Starting a finance company in Nigeria can prove to be worth the effort, if all necessary precautions are taken. The industry allows for flexibility in running businesses, provides financial assistance to other industries and still permits owners and shareholders to make money.
In order to record success in the finance industry, investors must lay a solid working foundation that will parachute growth and ensure stable inflow of cash.
In African countries, the finance industry can be promising for finance company start-ups. The manner of registration for finance company start-ups can vary greatly depending on the country of location, and on the kind of financial business operations they would like to set up.
For this reason, it is advised that investors seek financial business counsel from fiance law firms or lawyers conversant with the operations of the finance industry. These lawyers can provide support, information and legal backing necessary for setting up such businesses in a particular location.
Finance companies provide financial services and loans to various categories of customers. They serve retailers, small, medium and large scale businesses, support start-ups and help them remain in business, and provide personal, home equity, car or student loans.
Apart from an outstanding understanding of customer and market demand, and clear product line, a solid business plan targeted at success must be in place for finance companies to do well.
In addition to the above, finance companies must strictly comply with the specifics of the particular location: federal and state government requirements, including compulsory minimum funding before starting.
Below I will discuss things that should be considered when setting up a finance business. It can be applied to other types of businesses as well.
Understand the Business Thoroughly
Know thyself. Before starting your business and career in finance management and service provision, it is essential to assess your capabilities, strengths and weakness, obstacles and possible challenges. Take note of all the steps and approaches you can put in place to help you run your business smoothly.
For example you should be able to answer these questions before you start the business:
What financial management skills do you have?
- Do you have any professional certifications (including those in financing and accounting)?
- How about people management and leadership skills? Do you have them?
- Do you have the required soft skills to handle the business environment?
- Are you a problem solver?
- Can you make quick, accurate and efficient decisions when the need arises?
Answer these questions honestly and make your decision from there.
Decide On What Your Finance Company Would Be Specializing In
A finance company would generally provide loan services to a target populace. But then, there are different categories of loans and financial secuties out there. So, you must decide on what exactly it is that you want to specialize in. That is, you must decide on the exact kind of loan that your finance company would be giving the public.
This specialization would determine the marketing, financial, and operational requirements of your proposed company. The chosen niche should be picked based on knowledge, interests, experience, and expected success.
Do not be a Jack of one trade, master of none. The ability to focus on your chosen specialty is a recipe for success in the creation and growth of your business in the finance sector.
I will discuss market survey when I talk about check the viability of the business. Now, if your market survey shows that there is a growing number of start-ups needing money to finance their businesses, it is a good pointer that starting a finance company in such a region could be a lucrative venture to do.
So, you would/should determine how your finance company and its products can assist your target market in growing their businesses, bring you more clients and serve both of your interests.
Check The Viability Of The Business
You want to start something that will bring in customers consistently and generate profit at the same time. Because of this, it is important that you carry out a thorough market research to know where you can fit in, if you fit in, how much competition is there already, and how would you face these competitors, if any.
Your survey should be able to state how big (or small) the market is, what products and services other companies provide which are similar to or the same as yours, what geographical location(s) you and your competitors will be serving, your potential customers, their needs and how to help solve their problems, as well as price and price stability (or fluctuation).
Recognize The Business Requirements
Find answers to the WHYs and HOWs of your business.
Beyond this, you would need an office space, office equipment, electricity, electronics, hire different categories of staff, and pay them their salaries and wages.
Also note that there are the day-to-day office operations to be carried out by clerks, marketers, accounts, credit officers and guarantors. So, you need to clearly identify each personnel’s role and contribution to the growth of your finance company on a day-to-day basis.
Finally, you need to decide how you will provide your services and how you would promote the business offline and online using the internet and social media.
Calculate And Summarize The Numbers
The finance business is a number business. Clearly write down the amount of capital you need, including registration fees, location, and logistics, and how much you’re going to possibly make per customer or transaction.
Check for profitability. Ensure that you can make profit from this business before your risk you and other investors’ capital.
Set Up Your Business Plan
A business plan is the bedrock of a business. It is the foundation upon which every other activity in the company is carried out. A documented plan for this business would provide your business with a direction for establishment, growth, sales, focus, and customer, investors, lenders and staff relations.
Take everything into note when writing your finance company business plan. State exactly what your goals are and the steps you need to take to achieve them. State also how your business would get funding, when you want to launch your products into the market, and any other plan for growth and expansion.
Compose A Business Description
Your business description should include an outline of your company’s overall structure, services provided, clients to be served, and aims and objectives.
Indicate why clients need you and should buy your products, why you’re a valuable addition to the market in that sector, and who your customers are. It can also include your products and their descriptions, your target customers, a clear line of marketing action, and a mode of communication with potential customers.
Portray Your Product Line
State clearly the exact financial products, loans and services your company offers. Tell people how these products are good for them and why they should consult you when they’re in need of those services. Tell them how their needs can be met by the products that your company offers.
For instance, if you have an SMEs support product, let them know how the loan services you provide can be of help to them and their businesses.
Document Your Marketing And Sales Marketing Strategy
Keep records of how you want to sell and market your products, including the strategies and funds for these. Your company’s sales strategies should explicitly show how you intend to attract customers, clients, lenders and depositors, the blueprint for your company’s growth, and the details of product marketing.
Advertising, public relations, fliers and social media ads should be incorporated in the promotional and ad strategies. It can also include details about your marketing team, their goals and methods of reaching the sales goals.
Source Funds For The Business
- Shareholders’ Funds Borrowing: Here the company borrows money from members of the public, other corporate and financial organisations, and banks.
- Securities: This type of fund is gotten from debentures or investment notes, SME funds and commercial papers.
Obtain The Required Operational Licenses And Permits
For a finance institution to be registered and approved to operate in Nigeria, the following details must be submitted with a written application to the Central Bank of Nigeria:
- A ₦100,000 (one hundred thousand naira) application fee paid to the Central Bank of Nigeria.
- An initial draft deposit of at least ₦100,000,000 (one hundred million naira) in the Central Bank of Nigeria.
- An evidence of payment of the above.
- A comprehensive business plan or feasibility study.
- A draft copy of the company’s Memorandum and Articles of Association.
- A signed letter of intent by the shareholders to subscribe to the finance company.
- A tabular list of intending or proposed shareholders including their names, businesses/occupations, home address, and bankers’ information.
- Names and curriculum vitae of all proposed members of the Board of Directors including their former directorship positions and signatures.
Once granted an operating licence, the financial institution can then register its business with the Corporate Affairs Commission (CAC). For this registration, the following are needed:
- Notice of business approval (Availability Form)
- CAC application form (1.1)
- Memorandum and Articles of Association
- Evidence of Stamp Duty payment.
- Approval in Principle from CBN
- Payment receipt of the CAC charges
- Identity card of shareholders, directors and company secretary.
Note: The shareholding of a company must be up to the minimum share capital for finance institutions, and their objectives must be in agreement with those of a financial company.
Corporate Affairs Commission will surely register any company that meets their registration requirements.
It is well-known that there are no businesses without risks. In fact, businesses themselves are risks that people take. That being said, the risks people take in running businesses can provide fruitful results if the right things are put in the right places.
Follow and seek legal advice, do a thorough market survey or analysis, and put a good plan in place. If all these things are done well, it is very likely that your business will do well for you in the long run.