Building Credit Score To Access Financing For Small Businesses

Finance experts have urged the Micro, Small and Medium Enterprises(MSMEs) to participate in driving inclusion in the financial ecosystem as this would ensure that Small and Medium Enterprises(SMEs) build a good credit score within the financial service sector.

A finance expert and chief executive officer of Kwikpay Credit, Mr. Gbemi Adelekan said MSMEs need to improve a solid repayment history to access their credit scores and have access to funding.

Adelekan said, in Nigeria, accessing credit facility is crucial for individuals and enterprises to meet various financial needs and increase circulation of disposable income and engender business sustainability.

Emphasising that a strong repayment history would enhance access to higher levels of funding that would enable the expansion of small businesses into larger enterprises and increase their performance, he noted that a short term loan with a solid repayment history can significantly enhance your credit score in a short period.

This improvement in your creditworthiness opens greater opportunities to secure larger loans amounts in future applications, he said.

Adeleke noted that, short and quick loans had helped many small businesses to navigate murky economic terrain, particularly, those operating within the informal bracket.

An ice block maker, hair dresser, mechanic and artisans on the street whose machine needs to work may be unable to go to big banks or development finance institutions for small loans due to the requisite paper work but the online lending platforms has saved a lot of businesses from collapsing, he emphasised.

Fortunately, he said, the money lending sector is fully regulated by the FCCPC and the rights of borrowers are very much protected.

He further said, non-repayment of loans has adverse effects,adding that, owing money for a long time and watching the interest accrue on such a facility can have a psychological effect.

Similarly, the national president of Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola hinted that, over 2 million SMEs have closed shops from 2023 till date due to market volatility, high inflationary environment, tarif hike, macro-economic headwinds and continuous eroding of business capital.

He asserted that majority of SMEs in the country are prone to bad debts such that many of the small business owners can’t afford to repay back their loans due to the compounded level of debt that has eroded their capital base and disposable income.

He noted that the SMEs and nano businesses are heavily impacted due to lack of expertise and faulty business structure on their path while he decried that the high level of bad debts and unpaid loans amongst the SMEs is the highest in history in the lending institutions.

Recent reports from the Nigeria Bureau of Statistics(NBS) showed that over 2 million businesses have closed shops and this is enough indication that businesses are not doing well in the country..

 

Building Credit Score

On building credit score for SMEs, Egbesola advised business owners to learn management skill, accounting skill and financial literacy skills to enable them stay accountable to invest their capital into business and recoup profits.

Continuing, he charged government to create SME Banks that will cater to the needs of the SMEs and also address the challenges facing the sector while buttressing that the creation of SMEs banks will make soft loans and grants accessible for SMEs.

He stated that, the Bank of Industry offers loans and grants mostly to industrial organization and manufacturers which, he said, are the biggest beneficiaries of BOI loans while positing that the artisans, SMEs and creative enterprise groups are finding it difficult to access loans to revive their businesses.

He further declared that government needs to revive the SMEs by creating SMEs banks across various MDAs, LCDAs and even sub national level in the country to reduce poverty, tackle funding crisis and address the weak fundamentals of the SMEs.

 

 

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