibility requirements. To be eligible for the loan,
- Your fashion business should be registered with the Corporate Affairs Commission (CAC),
- Your business should be at least 3 years old,
- You should have a business account with the bank that is not less than 1 year old,
- There should be no returned cheques on your account for the past 1 year,
- Ensure that lodgement in any month is not lower than the value of 30% of (total annual turnover/12).
What 'Ensure that lodgement in any month is not lower than the value of 30% of (total annual turnover/12)' means is that per month, the amount of money in your account at any given time should not be less than 30% of the average monthly income for that year. That is before you subtract profit, running expenses, and so on from the amount.
For example, if you receive ₦20 million in 2019, the amount of money in your account at the end of every month in 2019 should not be less than ₦500,000. The ₦500,000 is gotten by;
(₦20,000,000 / 12 months) x 30% = ₦500,000.
All monthly lodgement between that period should be equal or greater than that figure
As far as you meet the eligibility requirements for the loan, you can access it via their Internet Banking platform.
To access this loan, you do not need to have any form of collateral.
What are the Interest Rates and Repayment Plans on the Loan?
The Fashion Industry Credit Loan has a competitive interest rate of 9 per cent as opposed to 23 per cent for regular loans. This 9% per annum interest rate can be paid over a period of 12 months.
The repayment is calculated as; Monthly Principal + Interest Payment.
So, as you repay your loan, you have to pay back a certain percentage of the loaned money and a percentage of the 9% interest rate.
N.B: The 9% per annum rate is shared across the number of months, not more than 12 months, you wish to repay your loan for and it has to be a fixed amount per month till the total sum of 9% is paid off.
What is the Minimum and Maximum Amount Fashion Netreprenurs can Access?
As a fashion entrepreneur, you can access loans from as low as ₦250,000 to as high as ₦5 million.
For more information regarding this loan, click here.
As a fashion entrepreneur, you can benefit greatly from this loan once you meet all the eligibility requirements.