Latest / Closing Sales in Nigeria - Sales For The Nigerian Business Person: The Sales and Marketing Blueprint / Can Your Small Business Get a Bank Loan for Land? The Reality for Nigerian Entrepreneurs

Transcript

Can Your Small Business Get a Bank Loan for Land? The Reality for Nigerian Entrepreneurs · Closing Sales in Nigeria - Sales For The Nigerian Business Person: The Sales and Marketing Blueprint

• 0:01
  Hello and welcome to the show. I am at an undisclosed location
• 0:05
  in Abuja, but there will be some interruptions in the background,
• 0:07
  so I apologise for that. Now, the goal of this podcast is
• 0:10
  business education. If this is your first time of
• 0:13
  discovering the podcast, then stay here.
• 0:15
  You're in the right place and please do me a favour, make sure
• 0:17
  you talk about the show so that your friends and family members
• 0:20
  in Nigeria and abroad can benefit from the questions that
• 0:23
  we tackle. They can do that by subscribing
• 0:26
  on Spotify, YouTube, Apple or any player of their choice.
• 0:30
  And if you have any sales and marketing questions in
• 0:33
  particular, bring them to me. You can call, you can SMS, you
• 0:36
  can WhatsApp me on 08064662140. Today on the show, I want to
• 0:43
  briefly tackle a question from Wisdom who called in from Dawaki
• 0:48
  in Abuja. Now his inquiry was he wanted to
• 0:51
  know whether small businesses can get a bank loan so that they
• 0:56
  can buy land. So that's the reason why he
• 0:58
  called in. So the answer to the question is
• 1:01
  yes. But I keep saying on the
• 1:03
  podcast, OK, let me back up a little bit on the podcast where
• 1:06
  people call in or they hit me up and they want to know about
• 1:10
  business finance. I usually give them 4
• 1:13
  categories, let's say 4-4, maybe 5.
• 1:16
  Anyway, so the categories I give them is this, that if you want
• 1:18
  to finance your business, you want to do something for your
• 1:20
  business through your business, one way of doing that is you can
• 1:25
  bootstrap. Bootstrap just means you are
• 1:27
  using your savings or you are using cash flow that comes from
• 1:32
  the business to finance your business activities.
• 1:35
  So let me repeat. Option number one is
• 1:37
  bootstrapping. How much money have you saved?
• 1:40
  How much money have you been able to gather?
• 1:42
  You will now use that to grow the business.
• 1:45
  Or how much cash flow am I getting from my business?
• 1:49
  As in I'm doing good sales, I'm making correct profit.
• 1:52
  I'm now taking some of that profit I'm putting back into the
• 1:55
  business to be able to achieve one or two things.
• 1:58
  That is bootstrapping. That's usually what I tell
• 2:00
  people. Option number one option #2 is
• 2:04
  equity. Equity, you're going to talk to
• 2:06
  someone, you collect some money from them, but they give you
• 2:09
  that money on the understanding that look, as I'm giving you
• 2:11
  this money when our partners, you know, 505070302080 whatever,
• 2:17
  but sure, as I give you money that's in, I look, this is
• 2:19
  business partnership here. This is business marriage.
• 2:22
  That is what equity is. They own a percentage of your
• 2:24
  business. So that's another way to get
• 2:26
  some money. Then after that is loan.
• 2:29
  Loan is this money that I'm giving you, you know, is, is
• 2:34
  borrow, you pay me back. So whether you go through a bank
• 2:37
  or whether you go through a private individual, that is what
• 2:41
  a loan is. I collect some money and I agree
• 2:44
  that I'm going to give you back this money plus something, plus
• 2:48
  interest, plus markup, plus percentage, plus something.
• 2:54
  But should I have to collect money and you're paying back
• 2:56
  plus something that is a loan. And I think that's option #3
• 3:01
  Abby. Yeah, I think that should be 3.
• 3:03
  Then option #4 is grant. Now grant is a dash with the
• 3:09
  money, free money, if you're able to get that on a personal
• 3:13
  level and it's all good. But on a business level,
• 3:17
  typically you get grants from government agencies or
• 3:21
  charities, NGOs, you know, these sorts of things.
