Guide For Starting A Finance Business In Nigeria
Guide in for starting a finance business in Nigeria
Choosing to start a finance company can be a worthwhile undertaking. Entrepreneurs in this industry can set their own hours, mastermind finance for businesses in each industry and make enough gains.
Nonetheless, starting a financing business involves laying a ground work before setting off to success and financial freedom.
The financial sector can be an appealing industry for starting a company in an African nation. The registration method for a financial company can be contrasting contingent upon the nation which the investors will set up their operations, just as on the business exercises created by the separate company.
That is the reason it is prescribed to request legal advice from a team of corporate lawyers, who can give help on the requirements set up in a specific jurisdiction. Finance companies give loans to individual and commercial customers for various reasons.
Commercial customers can include retail stores, small businesses or huge firms. Commercial loans can help built businesses develop further, or they can enable new business to get up and running.
Personal loans for singular customers are made up of home equity loans, student loans and car loans. Starting a finance company requires not just a careful comprehension of your target client’s needs and a thorough product line, but also a strong strategy that explains how you will make your company successful.
In addition, any new finance company must follow exacting state and federal guidelines and meet starting funding requirements.
Here is a rundown of steps you should take when setting up any sort of business, however explicitly a finance company.
CHOOSE A FINANCE COMPANY SPECIALTY
Finance companies will in general specialize in the kinds of loans they give just as the customers they serve. The financial, marketing, and operational requirements changes depending on the specialty.
Concentrating on a solitary plan of action is a basic requirement to the successful creation and operation of a finance company. Private finance companies extend from the local mortgage broker who specializes in refinancing or giving new loans to homeowners.
The choice to seek after a particular finance company specialty ought to be founded on your interest, your experiences, and the probability of success.
CHECK THE VIABILITY OF THE BUSINESS
A new finance company must have a pulling power on customers and obviously generate profit. As a result, it is critical to research the normal market space where the business will compete.
You need to find out the size of the market, other companies serving potential customers, stability of price, restriction to a particular geographic area and so on.
Distinguish your target market, or the particular customers you plan to serve. Clarify their needs and how you expect to solve them.
ENUMERATE YOUR AREA OF SPECIALIZATION
For example, if your market research shows a developing number of small start-up companies needing loans, depict how the financial products and services you offer are strong enough to increase a noteworthy share of that market.
RECOGNIZE THE BUSINESS REQUIREMENTS
Find out the probable costs of operating the business – office space, equipment, utilities, salaries and wages. Also check the business processes which are essential for daily operations such as marketing, credit officers, guarantors, clerks and accountants.
Determine if potential customers will visit a physical office, communicate online, or both.
CALCULATE AND SUMMARIZE THE NUMBERS
Determine the size of capital required to start the business and the normal revenue per customer or transaction.
Then you can calculate the break-even sales volume. It is only sensible to guarantee that profitability is conceivable before risking you and other people’s capital.
DISTINGUISH YOUR SKILLS
Prior to starting your new company and perhaps, a new career, it is critical to objectively assess your skills and personality to figure out what steps you need to take to successfully start and manage a finance company.
Do you have any training in the finance specialty? Do you have knowledge in finance and accounting? Is it accurate to say that you are a leader, who moves others to follow them, or a manager, who can survey an issue, determine the root cause and use assets to actualize a solution?
Do you have any special capacities that explicitly fit in to the finance industry?
SET UP YOUR BUSINESS PLAN
Preparing the Business Plan serves numerous functions. It is a foundation for building your company in the future, a guide to guarantee you stay centered in your efforts, and a point by point description of your company for potential lenders and investors.
Start writing your business plan by including the entirety of the necessary areas and leaving space to fill them in. The steps in this part should serve as your segments, starting with the business description.
COMPOSE A BUSINESS DESCRIPTION
Your marketable strategy will form an outline for your company. The first segment of your business, the description, is an outline of the organization and goals you plan to achieve.
Start by justifying the need for a new financial company in the industry or target area. You can briefly distinguish your target market, how you plan to contact them, descriptions of your products and services, and the organization of the company.
PORTRAY YOUR PRODUCT LINE
Clarify the sorts of financial products and loans you give. Enumerate the advantages your products offer to your target customers. Indicate the needs your products fulfill in the market.
For example, if your target customers are small scale entrepreneurs, show how the financial products and investments you offer assist them with maintaining their businesses.
DOCUMENT YOUR MARKETING AND SALES MARKETING STRATEGY
Your marketing methodology have to disclose how you plan to pull in and reach out to both customers and lenders/depositors. It needs to likewise show how you plan to develop your company. The sales procedure characterizes how you will sell your product.
Promotional strategies incorporate advertising, public relations and printed materials such as fliers. Business growth means involve structuring your staff, yet in addition procuring new businesses or starting to offer various types of products.
The sales methodology ought to incorporate information about the size of your sales force, techniques for sales calls and sales goals.
ADD FINANCIAL STATEMENTS IN YOUR BUSINESS PLAN
Critically evaluate financial statements you input in your business plan, ensure your projections are sensible. You may likewise need to assess performance throughout the two years after reviewing your financial statements.
Incorporate a ratio analysis to establish your comprehension of financial trends with time and anticipate future financial performance. Prospective financial data have to give monthly statements to the first year of operating and yearly statements for the subsequent years.
Standard financial ratios is all about Gross profit margin, ROE, Current ratio, Debt to Equity.
Ratio and trend analysis data, allows you predict whether you will be able to keep on serving your customers after some time, how well you use your assets and manage your liabilities, and whether you have enough money to meet your commitments/needs.
