A private lending company is a company engaged in consumer and commercial money lending operations in Nigeria. This means the business of giving customers a loan with the agreement that it will be paid at a later agreed date with interest rates accrued on it. Private lending companies are subject to the regulation of the Money Lending Law of the various states of the Federation. Section 2 of the Money Lending Law states that “Money Lending includes every person whose business is that of money lending or who carries out or advertises or announces himself or holds himself to anyway as carrying on business, whether or not he also possesses or owns property or money derived from sources other than the lending of money and whether or not he carries on businesses as a principal or agent”.
How to Start a Private Lending Company
The first step to consider is to register the private lending company with the Corporate Affairs Commission (CAC). With the registration, the private lending company can open a corporate account with any bank in Nigeria for business purposes. Registering the company and having a corporate account builds the credibility of the private lending company and can boost the chances of attracting investors and clients to the company.
The next step is to obtain the required money lending license from the government issuing authority to operate a private lending company. Only companies licensed as money lending businesses are permitted to legitimately engage in lending operations in Nigeria.
Application Process for Money Lending License
The steps to apply for Money Lending License to legally operate a private lending company must be strictly adhered to before Money Lending License can be granted.
The proposed private lending company must make a formal application to the Chief Magistrate within the jurisdiction where the business is to operate. The application is to be made on the company’s letterhead with the Company’s seal affixed to it.
The application for a Money Lending License in Lagos State is to be accompanied by the following documents;
- A cover letter with the company’s seal attached.
- The office address of the individual or corporate applicant.
- Certificate of Incorporation of the Company.
- Certified True Copy of the CAC application Forms.
- Memorandum and Articles of Association of the proposed lending company. The object clause of the company must include money lending business or financial service.
- Tax Clearance of the proposed private lending company. Where the proposed private lending company is newly registered, there must be evidence that the company is a registered taxpayer.
- Police clearance from the Commissioner of Police for two (2) directors of the proposed private lending company.
- Evidence of maintaining an office by the proposed private lending company.
- Evidence of maintenance of a current account with a recognized licensed bank.
Upon application to the Chief Magistrate, the proposed private lending company will be issued a Form B and C. After obtaining the required Forms, the proposed private lending company is to further make a formal application to the Ministry of Home Affairs and Tourism.
The application to the Ministry of Home Affairs is to be accompanied by the following additional document:
- A formal application letter to the Ministry of Home Affairs and Tourism.
- Certificate of Incorporation of the Company.
- Evidence of payment of application fee into the Lagos State Government Account.
- Money Lending Ordinance (Form B) 19W8, issued from the Magistrate Court.
- A duly completed Magistrate Form C.
- A police report from the Commissioner of Police showing fingerprints of the Directors of the Company.
- 3 years Income Tax Clearance for the Directors of the proposed Company.
The final stage of the requirement to start a private lending company is the visitation and physical inspection of the intended office by the government officials. Upon visitation, if the company is already involved in lending operations, the books will be inspected too.
Where the statutory requirements have been satisfactory complied with by the proposed private lending company, the Money Lending License will be issued and it lasts for a period of January-December to be renewed annually.
Finally, a private lending company must obtain the required money lending license to legitimately carry on the business of consumer and commercial lending in Nigeria. A money lending company that failed to obtain a required license before carrying on business may be sanctioned by the appropriate authorities.
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