• 3:24
  However, when it is through a formalized source like a
• 3:28
  government or a charity, even though the money is free,
• 3:32
  meaning you will not pay back or meaning that they will not take
• 3:38
  a share in your business. Usually some conditions are
• 3:41
  attached to this money. So they usually are some pre
• 3:45
  qualification criteria. So that means you have to match
• 3:49
  certain things to be eligible. So there's some businesses, and
• 3:52
  I've done podcast episodes about that in the past, where there
• 3:55
  are women based businesses in Nigeria of a certain age trying
• 3:59
  to apply for certain grants. So of course for those ones, you
• 4:02
  know, you have to be a woman, you have to be in a certain
• 4:04
  sector, you know, that kind of thing.
• 4:06
  So that kind of grant, somebody like me who is a man above a
• 4:09
  certain age in a different kind of sector would not be able to
• 4:12
  take advantage of those grants. So you have to meet the
• 4:15
  eligibility requirements, you have to be eligible.
• 4:18
  Then after that for grants, there will be reporting
• 4:21
  requirements. So what that means is, depending
• 4:25
  on the organization, every month or every week or every year or
• 4:29
  every quarter or every six months, they will let you know
• 4:32
  what's up. You have to be reaching out to
• 4:33
  them like ORGA, Grant Maker, Madam Grant Maker, thank you
• 4:37
  very much for the money of the money you gave us.
• 4:40
  This is how we used it. We did this, we did this, we did
• 4:43
  that because people who give grants usually want to make sure
• 4:47
  that the money that was given is used for a specific purpose.
• 4:50
  So if I go and I apply for a government grant and it is meant
• 4:55
  to be used for what's, what's that word now?
• 5:01
  Working capital? Yes, working capital.
• 5:03
  Working capital is the money that you need on a daily, on a
• 5:05
  weekly, on a monthly, on a whatever basis to finance your
• 5:08
  business. So let's say there's a
• 5:11
  government grant and now collect like I can 15M and the point of
• 5:14
  it is working capital. The government wants to know
• 5:17
  that I'm using it for working capital.
• 5:18
  They do not want to hear that I collected 15 M and then I went
• 5:22
  back to my village and then I married 3 brand new wives.
• 5:25
  So that's the whole idea. You will have to meet some
• 5:29
  reporting requirements so that the person who is giving the
• 5:31
  grant can be able to verify that the money that they gave you,
• 5:34
  you used it for purpose. So when people reach out to me,
• 5:39
  these are the options that we explore when it comes to
• 5:41
  financing, my own personal favorite, especially since I'm
• 5:46
  coming at this from a sales and business development background,
• 5:48
  is always try and see how much of bootstrapping we can do from
• 5:53
  the beginning. Because bootstrapping doesn't
• 5:59
  have as many obligations, as many comma as many, you know,
• 6:04
  extra this and extra that as the other sources of finance.
• 6:08
  All the other sources of finance, you can see that they
• 6:10
  have comma, they have obligation, they have extra
• 6:13
  work, they have extra paperwork, they have extra.
• 6:16
  You understand that you have to comply with, but for
• 6:18
  bootstrapping, you don't have to comply with that.
• 6:21
  Another reason why I prefer bootstrapping is the process of
• 6:24
  bootstrapping itself often leaves you with a healthier
• 6:26
  business because you want to gather your savings or because
• 6:30
  you want to. Now make sure that your unit
• 6:32
  economics are correct. Unit economic means whenever I
• 6:36
  sell something, one particular product, am I selling enough so
• 6:40
  that the profits that comes on top is enough for me to put
• 6:44
  something in my pocket and is enough for me to throw back into
• 6:47
  the business. When you're bootstrapping, the
• 6:49
  whole thing of unit economics becomes very, very clear.
• 6:53
  If bootstrapping is the only way that you're building your
• 6:55
  business, you will now see that or more.
• 6:57
  This thing and I'm selling the profits on it is not enough.
• 7:00
  The markup on it is not enough. I'm currently talking to a
• 7:03
  trader right now and that is one of, excuse me, that's one of her
• 7:07
  issues. So she gets palm oil wholesale
• 7:13
  across state lines and for her, the numbers are not adding up.
• 7:17
  This is what the market normally sells for.
