So Many young and innovative men with awesome technological driven ideas and business start-up Cannot convert idea in their minds to advancement a very sad development.
However the banks possess the financial strength but they just refuse to help. They have received a lot of backlash on the said issue but the banks don’t bulge for no entrepreneur.
Today I will highlight two reasons why banks don’t give loans to Boot-strap firms and young men with sound and innovative ideas.
Banks Do Not Indulge In Equity Risk :
Most financial service providers go through some tough decisions on the kind of risk
For example;
John is into importation of goods, to lend him capital is a type of risk different from Sarah who is an information technology Guru that has developed a technology and aim to improve the way we live is another type of risk.
The banks are programmed to lend john who is into importation of goods than to lend Sarah even though they are fully aware that Sarah’s business idea may yield a high return on investment on the long run.
“Banks don’t take equity risk, they take debt risk which is detrimental to the future of that country with such banking policy”
The equity risk implies that if the assumed enterprise fails, the shareholder bear the brunt, if perhaps they provide Sarah with her loan request, the interest rate may even equal the capital,why?because of the risk involved.
Bank Avoid the Risk Of Non-Performing
Loans :
What is non-performing loan, simple it is a debt gone bad, most often the interest and the capital cannot be repaid.
SCINERIO:
If you are able to get a bank’s attention and your innovation looks good on paper,
they will suggest to you and in furtherance they will invest some money on your project, It will be called debt, but in reality some will still refer to it as equity (the innovator), but please kindly be informed that in their books it is called equity.
And that is what you’ll see on paper as an aspiring entrepreneur. The implication of the banks action is this “a mismatch on return it can derive from the investment is match or proportional to the risk involved”.
The means to an end is this ,they are gambling with depositors money, fraternizing with a someone who is coming with a fresh business model,yes shareholders of the bank take the riskbut the depositor stand to loss all their funds in the long run..
This write up is inspired by my experience with a bank in Nigeria here,were I went with a robust business model and I did not get past the conference room, I was told bluntly that I require collateral .Hopefully this business idea still burn within me and I hope to bring it to fruition one day
‘This post Is meant to inspire those with a dreams and aspirations out there, hold on to it and don’t let it go
Picture Source :
http://www.finanzas-personales.mx/2013/09/20/como-salir-de-deudas/
http://www.livetradingnews.com/key-reasons-banks-turn-small-business-loans-24314.html#.Wqgb1Vko80M
http://www.thisismoney.co.uk/money/experts/article-2387711/My-bank-rejected-business-loan-application-despite-showing-
increase-orders-How-I-fund-expansion.html
Thank you for Reading *