By Mashe Umaru Gwamna
An Estate Surveyor and Valuer ESV Blessing Chisom Kalu, said valuation has a key place in securing bank loans.
She said banks have revolving funds which can be accessed to finance profitable business ideas or expansion drive of an entrepreneur.
ESV. Kalu stated this in Abuja yesterday, saying that “No profitable business idea should be allowed to remain on the drawing board, nor should an entrepreneur have sleepless nights over capital to finance his expansion efforts when he can approach the banks for such funds.
She noted that so many lucrative and sound business ideas and investment expansion decisions do not see the light of day or at best end up at the conceptual stage as a result of paucity of funds.
“Lack of adequate funding has been the albatross of many businesses”.
She said, however, banks are not philanthropic organizations; they do not give grants nor release funds without adequate security in form of existing real estate assets as collateral for whatever funds they will make available.
“Thus, though they are ready and willing to fund viable business ventures, but they must carry out due diligence to ascertain the profitability of business and also require existing real estate assets as a collateral to safeguard their funds”.
According to her, the process begins when the businessman approaches a bank with his business idea or feasibility study of his investment concept to apply for funding from the bank.
“He /she is required by the bank to tender title documents of his real estate assets as collateral to the bank to support his application”.
She disclosed that, at this point, the services of Estate Surveyors and Valuers come to play.
She explained that Estate Surveyors and Valuers are the only professionals empowered and recognized by law in Nigeria by virtue of their training and expertise to assess and place value on such collateral for the use of the Financial Institutions / Banks (Land Use Act of 1978).
“The opinion of value expressed by the Valuer on your collateral will guide the bank to determine how much risk it can expose itself in advancing funds to you”.
Similarly, She highlighted some of the due diligence requirements of the bank in processing for the application:
“The banks will advance a loan of not more than 2/3 of the value of the collateral; this usually represents the Forced Sale Value of the collateralized property as expressed by the Valuer.
She said Normally, the Valuation Report expresses both the Market value, which is the actual value of your property and the Forced Sale Value, usually 2/3 of the Open Market Value. The Forced Sale Value enables the banks to recover their funds within a short period of time in the event of your failure to pay back within an agreed stipulated period of time.
“Also the bank will check your ability to repay the borrowed funds by checking the financial records of your business. Furthermore,the bank will confirm the genuineness of the title of your collateral to affirm that it is truly yours or you have authority to pledge same as collateral.”
She emphasized that the bank has concluded the above due diligence checks and are satisfied, “they will then release the required funding to you at agreed rates and repayment plan, bearing in mind that the bank has the power of foreclosure of the collateral if the customer defaults.”