• 7:19
  If I stick to this, I'm going to be losing 3000 on every single
• 7:23
  consignment. Now, 3000 doesn't seem like as
• 7:26
  much, especially since, you know, she's buying big and big
• 7:28
  and big consignments. But The thing is, losing 3000 on
• 7:31
  every single consignment still doesn't change the fact that,
• 7:34
  look, this business, we are not in the profits.
• 7:37
  We are in the minors. So when you're bootstrapping,
• 7:40
  we're paying attention to all these issues.
• 7:42
  Are my unit economics correct? Am I selling at the right price?
• 7:46
  Do I have enough to throw back into the business?
• 7:49
  When you're asking yourself these questions, usually you end
• 7:52
  up with a healthier business because you're worried about the
• 7:56
  business fundamentals. It's like when we go to the
• 7:58
  doctor and you go and sit down there.
• 8:00
  The doctor is asking you a bunch of questions.
• 8:01
  How is your BP? Your BP is too high.
• 8:05
  Have you been eating sugar? Your sugar is too much.
• 8:08
  Have you been taking salt? Your salt is not enough.
• 8:11
  You know, they're trying to fix the fundamentals so that you
• 8:13
  will continue to survive. And bootstrapping puts you in
• 8:16
  that frame of mind where you are looking at the business
• 8:18
  fundamentals and you want to make sure that your business
• 8:21
  survives. When we go through all these
• 8:23
  other ways of funding the business, sometimes, you know,
• 8:28
  you collect money like let's say the granting the government
• 8:30
  gives me 15 M that 15 M covers the multitude of sins.
• 8:34
  I'll be able to close my eyes to the fact that I am not running
• 8:36
  my business the right way. So I'm not saying bootstrapping
• 8:40
  is the best, but that is the reason why for most people I
• 8:43
  say, let us start from bootstrapping.
• 8:46
  Now, the reason why I've gone into all this story is just that
• 8:49
  I'm saying that if you reach out to me just like Wisdom from
• 8:52
  Dawaki in Abuja, that is going to be the first thing I want to
• 8:56
  be looking for. Like OK, you know what?
• 8:57
  Yeah, all these options are there, but let's see how we can
• 8:59
  bootstrap this thing. But if you insist, of course,
• 9:04
  I'll give you all the information that you need to do
• 9:06
  what you think is best for your business and for your context.
• 9:11
  So he wants to know, can he raise money from the bank so
• 9:15
  that he can buy land that he will now use for his business?
• 9:18
  It's all right, it's not a problem, you can do that.
• 9:20
  However, once you enter bank route or all these formalized
• 9:26
  routes, just know that there's plenty of paperwork and plenty
• 9:30
  of diligence that lies ahead. People want to see that you have
• 9:34
  planned something. So you will need to have a
• 9:37
  proper business plan that is laid out, complete with the
• 9:41
  projections and what you plan to do with this money.
• 9:45
  So you need to have something written.
• 9:47
  You need to have a formal business plan.
• 9:49
  You also need to be on top of your numbers.
• 9:51
  This is how much we're making today.
• 9:53
  This is how much we're making this week.
• 9:55
  Because of that, we project that we will need this amount for six
• 9:58
  months, for three months, for one year, for whatever.
• 10:02
  And based on how much we're selling today, we project that
• 10:05
  we will make this in six months, this in 18 months, this in 36
• 10:10
  months. So you need to have that
• 10:12
  paperwork down. There's also another individual
• 10:15
  that I'm talking with. He runs a marketing agency.
• 10:18
  They want to go down this route. And for them, they run their
• 10:21
  business of the banking app. And I told him, look, guy, this
• 10:24
  will not fly. You actually need to have an
• 10:27
  accountant coming. You need to have a, a, what are
• 10:30
  they called, a book? What are they called accountants
• 10:33
  or book bookkeeper? Either an accountant or a
• 10:36
  bookkeeper. Somebody used to come in and
• 10:38
  separate everything and create proper statements for the person
• 10:43
  who runs the marketing company. They're interested in raising
• 10:45
  equity. So what that means is they want
• 10:47
  to go and talk to somebody who will drop money and the person
• 10:50
  will become part owner of the business.
• 10:52
  The person who is going to want to become part owner of the
• 10:54
  business, except if he is your uncle that has known you from
• 10:56
  small or your auntie who used to wipe your bum bum when you were
• 10:59
  a baby. They want to see something on
• 11:03
  paper to be sure that you know what you're talking about and
• 11:05
  that you're thinking, correct. The business plan, where, where
• 11:08
  is it? The sales and marketing plan,
• 11:10
  where where is it? The projections, where is it?
