Borrowing Made Easy

OVERVIEW

My Motivation for writing the book: Most authors write books for lenders or practitioners in the financial sector, hence you can hardly see any book written to educate borrowers or aspiring borrowers in Nigeria and indeed Sub-Saharan Africa. Borrowing Made Easy was conceived and written to educate people in the simplest form on how to borrow successfully and what it requires to get the best deals and manage loan wisely without stress. I attempt to unravel the perceived mystery around credit and put the consumer at the driving seat. It is a tool for financial planning and seeks to change the narrative in personal and business financial education. Target Audience: The target audience are individuals, entrepreneurs or business owners who wish to borrow, have borrowed before or aspire to borrow money for personal or businesses purpose. They include working class professionals, self-employed professionals, start-ups, entrepreneurs, small business owners in various fields including agribusiness, traders, logistics, manufacturing, hospitality, healthcare, education services, energy, technology, media, distributors, service providers, other mid-size corporates, as well as students who may also have this as a financial planning guide. Introduction Many books have been written on how banks and other financial institutions can lend money and apply best practices while ensuring a quality loan book and sustainable profit. However, not much has been written on how individuals, entrepreneurs, micro & small business owners and other corporate entities can borrow wisely and manage debt from the array of options available, which include commercial banks, microfinance banks, finance houses, thrift & co-operative societies, loan sharks, friends and family. The introduction dwelt on my background and early years in Isolo, a Lagos suburb and my early foray to borrowing while working in the family grocery business, which includes bread depot, vegetable oil distribution, food stuff retailing and supply. Looking back, there is nothing I learnt in modern day academics and business practice that wasn’t revealed from the education I got on the street and while in the family trading business. From Return on Asset, to Return on Investment, Velocity of Asset, Breakeven Analysis, Cost, Expense, Profit Margin, etc. There was always something to learn daily and apply. These and some other insights formed the perfect background and introduction to the book. CHAPTER 1 A Person in Need of Cash: This chapter built on the introduction and provided insights about the need for cash and how to separate want from need, and also determine the real need for cash coupled with exact funding requirement at any given time. It also emphasized the essence of credit in our personal and business pursuit and how the fortune of an individual or business can be impacted, as well as the advantages and shortcomings of taking out a loan. How to determine your need for extra cash? As individuals or businesses, we constantly worry about money, how to get it, where to get it, when to get it, how to manage it, pay back and how best to stay ahead. This chapter further educate the reader on how to determine the exact funding gap and how much you need to borrow, noting that under-borrowing may lead to shortfall and inability to meet the desired goal while excess loans is an invitation for wastage and future cash problem from being over-leverage and burdened with too much loan to repay. Benefits of borrowing: * Immediate financing *The need to take advantage of opportunities *To meet pressing financial need *It allows for ease of repayment *Start a business *Debt is usually less expensive than giving up equity, etc. The unpleasant side of taking out a loan: *Loan Interest repayment burden *Possible loss of asset at loan default *Inability to borrow in future in event of unpaid loan(s) *The borrowing application process *The need to make full disclosure of your reasons, etc. The chapter ends with a summary, key learnings and questions for the reader to answer sincerely. CHAPTER 2 Types of Loans: During the early introduction of credit cards in the Nigerian economy, I observed with keen interest and amazement the manner in which some of my friends used their credit cards to pay off auto loans, so that they could collect their vehicle documents and be ‘free’ from the debt on their cars. This was rather unfortunate as they were using an expensive and recurring debt to pay off a cheaper one and fixed term loan. This chapter provides clarity on the types of loans, their benefits and insights on why each of them is preferred at specific periods based on the purpose. The chapter describes Secure and Unsecured borrowing, Formal and Informal Loans and made reference to key players such as commercial banks, co-operative societies, moneylenders, Fintechs, mobile lenders, credit unions, corner shops, etc. Loan sharks was a major highlight based on the issue associated with them. Type of Loans explained with features, terms, benefits, challenges and when required: Personal Loans | Payday loan | Credit Card | Charge Card Term Loans | Overdraft | Mortgages | Distributorship Finance Purchase Order Finance | Invoice Discounting Finance | Export Finance Facility | Import Finance Facility Education Loan | Agribusiness Loan . Key Takeaway; One key learning here is that the idea of borrowing should come with an understanding of your need, how best to meet it and at what cost to you now and in the future. CHAPTER 3: How you can borrow as an individual & Business: In the course of my interactions across several platforms and associations over the years, I have come across various people who just want to borrow and do something. Some do not even know what to do with the money, while others have a dream without a foundation. The common issue among most of these individuals and businesses is that they do not even understand how to borrow. In this chapter, I explained loans available to individual, entrepreneurs and other corporate concerns. There are some loans available to different categories of consumers depending on identity, legal status, demographics, locations, income, employment status, profession, type