I guess you must have heard of the CBN Intervention Loan? If not, then this is a must-read for you.
As a result of the COVID-19 world pandemic, the CBN introduced a ₦50 billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) affected by the pandemic. The deadly coronavirus outbreak has impacted negatively on the livelihood of many households and business activities leading to a decline in the world’s demand for goods and services, reduced consumer confidence, skyrocketed insecurity, and caused a decline in production, among other things.
According to Nairametrics, the Federal Government through the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance, Budget, and National Planning announced some monetary and fiscal measures to help ameliorate the impact of the coronavirus pandemic on the populace and the economy. The apex bank did announce some weeks ago some stimulus packages that will impact different sectors like the health sector, Micro Small and Medium Enterprises (MSMEs), manufacturers, households, and so on. But do you know that just two days ago, the CBN on its verified twitter handle, @cenbank, still encouraged Nigerians to apply for this loan facility? You can check more on www.cbn.gov.ng.
Eligibility for the CBN Intervention Loan.
In the operational guideline for the facility, the CBN listed participants who are eligible to apply for credit from this facility. They are as follows:
- Households with verifiable evidence of livelihood adversely impacted by the coronavirus outbreak;
- Existing enterprises with verifiable evidence of business activities adversely affected as a result of the coronavirus pandemic (as part of its consistent review, CBN has declared that eligible applicant does not need to have a business plan), and firms in agricultural value chain activities.
- The hospitality industry (accommodation and food services)
- Airline service providers
- Health (pharmaceuticals and medical supplies)
- Manufacturing/value addition
- Trading and other income-generating activities as may be prescribed by the CBN.
The scheme shall be funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the eligible participating financial institution for the scheme is NIRSAL Microfinance Bank (NMFB). Thus, while the CBN will be providing the funds, applicants will have to apply for the loan through NIRSAL Microfinance Bank.
How to access the CBN Intervention Loan.
According to the information issued from CBN on March 23, 2020, the modalities apply to either Households/MSMEs or Corporate entity.
The first step is for an eligible household to submit an application to NIRSAL MFB, which must, among other things, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.
NMFB shall assess and conduct due diligence on the applications.
Upon satisfactory appraisal of application, NMFB shall forward the applications to the CBN for final approval.
Then, CBN reviews applications and gives final approval for disbursement to NMFB.
Thus, applicants must endeavour to provide the documents listed above which are mostly basic. For help in writing a good business plan, kindly contact Dattobs.com
For Corporate Entities
Like their MSMEs counterparts, applications are submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of the COVID-19 pandemic.
Also, NMFB shall appraise and conduct due diligence applications.
After a satisfactory appraisal of the application, all protocols shall be followed just as described above for the households/MSMEs.
There are a number of prerequisites used to determine the amount of loan that can be disbursed to different eligible participants and segments. They are:
SMEs- The loan amount shall be determined based on the activity, cash flow and industry/segment size of the would-be beneficiary and this is subject to a maximum of N25 million for SMEs.
Households- They can access a maximum of N3 million. Working capital shall be a maximum of 25% of the average of the previous 3 years’ annual turnover. But where the enterprise is not up to 3 years in operation, 25% of the previous year’s turnover will suffice.
According to CBN, the interest rate under the intervention shall be 5% per annum (all-inclusive) up to February 28, 2021, and thereafter, the interest on the facility shall revert to 9% per annum (all-inclusive) as from March 1, 2021.
The guideline states that the loan for working capital shall be for a maximum of one year, with no option for rollover. As for the term loan, a maximum tenure of not more than 3 years with, at least, one-year moratorium.
The guideline states that the collateral to be pledged by the beneficiaries under the programme shall be as may be acceptable by NIRSAL MFB, but may include:
*Moveable asset(s) that is duly registered on the National Collateral Registry (NCR);
*Simple deposit of title documents, in a perfect state;
*Irrevocable domiciliation of proceeds;
*Two acceptable Guarantor and
*Personal Guarantee of the promoter of the business
*Life insurance of the Key Man, with NMFB, noted as the First Loss Payee
*Comprehensive insurance over the asset
- Exit date
The exit date of this intervention is December 31, 2024. It is important to note that this framework from CBN shall be subject to review from time to time as may be deemed necessary by the apex bank.
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