• 11:13
  The money that I'm giving you? Excuse me, excuse me, I have a
• 11:17
  bit of a cold. So the money that I'm giving
• 11:19
  you, what are you going to use this thing for?
• 11:22
  When you use it like this, everything works.
• 11:24
  How much are we going to get back when the thing gets back?
• 11:27
  How soon you start paying me? You know all these sorts of
• 11:29
  things. So once you start entering all
• 11:33
  these formal whatever, all these paper trail now becomes a big
• 11:37
  issue. So for Wisdom in Abuja, in
• 11:40
  Darwaki, you want to raise money from the bank to buy land for
• 11:45
  your business, Sure, no problem. But you will have to provide
• 11:49
  some personal and financial information, you guys to get
• 11:52
  your ID, whether it's driver's license or whatever.
• 11:56
  But I make sure it's updated. I understand it can be a hassle
• 11:59
  because to be honest, I just picked up my own license three
• 12:02
  days ago and between you and me, it, it took me two years to
• 12:07
  collect this license. I'm not lying, two years in
• 12:11
  Abuja. Luckily, the license I paid for
• 12:14
  was five years. So even though two years don't
• 12:17
  lapse, at least I'll be able to use this license validly for the
• 12:20
  remaining three years. But two whole years to collect
• 12:24
  my license mom see it took out like nine months to collect the
• 12:28
  license. Then my former business partner
• 12:30
  who used to handle video for me the last time we spoke was
• 12:34
  already like that kind of like one year, three months, four
• 12:37
  months. The guy never collect license.
• 12:38
  So yes, more these things can be a hassle, but what can we do?
• 12:42
  So go and get your license. You need to identify yourself.
• 12:45
  Then you also provide the bank with your BVN.
• 12:48
  The BVN, is that what's it called?
• 12:51
  Is it bank verification number or something like that?
• 12:53
  That's the universal identification number for people
• 12:56
  in Nigeria anyway that is attached to anybody who has a
• 12:58
  bank account in Nigeria. The idea is people, the, the
• 13:02
  government regulators and the banks want to be able to track
• 13:05
  you across different, across different banks.
• 13:09
  You know, because it's possible that I, even though I have an
• 13:12
  account with Access Bank, I can go open an account with Zeni's
• 13:16
  bank and maybe I'll go and we'll do them and then I swap them and
• 13:20
  collect maybe like 20 M and then I disappear.
• 13:23
  But with the BVN, you'll be able to track people across all
• 13:26
  platforms across all different banks.
• 13:28
  So you have to provide them with your BVN, your bank verification
• 13:30
  number. I think that's, that's what it
• 13:32
  means. If I'm wrong, please send me a
• 13:34
  message, let me know. Then you will also have to
• 13:36
  provide them with your NIN number.
• 13:38
  That's your which is NIN again, national identity number.
• 13:43
  Yes, probably national identity number.
• 13:46
  Then you'll also have to provide address details.
• 13:48
  So for now, that's usually utility bills.
• 13:50
  So that's water, Napa, you know, whatever and you know where you
• 13:53
  live. So that's the facet of paper
• 13:55
  trail. Now after that, in fact, this is
• 13:58
  where the hard work begins. You will not have to provide
• 14:01
  your income and employment details.
• 14:03
  If you're somebody that has work, if you're somebody that
• 14:05
  has 95 S, whether you work with Zenith Bank or Ministry of
• 14:08
  Finance or you know whatever, you will not have to provide
• 14:14
  bank statement with everything. This is how much money I make.
• 14:17
  This is my employer. This is where we work.
• 14:19
  You know all that detail, you give it to them because when
• 14:22
  you're collecting loan, the bank wants to know like is this guy
• 14:25
  stable? Is this somebody I can chase?
• 14:28
  How much money is flowing through this guy?
• 14:30
  Can this guy or this girl? Does you look as if this is the
• 14:33
  kind of person that will pay me because no bank wants to drop,
• 14:36
  you know, 40M50M or whatever and then tomorrow they can't find
• 14:40
  you or next month they don't know how they're going to get
• 14:43
  paid. So you have to provide that
• 14:45
  paperwork. Now, since wisdom from Dark,
• 14:48
  he's a business owner and is self-employed just like I am.