of business, circle of influence, credit history, credit score, loan performance prediction, social status, among others. I also provided clear details on what individuals, entrepreneurs, groups, all categories of peoples irrespective of skilled level, vocations and associations requires to borrow successfully. For businesses, you need to check the company registration status, business location, revenue, potential for revenue, scalability, promoter, etc. Key Takeaway; One thing I can relate with for most borrowers is that one or more of the conditions mentioned in the chapter has been a stumbling block. I asked sincere questions on such conditions and what readers who fall within such category plan to do about it. Now that I know that readers might have gathered momentum and ready to take on credit or revisit the lender, I introduced additional security or comfort popularly called collateral for better understanding in the next chapter. CHAPTER 4; Understanding Collateral in a Borrowing Relationship: Simply put, collateral is something you pledge as security for repayment of a loan, to be forfeited or lost in the event of your inability to repay the loan. It can be physical or non-physical, while some consider it as tangible or non-tangible. In this chapter, I unraveled the mystery surrounding collateral and showed readers and aspiring borrowers why collateral is important as a comfort to lenders. I reiterated that the most important thing to financial institutions and most serious lenders is the ability for the borrowers or their businesses to generate constant cash flow to meet repayment obligations and remain a going concern. I explained types of collateral, implications and how best to enter into a loan relationship using collateral and what the lenders expects from the borrower. One other key issue here is for the borrower to fully understand the terms and conditions before signing the offer, either electronically or manually. Legal mortgage, Cash, Debentures, guarantees and other types of collaterals were properly explained for better understanding and ease of application by the borrower. Key Takeaway; Now that readers have been able to breakdown the myth surrounding collateral, the different forms they are presented and why lenders request for it when they want to borrow in some cases. They will be able to fulfill a transaction and apply the perfect fit for desired loans. Having sorted this, borrowers may need to check a few tips in the next chapter before accepting that offer. CHAPTER 5; Now that you want to borrow: Having counselled many individuals and businesses on borrowing and mediated in debt management and credit repair through the provision of financial planning techniques for several years, I know that debt is good when collected for the appropriate purpose, from the right institution or lender and utilized with guidance and common sense. While I have witnessed how loans moved some individuals from small business owners / entrepreneurs to millionaires and billionaires, I have also seen how reckless borrowers or those that do not seek guidance fall by the way side to the agony of uncontrolled debt. To support borrowers or aspiring borrowers, I shared 50 bonus tips on how to borrow. Some of which are; 1. Ensure that your account does not fall into debit position or fail a repayment on a cheque you issued earlier or direct debit standing order. 2. Avoid borrowing to fund a regulated business without having the requisite certification, e.g., borrowing to set up a pharmaceutical store without the required registration and certification. 3. Never look at the pricing of a loan from the interest rate at the first glance. Ensure you compare the cost of loan with other financial institutions. 4. Never pay a bribe to get a loan. You may be scammed. 5. If any of these answers are ‘no’, that debt is likely to be bad.  Have I shopped around to get the best deal?  Am I borrowing this money as cheaply as possible?  Will I be able to cope should interest rates rise in the future?  Will I comfortably be able to afford the monthly repayments?  Will borrowing this money improve my finances in the long run?  Do I understand the risks and what could happen if things go wrong? Etc. After sharing the tips, I gave further insights into types of financial institutions and how borrowers can easily identify those that can meet their need at any point in time. Oftentimes, people confuse the responsibilities of different financial institutions when they need money to meet personal or business objectives. For instance, I have come across a lot of people blaming commercial banks for not investing in their start-ups or not extending loans for them to engage in speculative businesses. It is important to have a better understanding of financial institutions and the need they are expected to meet and how they can support you. Some of the financial institutions are commercial banks, credit union, microfinance banks (some FINTECHS come in here), venture capital, development banks, etc. The chapter also highlight Development Banks as a support institution and the role government play in providing access to finance for startups, SMEs, and large corporates. Some of the examples mentioned where the Central Bank Intervention funds, The Lagos State Employment Trust Fund loan program, Anchor borrowers program, Trader moni, etc in Nigeria ———————-End of Chapter 5————————– My closing words. I hope this book has been informative? However, this may be coming to you rather late, considering that you might have taken the loan, signed an unpleasant offer letter, lost an asset or perhaps, you have been a guru and enjoyed the loan with unprecedented returns or you have not even touched a loan, but presently considering taking up one. An African proverb says, “Anytime we wake up is considered our morning.” This means that it is not too late to start, seek guidance, collaboration, wisdom and solution to make our lives better and comfortable. When we keep hope alive, a loan is just cash mentioned in numbers while our refreshed minds can count the numbers again and again, with smiles and the determination to make the best of what we have and also help others. Thank you