Credit 101: What Every First-Time Borrower Should Know

 Your First Loan, Made Simple: A Beginner's Guide to Credit

Young entrepreneurs often hesitate to take their first loan due to misconceptions and fears. This guide breaks down the essentials of credit in clear, jargon-free language to help you make confident financial decisions as you launch your business journey.

Part 1: Credit Basics - What You're Really Getting

What Is Credit, Really?

Credit isn't just money, it's opportunity with responsibility. When Accion MFB extends credit to you, we're providing resources now that you'll return later, usually with a fee (interest) for using those resources. Think of it like borrowing a tool that helps you build something valuable.

Types of First-Time Credit Options

• Microloans: Small amounts (₦50,000-₦300,000) with shorter terms

• Group Loans: Sharing responsibility with peers

• Asset Finance: Loans specifically for equipment purchases

• Starter Business Loans: Designed for first-time entrepreneurs with minimal requirements

  
  

The Real Cost of Credit

For example, let’s say you borrow ₦100,000 at 8% monthly interest for 6 months.

• Your total repayment would be around ₦148,000

• That’s about ₦24,670 per month

• The ₦48,000 difference is the cost of borrowing,  what you pay for getting access to that ₦100,000 today instead of saving up over time

Part 2: Building Your Credit Profile

Your Credit Journey Starts Now

As a young entrepreneur, you're writing the first chapter of your financial story. Every loan payment becomes part of your track record, determining:

• The amount you can borrow in the future

• The interest rates you'll qualify for

• How quickly you can access funds when opportunities arise

Documentation Simplified

For your first loan, you'll typically need:

• Valid ID (National ID, voter's card, driver's license)

• Proof of address (utility bill, rent receipt)

• Basic business plan 

• Bank statement or transaction history

No Credit History? No Problem

Alternative ways we assess your reliability:

• Regular savings pattern (even small amounts matter)

• Mobile money transaction history

• Business location stability

• Participation in savings groups

Part 3: Making Credit Work For Your Business

The Smart Borrower's Rules

1. Borrow for Revenue-Generating Activities: Use funds for inventory, equipment, or other items that will generate income

2. Know Your Cash Cycle: Understand how quickly your business turns cash around

3. Match Loan Terms to Business Needs: Choose repayment schedules that align with your cash flow

4. Start Small: Build confidence and history with manageable amounts

5. Separate Business and Personal Finances: Even if just using different mobile money accounts

   
   

Red Flags: When Not to Borrow

• When the money will be used for personal expenses

• When you don't have a clear plan for using the funds

• When repayment depends on a single future event

• When you're already struggling with existing debts

Part 4: Your First Repayment Plan

Planning for Success

A simple repayment strategy:

• Set calendar reminders 3 days before due dates

• Allocate 20% of daily income toward loan repayment

• Keep a one-week buffer amount if possible

• Use automated payments to avoid missing dates

What If You Can't Pay on Time?

• Contact us BEFORE the due date (this shows responsibility)

• Explain your situation honestly

• Discuss restructuring options

• Bring what you can rather than nothing at all

The Dignity of Repayment

Meeting your obligations isn't just about numbers, it's about:

• Building self-confidence as an entrepreneur

• Gaining respect in the business community

• Creating opportunities for larger future financing

• Contributing to a system that can help other young entrepreneurs

Part 5: Success Stories

From First Loan to Thriving Business

Meet Chioma, 26, who started with a ₦75,000 loan three years ago to sell phone accessories. Today, she operates two shops with five employees and qualifies for ₦1.5 million in business expansion credit. Her advice: "The first loan is the hardest decision but the most important step."

Your Next Steps

1. Schedule a no-obligation consultation with an Accion representative

2. Download our loan calculator app to explore scenarios

3. Join our Newsletter community to keep abreast of AccionMfb’s offers

Did You Know? 78% of successful young entrepreneurs in our network started with loans under ₦200,000. It's not about how much you borrow, it's about how strategically you use it.