• 14:52
  We will not have to provide income and business details plus
• 14:56
  audited financial statements. This is me, this is my business.
• 15:00
  This is what we do. This is how much we've made.
• 15:02
  This is how much we did last year.
• 15:03
  This is, you know, you have to provide all those details.
• 15:07
  So can you see how the paperwork is beginning to stack and
• 15:11
  beginning to stack and beginning to stack Now, if you have all
• 15:15
  this information, it's not a bad thing.
• 15:17
  I'm not trying to discourage you.
• 15:18
  I'm just trying to say that look, if you must go this for
• 15:20
  more routes, just know what lies ahead.
• 15:23
  And by the way, all of these things that we're doing, it's
• 15:27
  not guaranteed. It's not as if we provide all
• 15:28
  these things and then we even get it.
• 15:30
  OK, then tax clearance. So that means as a business
• 15:33
  person, you should have been paying your tax.
• 15:35
  And you listening to this podcast, you don't have to
• 15:37
  answer, but in your heart of hearts, be honest with yourself.
• 15:40
  When was the last time you paid tax?
• 15:42
  Be honest, you know, you know, anyway, so these are some of the
• 15:46
  hurdles that we have to meet if we want to collect money from
• 15:49
  the bank because we want to use it to buy land.
• 15:51
  Then also had to point out to wisdom that even this thing of
• 15:56
  collecting money from the bank is not as if he's 100% like that
• 16:00
  or you guys drop something, there's something that they call
• 16:02
  equity contribution. So that means you will drop
• 16:05
  something on the value of the land.
• 16:06
  So if the land is 100 M, they will tell you to drop anything
• 16:10
  between 20% to 50%. So the bank, if the land cause
• 16:14
  100 M, they might ask you to drop 50 M.
• 16:16
  They will drop the remaining 50. You can see you still have to
• 16:19
  raise money or 100 M 20% to be so it'll be what is that 20 M?
• 16:26
  I'll be OK. I'm not good at the math.
• 16:28
  So let's just say that 20% of 1,000,000 will be sorry, did I
• 16:33
  say 1,000,000? OK, let me just pretend it's 101
• 16:36
  million now to make it easier. OK, let me say 100 million.
• 16:39
  So 20% of 100 million will be 20 million.
• 16:41
  So you still have to raise like that kind 20 M and drop first
• 16:45
  before they will now drop money for the rest.
• 16:47
  So there will still be an equity contribution.
• 16:50
  It's not said we give you that money 100% then.
• 16:54
  So let me check my notes. There was also going to be land
• 16:56
  specific information. You need to have an offer letter
• 16:59
  from the vendor before they will give you that money.
• 17:02
  Then you also need to have your title documents correct.
• 17:06
  C of O certificate, certificate of occupancy title documents are
• 17:09
  the documents that you use to show ownership.
• 17:13
  Real ownership of the land is really, really important because
• 17:17
  nobody wants to give you money today to go and buy land
• 17:21
  tomorrow and then next tomorrow after you buy the land next
• 17:24
  week, some other person will say who are you?
• 17:26
  You can't come and buy this land.
• 17:28
  This land does not belong to you.
• 17:30
  Before you know it, you're in court matter.
• 17:32
  The problem we're entering court matter for you means that the
• 17:34
  person who gave you the money, the person automatically now
• 17:37
  becomes part of your basic and nobody wants to, nobody wants
• 17:40
  that all that kind of hassle. So the bank is going to want
• 17:45
  land specific information. Let's see title documents.
• 17:49
  That's why I said last. So CFO certificate of occupancy,
• 17:53
  do you have it? That's the strongest valley to
• 17:56
  show who owns the land. Then deed of assignment.
• 17:58
  The deed of assignment is a document that shows that one
• 18:01
  person wants to transfer ownership to another person.
• 18:05
  Then there's also the survey plan.
• 18:08
  Survey plan is just the what do you call these people?
• 18:11
  These people that come with all those funny cameras, the estate
• 18:14
  survey or the land survey or all those people that do come put
• 18:19
  all those machines, measure this place, measure that place, you
• 18:21
  know, just to show that, OK, this land is indeed the land
• 18:24
  we're talking about. Then governor's consent is also
• 18:27
  required as OK, well, you need that if you're going to get the
• 18:31
  COO now what else? OK, evaluation report,
• 18:34
  evaluation report has to be done so you can get the market value
• 18:38
  of the land. And then OK, legal search.
