• Friday, March 29, 2024
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Mismatching business and finance option is death trap, says Ibukun Awosika

Mismatching business and finance option is death trap, says Ibukun Awosika

‘A lot of people are excited when the bank offers them money or when they have a chance to take a loan. They don’t consider the pitfalls of the issue.  So it doesn’t matter who is giving it to you, if it doesn’t match your business, do not take it.’

 Chairman, FirstBank of Nigeria Limited, Ibukun Awosika told a large gathering of entrepreneurs at the LBS  13th EDC SME Conference 2019 in Ajah Lekki recently that mismatching business and financial option is a death trap and should never been done for any reason.

The multiple award winning star entrepreneurs, who was responding to a question raised by an agric entrepreneur at the event, said “What you must know about your business and financing is that you must not mismatch your business and financing option. If you have a long term product line, you can’t take short term money. That is a death trap. It doesn’t matter who is offering it to you, you have to say ‘No’ because it is not good; you are not going to survive. You are going to run into debt not because you do not have a good business, or you do not know what you are doing, but you have mismatched.

She explained: “It is like going to take overdraft to buy a machine. You are insane if you do this. You are going to run into trouble. Overdraft is 90 days – at the most 90 days. And if you buy a machine – most of my machines are 10 to 20 years lifespan – it is either I fund a machine from equity or I lease the machine from a company. Or I go after a fund that will take me 7 to 10 years to pay.  If you are a trader, you can take 30 days money.  But even a trader who is importing from China cannot. Why? What is your circle? When your banker is trying to sell you a fund proposal, you must know your business circle. It is your business circle that you must use to negotiate.”

Read also: First Bank remains passionate about supporting small businesses& growth

Awosika explained further: “When your banker says you must start paying in 90 days, you must say ‘no, my business circle is 120 days. When I order my product, it will take me six weeks for them to finish production. Another week, I am waiting for arrangement and shipment.  Then it is six weeks from China to get to Nigeria.  Here at the port, it is x+x.  So when you do that, you must calculate the nearest date plus x. And so the financing that you are arranging must cover that, otherwise, you have already set yourself up for the grave.”

She argued a lot of people are excited when the bank offers them money or when they have a chance to take a loan. “They don’t consider the pitfalls of the issue.  So it doesn’t matter who is giving it to you, if it doesn’t match your business, do not take it.”

She drew the attention of the largely young entrepreneurs, a number of them rookies, to the opportunities for funding in the Bank of Industry (BOI). Said she:  “There are lots of offerings on the BOI internet platform for small businesses. Some people tell me it takes too long. But it will come one day. It may take a year, but it is worth waiting for. To build a business, you must exercise patience, you must have  have tenacity.”

She emphasised the need for discipline in business: “The other thing is, learn the discipline of not consuming your capital, or your profit. People spend the profit before it comes in.  They buy a car, travel to places they do not need to travel to go to. I did not buy a car for 12 years. When I started my business, I bought a used car.  When I bought my second car, I bought a used car.  By the time I bought my third car, a new car, I had already built a house and my turnover was over N150 million. I am in a strictly capital-intensive business. Instead of buying a car, I buy a machine. I used to charter taxis and drivers per hour. That means I am going for a meeting. You take me there and park outside and wait.  My machine was more important to me than a car. The car will not earn me money; my machine generates money for me from day one.”