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In Nigeria, accessing funding for business growth has often been a challenge for entrepreneurs, especially in the technology sector, as there are limited local lenders willing to support ventures in uncharted territory. However, Ecobank Nigeria Limited has taken a bold step by offering loans at a low interest rate of 9% to qualified technology businesses and entrepreneurs seeking to purchase equipment or gadgets to scale their operations.
This single-digit interest rate loan falls under the Central Bank of Nigeria’s creative industry initiative and comes with a repayment period of 10 years. In addition to the favorable interest rate, there is a 3-year moratorium, allowing businesses to postpone payments and devise a viable payment plan.
The opportunity for a single-digit interest rate loan is available to both existing and potential Ecobank customers in the technology sector, with a requirement of a 20% equity contribution for acquiring new equipment or gadgets for their business operations. The equity contribution is determined based on the cost price of the equipment obtained from the supplier’s proforma invoice, including other specifications.
Compared to purely commercial loan offerings, this creative industry support for tech businesses is considered an attractive deal due to its low interest rate. Several technology companies that have accessed funding from Ecobank have reported that the process was streamlined and disbursement was expedited.
This open lending offer is designed to foster business growth in the technology segment of the economy, providing adequate funding for startups and enabling them to expand their operations. The finance lease arrangement ensures that ownership of the equipment is transferred to customers after a proper contractual arrangement.
Repaying the loan with a single-digit interest rate is more manageable now. At an annual interest rate of 9%, a loan of N1 million over a 12-month period would require an interest payment of N90,000. For larger amounts, tech business owners can spread the repayment over a 10-year period, depending on the equipment acquired.
With a repayment period of a decade and a three-year moratorium, tech businesses have ample time to drive growth and meet their obligations. The key requirements are maintaining proper records of business transactions and developing loan repayment plans, which can be achieved with careful financial planning.
It’s important to note that this loan offer comes with terms and conditions. Collateral is required to obtain the loan, which can be in the form of a mortgage debenture or a lien on stocks of trade and equipment. Considering the value added to the business, these collateral requirements are reasonable.
LSintelligence Associates explains that when considering expansion and the need for equipment worth, for example, N50 million, the real challenge is determining whether the equipment will generate a direct or indirect return equivalent to the principal plus interest rate at the due date. A detailed capital expenditure plan, outlining inflows and outflows, is necessary to assess the net position.
If the asset is projected to contribute to business growth and the net position is positive, entrepreneurs should seize this opportunity. As long as the return on investment exceeds 9% (plus any management fee, if applicable, which is not specified by the bank), taking the loan can be a strategic move to fuel growth. Tech entrepreneurs are encouraged to conduct thorough research and analysis to make informed decisions.
In summary, Ecobank’s affordable loans offer a favorable opportunity for technology companies and entrepreneurs to access funding at a low interest rate, supporting their growth ambitions and enabling them to invest in essential equipment.
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