How to access the £800Million entertainment fund in Nigeria
Media reports have it that only six applicants have successfully
accessed N700 million of the N200 billion entertainment fund disbursed
by the Nigerian Export Import Bank (NEXIM) for the entertainment
industry. Yet the entertainment industry is in dire need for these
funds as the industry especially the film sector is in comatose. For the
purpose of clarity, the objective of the fund is to stimulate the
entertainment industry by funding of production, distribution
infrastructure, acquisition of hi-tech production equipment and project
refinancing.
Many practitioners have decried the conditions attached to the fund hence this attempt to demystify the process:
Change your orientation - It’s a loan not a grant.
Most applications still consider the fund a grant. While a grant is
non-repayable fund disbursed by the government or its agencies,
corporation or foundation often for a specific project, a loan requires
repayment, the meeting of certain conditions and here’s the best part – a
security or collateral. A loan is generally provided at an interest.
So, change the mind-set because if you view it as a loan it becomes
easier to consider the terms.
Apply as a corporation – Don’t own one, affiliate with one.
The fund is available to only incorporated companies so if you only
registered a business name or enterprise you may not be eligible. You
need a memorandum and article of association, article of association,
forms CAC2 and CAC7). The company must operate in the entertainment and
creative industry. So that registration certificate of Alawada and Sons
Limited your father registered in the 60’s to carry out the business of
importation of Tokunbo vehicles will not apply.
Funding under the NEXIM bank facility only covers segments of the
entertainment industry in the following categories: Music, Film,
Television, Radio (Production and distribution) and also fashion
segments. So, if you are in the fashion industry and you have been
searching for funds for that fashion show, well, you’re welcome.
Meeting the conditions is not rocket science – Hire a consultant
.Non-compliance of stipulated guidelines by the practitioners in the
entertainment industry it has been observed is the greatest constraints
to accessing the funds. However this does not have to be difficult if
you are smart enough to hire a consultant. A firm of chartered
accountants and tax practitioners will help you to prepare audited
accounts, statement of
cash
flow, statement of affairs and project feasibility study/business plan.
These documents give a picture of the financial state of the business
so that NEXIM bank can determine whether it is a viable enterprise. But
ensure you do not patronize quacks, it will haunt you when the tax
people come calling. Also, the lenders know a statement of accounts
prepared by professionals. Call me.
Collateral is not only the family house – Think outside the box
A major constraint to securing loan in this part of the world is our
often skewed idea about what constitutes collateral. Usually a secured
loan requires the borrower to pledge some assets, e.g. a car or a
property. Unsecured loans are not secured against the borrower’s assets.
In the case of NEXIM bank, it is a secured loan hence you require an
asset. But there are tangible assets such as a house or a car and
intangible assets such as trademark or copyright. So, if you are looking
to produce and distribute a film your collateral can include
proprietary rights to your business or intellectual property right. Yep,
the copyright to the screenplay, music score (sound track) can suffice
if you pledge this to NEXIM bank. They will only need to secure it by a
stipulated amount. How nifty is that? And don’t forget the distribution
rights – so you need a lawyer to protect you. Check rule 3.
Work with structures – Corporations protect you
Incorporated entities have legal lights and liabilities that are
distinct from its shareholders hence there’s the presence of a corporate
veil that serves to shield its owners in times of adversities. Also
corporations prefer to do business with corporations.
However, in the entertainment industry rather than corporations there
are groups and associations mostly informal and lacking legal framework.
This structure is defective and makes it difficult for other industries
to engage the entertainment industry. Register your company.
Set up a disbursement chain
So NEXIM bank has finally agreed to dole out the cash to you (of course,
you followed Rule 3) but you need a collection account hence your
company’s current account should not be dormant or to be on the safe
side, open a dedicated account for it. Loan proceeds too could be
disbursed directly to your service providers/contractors against job
completion certification hence it is important that you hire only
registered service providers.
The best part of the loan is the interest - take advantage of it.
The total interest to be charged on any loan facility under the NEXIM
bank scheme is in single digit. This means for loans with maturity
duration of 2 -1o years they shall not charge more than 9% interest
rates. This is way too generous when you consider that currently banks
lend at rates above 22% and in some instances up to 35% with conditions
that for the lack of milder adjective we’ll leave at punitive.
There are charges associated with the loan, a processing fee of 1% flat
on approved amount, annual management fee of 0.75% of outstanding loan
amount payable at anniversary date of the facility drawdown on
outstanding loan amount from time to time to cover project management
and monitoring fees and legal fees charged to the account of the
applicant for sundry legal filings and documentation.
Checklist – the tricky items
Most of appraisal requirements are relatively easy so let’s dwell on the
tricky parts. Valuation report on collateral to be pledged – this could
be land/building, equipment or intellectual property. When physical
asset is not available, you must be ready to produce a valuation report
that will show how your intellectual property secures the loan. You must
also produce past audited accounts and the most recent management
account/statement of affairs and tax clearance. Confused? See Rule 3.
Have a sound business plan – It’s your best defence
If you’ve watched the popular series
Dragon’s Dena Sony
entertainment franchise where entrepreneurs pitch business ideas in
order to secure investment finance from a panel of venture capitalists,
then you’ll understand the importance of a business plan. To be
effective, it should give a detailed history of the project, ownership
structure of the company, details of activity, marketing arrangement,
cash-flow and profitability analysis.
Protect your investment
Now that you have understood the value of a corporation, secure yours.
Take out insurance indemnity, pay relevant taxes usually with a tax
consultant supporting you as they may best advice you on allowances due
you. Most importantly, keep a record of every transaction and regularly
have your accounts audited. And don’t use the loan proceeds to pay for
your wedding. Trust me, your bride will not be happy if she learns she
was married on a loan.
~ By Isaac Anyaogu, a financial consultant offering tax and business
advisory services located in Nigeria. A graduate of Mass Communication
at the University of Nigeria Nsukka, Isaac also writes for television
and films.
CONTACT: Suzanne McGee (Brand & Digital), 212.413.6150, suzanne.mcgee@nbcuni.com 
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