Insufficient capital to start-up a business has been one of the significant challenges new businesses face. Earlier, business start-up loans used to be very difficult to access most times. And this is why the Ghanaian government has taken it up as a responsibility recently.
Fast-growth companies can gain up to tens of millions of cedis that they can invest, network and grow their company. The meaning of business start-up loans, how to apply, features and many more are all-inclusive in this article.
What is a business start-up loan?
The initial growth of a new small business can not be possible without the support of a capital.
A business startup loan is the type of loan that helps start-ups to purchase equipment, machinery, inventory, supplies, furniture and many more things for the business. However, business startup loans can either be short term or medium-term loans.
What is a short-term business start-up loan?
The short-term business start-up loan lasts for twelve (12) months and is for financing the daily working capital requirements of the customers.
What is a medium-term business start-up loan?
The period for medium-term loans ranges from twelve (12) months up to thirty-six (36) months.. This enables customers to meet their capital expenditure (capex) requirements, with repayments being made on a monthly basis.
Note: The Interest rates on both the short-term loan and the medium term loan in Ghana depend on the risk profile of the applicant.
What are the requirements for a business start-up loan?
There are requirements you have to make available for you to get a business start-up loan. Although, they might not be all-inclusive because these requirements vary from one financial institution to the other.
- Your business registration documents
- Six months’ statements from one or two banks
- Financial statements and cash flows for 3 years
- The valid collaterals include; landed property, bank guarantee from a reputable bank, cash or investments (treasury bills)
- Credit bureau report that is favourable
- You may need to meet other requirements subject to specific borrower conditions.
Who is eligible for the business start-up loan?
All Ghannian entrepreneurs are eligible to finance business with start-up loans.
How to apply for business startup loans
Having known the eligibility for business start-up loans.
The step-by-step method of application will help you go along way in successfully applying for the loan:
- Choose your preferred financial institution for the loan
- Download the application form or go to any of their office branches in Ghana.
- Complete the field
- Upload or attach documents
- Submit and wait for feedback from the financial institution.
What is the interest rate for business start-up loans?
Before you apply for a business start-up loan to birth and grow that business. It is advisable to know the interest rate attached. This is because the interest rate for startup loans is very competitive. Because of this, there is no specific interest rate for a start-up loan. It varies from one lender to the other.
What are the features of business start-up loans?
Are you entrepreneur inclined? Or you have some business idea you want to develop or grow? You need finance to birth and grow the business. But There is a need for you to know the features of business start-up loans. Below are some features of business start up loan:
- It has collateral requirement
- The loan can be up to GHC100,000, GHC500,000 or even more depending on the lender
- It requires guarantee from a friend or relative
- Loan turnaround time of 48 hours.
Loan duration for business start-up loans
Knowledge of how long a business start-up loan can run helps in the loan’s repayment, which range from 6 to 12 months, 2 to 5 years or even more. So, it depends on the repayment terms that the lender and borrower have.
What are the government loans for businesses in Ghana?
The government of Ghana established some loan initiatives for the businesses of Ghanians. This is in order to help them establish and grow their businesses.
The following are government loans for businesses in Ghana:
- CAP-BuSS Initiative
This scheme bears The Corona Virus Alleviation Programme – Business Support Scheme (CAP-BuSS). The Ghanaian government established it in order to help micro, small and medium-sized enterprises (MSMEs) in Ghana.
Also through this scheme, the government through National Board for Small Scale Industries (NBSSI) collaborated with financial institutions. To roll out a soft loan scheme with a one-year moratorium and two-year repayment period for MSMEs.
Consequently to provide emergency relief funds for MSMEs and entrepreneurs in Ghana. Besides that, they aim to establish a comprehensive and financially sustainable emergency relief fund package for MSMEs.
- Covid-19 Alleviation and Revitalization of Enterprises Support (CARES) programme
The Ghanaian government established this programme to help businesses bounce back from the adverse effects of Covid-19 in Ghana.
Microfinance and Small Loans Centre (MASLOC) is a microfinance top body in Ghana. It has the responsibility to implement the Government of Ghana’s (GoG) microfinance programmes targeted at reducing poverty. Consequently, start-ups and small businesses can have micro and small loans through MASLOC. And this comes with easy and accessible microcredit and small loans. In order to grow and expand their businesses in order to enhance job and wealth creation.
They are a non-profit public sector organisation that is under the Ministry of Trade, Industry and Presidential Special Initiatives.
The Government believed in the sector’s potential to contribute immensely in reducing the high unemployment rate in Ghana. Besides that, they have to develop the human resource and the structures. And also to give MSEs the access to high-quality business development services which promote their growth and competitiveness.
What are loans for small scale business in Ghana?
There are some loan options that small scale businesses in Ghana can try out.
The following are the loan types for small scale businesses:
- Capital Markets and Equity Loans (Facilities)
- Personal Savings as Start-Up Loans
- Bank Loans (Debts)
- Home Mortgage Finance and Loans
- Hire Purchase Finance and Loans
- Leasing Finance and Loans
- Informal and Formal Supplier Credit Loans
What are the pros of a business start up loan?
Although there are benefits of receiving a startup business loan in Ghana. There are also some disadvantages to consider when applying for business start-up loans. Always remember that your business is new. It takes time to determine what your business’ needs are.
The pros of startup business loans include:
- The start-up business loan helps to separate your business’ finances from your personal finance.
- It helps you to have enough funds to start-up your business. You may need more than you can borrow from friends, savings, family, or credit cards to grow the business.
- The business start-up loan helps you to keep ownership of your business. Besides that, it helps start-up businesses shun investors who might want to control your business.
What are the cons of business startup loans?
Business start-up loans have downsides too. But the advantages can overshadow the downsides.
The cons of business start-up loans include:
- It can restrict cash flow in your business when you have monthly payment obligations
- Your personal credit score may be at risk if the business defaults to make the loan payments
- You might not know how to use the loan yet as a new business owner.
There’s no doubt that business start-up loans encourage the dreams of starting a business. This is because it eliminates the fear that financial problems throw at business owners. Therefore, it enables them to hold their heads high and face whatever situation could come their way (financially) as they enter into the market.
Rightly said, business startup loans help provide the capital for the purchase of equipment, inventory and payment of workers’ salaries. The business start-up loans are the hope for the new businesses. And for this fact, new businesses should not worry about finances anymore.