Accessing CBN’s N200bn loan facility for SMEs

In a bid to further stimulate the economy and patch up financial holes defacing the fabrics of the nose-diving economy, the CBN intervened with the Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), dedicating N200 billion to the cause.

SMEs, through their banks, can apply upon meeting listed eligibility criteria. In the SMECGS, qualified enterprises can access loan up to N100 million which can be in the form of Working Capital, Term Loans for refurbishment/equipment upgrade/expansion, overdrafts, etc.

With an exception to TRADE, the scheme caters for ventures such as Manufacturing, Agriculture Value Chain and Educational Institutions. However, the CBN leaves it open for its Managing Agents to include other ventures as may be specified. Although, the decision of the apex bank, to exclude traders, has been frowned at by many who feel such decision is a technical short circuit on the economy. With trade being a central market booster, many have queried why the CBN had ceremoniously clipped out this fundamental category of business unit.

Aside meeting the requirements listed by a participating bank; a borrower must also fulfill the criteria enumerated by the CBN such as the business must be owned and managed by a Nigerian private limited company, and must be registered under the Companies and Allied Matters Act of 1990.

Reproduced below are other terms to be met:

• A legal business operated as a sole proprietorship;

• A start-up company with satisfactory cash flows indicating a Fixed Asset cover ratio of 100: 150;

• Have no non-performing or delinquent loans with any financial institution;

• Be a member of the Organized Private Sector Bodies/Associations such as Nigerian Association of Small & Medium Enterprises (NASME), the Manufacturers Association of Nigeria (MAN), etc.;

• Have a clear business plan;

• Provide up-to-date records on business operations, if any.

What you should know about the loan

Before SMEs go on to engage their bank on the development and terms, here is an overview as contained in the document published by the CBN.

All loan applications by SME promoters under the Scheme shall be made directly to the Participating Bank, and must be accompanied by the necessary documents as per normal loan processing requirement.

Applications received by Participating Banks upon recipient of necessary documents will be processed within 60 days.

As a borrower, banks may call for information which has not been sufficiently provided.

For a loan to be granted, Participating Banks must stand in as guarantors by submitting an application for guarantee which must be accompanied with an Offer Letters.

For the purpose of this scheme, and according to the CBN, a Small and Medium Scale Enterprise (SME) is an enterprise that has asset base (excluding land) of between N5million – N500 million and labour force of between 11 and 300.

What this means is that an eligible business must worth between N5 million naira and N500 million when liquidated.

By the term Participating Bank, the CBN has explained this to cover all Deposit Money Banks and Development Finance Institutions (DFIS).

According to CBN, these banks will be in charge of approving loan requests under the scheme and shall grant credit facilities to qualified SME Promoters at prime lending rate. Furthermore, they will serve as CBN’s security agents monitoring activities of borrowers.

With CBN’s reservation for trade and with the asset base clause, one is left to wonder if the CBN meant good for the economy, given the level of hardship and financial constraints citizens are currently immersed in. If CBN will not review the scheme, it had better hold on to the facility as it is as good as non-existence.