• 18:43
  Of course the bank want to do legal search to authenticate
• 18:46
  title. Authenticate just means the
• 18:48
  thing I'm looking at now, is it the real thing?
• 18:51
  I'll be this one fake. So that's just the process of
• 18:53
  authenticating. They just want to make sure that
• 18:56
  the title is correct. Now remember, title just means
• 18:59
  ownership. When we're talking about land,
• 19:02
  we want to make sure that the ownership is correct because we
• 19:04
  want to be sure that the person who say he is selling the land,
• 19:07
  let he be sure that he's the owner of the land.
• 19:09
  Because those of us who grew up in Lagos, you know how this
• 19:12
  thing happens. You go, you buy a piece of land,
• 19:16
  you start celebrating that yes, I have bought land.
• 19:18
  Then the day you show up on the land and you want to start
• 19:21
  putting a block to put you on the land, some people just show
• 19:24
  we say what's going on to say, look, we are on Manila, that we
• 19:27
  are the, we are the children of the land, We are the owners of
• 19:30
  the land. Whoever you dealt with, that's
• 19:32
  between you and them. You still have to settle us.
• 19:34
  If you don't settle us, you are not doing anything on this land.
• 19:37
  So these are things that need to be sorted out.
• 19:41
  I don't know if we have these sorts of issues in Abuja, but in
• 19:46
  Lagos it's a thing. And then also in Benwood state
• 19:49
  is also a thing because you can deal with one person, but before
• 19:52
  you now start building other people show and say, look, you
• 19:55
  dealt with that person, that person did not discuss your
• 19:57
  family head. Since they did not discuss your
• 19:59
  family head, you have bought nothing.
• 20:01
  You still have to deal with us. We had the family at large.
• 20:04
  So all these issues, you know, they, they now start to come up.
• 20:07
  So that's what this whole thing about authenticating title is
• 20:11
  about. Then of course, there's also.
• 20:14
  Site inspection, you know, go and visit the places is the
• 20:16
  right plot of land, you know, blah, blah, blah, blah blah.
• 20:18
  So these are the sorts of issues.
• 20:21
  So I am not trying to scare you, dear listener.
• 20:27
  I just want you to have a realistic understanding of the
• 20:31
  process that lies before you when you say you want to use
• 20:36
  formalized institutions to raise money.
• 20:39
  Now, if you're a sophisticated business person, you've been in
• 20:41
  business for a while, you've been paying all your taxes, you
• 20:44
  have an accountant, you have a bookkeeper, you have your
• 20:46
  audited financial statements, everything, your business.
• 20:49
  Now, if you are at that level, then all all well and good, you
• 20:52
  know continue, but a huge percentage of people who listen
• 20:55
  to this podcast are not at that stage yet.
• 20:58
  So realistically speaking, that is the reason why when a lot of
• 21:03
  you reach out, the first thing I will say is it was up.
• 21:05
  How much do you have in savings or was the business look like?
• 21:09
  How much profit are you guys making on the weekly or the
• 21:11
  monthly, you know, or on a quarterly like was you're
• 21:15
  looking at is there any way that we can bootstrap this thing?
• 21:20
  We can't cash flow this thing small first before we start
• 21:23
  looking at other things. But if you want to just know
• 21:27
  that there is a paper trail, there are other plenty paper,
• 21:31
  paper work and everything that you have to meet before you get
• 21:36
  this finance. But the answer to the question
• 21:39
  basically is can you raise money even as a small business person,
• 21:44
  as a one man show, as an SME, as a one woman gang?
• 21:49
  Can you raise money to buy land through the bank?
• 21:51
  Oh yes you can. If you meet the requirements and
• 21:55
  you make a compelling case, yeah, then sure, you absolutely
• 21:58
  can. So that's the answer to the
• 22:00
  question. And that is all for today.
• 22:02
  Now remember, if you have any sales and marketing questions in
• 22:06
  particular, call, SMS or WhatsApp me on 0806466 2140.
• 22:15
  Thank you very much for your time and attention.
• 22:17
  I will catch you at the next episode.