Sources of funds
The sources of funds of a Finance Company includes:
- Shareholders’ Funds Borrowings: This includes Borrowing from members of the public, Inter-corporate borrowings, Borrowings from banks and other financial
- Securities: This includes Commercial papers, Debentures / investment notes and SME Funds
NAME AND REGISTER YOUR BUSINESS
Pick a name that is unique and portrays your brand and stands out enough to get a website address or URL. Check with your state to ensure the selected brand name is not being used by another corporation.
You are required to register with your state as a corporation. The accurate registration process varies according to country and the type of corporation you choose to build.
Since your business name is one of your most significant assets, insure it by applying for trademark security.
How to register a business in Nigeria
- Check for availability of proposed company name
- Reserve a new Name
- Complete pre-registration form – CAC1.1 (Online using Company Registration Portal)
- Pay filing and Stamp duty fees
- Steps 1-3 can be completed on COMPANY REGISTRATION PORTAL (CRP)
- Prepare the signed scan copy of your pre-registration documents for upload as follows:
- Form CAC1.1
- Memorandum and Article of Association (MEMART)
- Recognized form of identification for Director(s)/Subscriber(s) and Secretary
- Proof of payment to CAC
- Upload the scanned documents for processing.
- Submit the original copies of the documents uploaded at step 6 (Form CAC1.1, MEMART, etc) to the CAC office you had selected in exchange for your certificate and the Certified True copies of the documents.
OBTAIN THE REQUIRED OPERATIONAL LICENSES AND PERMITS
Financial organizations get these from the state/country in which they operate. Counsel with your State Business License Office to distinguish the particular license and permit you need. Each state/country has varying requirements for permitting financial organizations to operate.
You should determine precisely what kind of financial foundation corporation you are opening, for example, an investment company or a licensed lender. You will at that point outfit the imperative documents and pay any charges.
Because of the extraordinarily perplexing and continually advancing nature of the financial services industry, it is exhorted that finance companies enlist and hold master legal direction to guide them through these guidelines.
HOW TO OBTAIN PERMIT FOR FINANCIAL BUSINESS IN NIGERIA
The process of receiving a permit to start a financial business in Nigeria basically involves three stages namely:
Apply to a Magistrate Court
You are required to apply to a magistrate court having jurisdiction in the area in which you intend to run the business with the following supporting documents:
- A cover letter addressed to the Chief Magistrate on the Applicant’s letterhead.
- A Certified True Copy of CAC Form 2.
- A Certified True Copy of CAC Form 7.
- Memorandum and Articles of Association of the Company.
- Certificate of Incorporation.
- Tax Clearance of the Applicant.
- Police Clearance from the Commissioner of Police.
- Proof of Maintenance of current account with a licensed Bank.
- Upon the Application to the Chief Magistrate, the Applicant will be issued with a Letter and Forms B and C, if successful.
NB: The assets in your Company’s Memorandum of Association must include financial service or money lending business. Also, the share capital must not be less than N20, 000,000 (Twenty Million Naira).
APPLY TO THE MINISTRY OF HOME AFFAIRS AND TOURISM
After obtaining the necessary Court documents, you have to apply to the ministry of home affairs and Tourism with the under-listed accompanying documents.
- Application letter.
- Money Lender Ordinance [Form B] 1938 – from Magistrate Court.
- Duly completed Form C- from Magistrate Court.
- Police Report from Commissioner of Police showing- fingerprints of individual Applicants/Directors/ Proprietors/.
- 3-year Tax Clearance Certificate, [including current year] / Development Levy for each individual Applicant/ Director/ Proprietor.
- Pay as You Earn [PAYE] Certificate, Tax Clearance of at least two (2) of its directors, and evidence of payment of Company taxes.
- Copy of Certificate of Incorporation and CTCs of Forms CAC 2 & 7.
- Evidence of payment of Application fees.
- Evidence of maintenance of a bank account with a licensed bank.
VISITATION AND PHYSICAL INSPECTION
This is the final step in order to the finance business license. Visitation and physical inspection of the office you intend to run the business is carried out by the government officials.
During visitation, if the company is already engaging in the business of money lending, the books will be inspected in addition to the office.
If the company is yet to commence business, inspection of the office premises and officers of the company will be carried out. The office will be inspected to check for required facilities and equipments which will ensure the smooth operation of the business.
If satisfied that the company has complied with perquisite statutory requirements, the Applicant shall be issued with the Money Lending License Certificate.
It however goes without saying that there is no business today without its accompanying risks. Business in summary is all about risks.
But then, you can have the tide in your favor if you seek legal advice, follow the right steps, do your research and feasibility studies as all these will guide you in the direction of success.
We can help you write a detail, strong and winning business Plan for any use.
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Serial Entrepreneur - International Business Planning Consultant - Speaker - Trainer - Author - Blogger - Network Marketing professional.
- 2018 SME Business Trainer and Coaching Advisor at GIZ for SME Loop.
- 2018 YALI RLC Online Cohort 9
- 2017 Fellow, Inspire Africa Train-the-Trainer Entrepreneurship programme sponsored by US Consulate Lagos and the Dickey Center, U.S.A.
- 2016 Fellow, Tony Elumelu Foundation Entrepreneurship Programme
- 2015 Top 50 Innovative Entrepreneurs, BET5 by Diamond Bank and EDC, PAU.
He is an alumnus of Enterprise Development Centre (EDC) of the Lagos Business School (LBS), Pan-Atlantic University (PAU). Through his training, mentoring, speaking and coaching programmes, he has empowered many young people over the years to start and grow their own business, build wealth, create multiple streams of income and achieve financial independence.
- He is a Certified Trainer in Design Thinking by the U.S Consulate, Lagos and the inspire Africa Entrepreneurship Institute.
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