Let’s paint a scenario. Two petty traders Shola and Bola started their snacks and beverage supply business a week apart from each other in the very busy Idumota market. Their businesses grew rapidly from their strict management regimen and customer foot traffic. But no matter how much Shola’s demand grew, she never seemed to be able to raise the capital to make expansion a reality. I guess it is important we note that Shola’s business is an unregistered enterprise. Bola on the other hand, whose business has been registered, grew to acquire other stores and now even owns stores in other markets on the mainland. These two fictional characters started their businesses at roughly the same time, selling the same products but have divergent financial rewards. This article wants to explore why this could be and how a simple process can be the equivalent of night and day to your market reach.
Registering your business with the Corporate Affairs Commission (CAC) is a vital step that many people take for granted. Ignorance and myths have made many like Shola to continue slaving away at their business without getting the commensurate financial rewards they deserve. The myth that registering your business doesn’t matter is one of life’s greatest disservice. Let’s explore why.
Recognition by Law: For starters, your business is virtually none existent if it hasn’t been registered. Birthing your business legally means your business can operate legally and openly be accorded the legitimate rights due it.
Transaction limits: Without a registered business and a bank account linked to it, you can’t make major transactions. Government bodies are prohibited from transacting with none registered businesses. Most corporate organizations would rather not take on the headache of filing payments to none registered companies that they would rather transact with other registered organizations. This limits the number of customers none registered firms can transact with. While Shola could only sell to small businesses and individuals, Bola on the other hand serviced major hospitality concerns whose orders ran in millions. This is the difference a few collective hours and about 10,500 naira on the CAC website could make.
Access to loans and financing: If Shola was to walk into a bank to request a loan facility to close a major supply opportunity, she would meet either a resounding NO or a “let’s see” leaning heavily towards a NO. The simple reason would be that every due diligence check will come back negative. The business on paper does not pay rent or bills, own a bank account or carry out major transactions. No one would deposit a business loan into a personal account. This lack of documentation for transactions that every business carries out, will definitely return a negative red stamp on a credit application. While Bola on the other hand would be courted by banks looking to make some returns on their idle deposits. This access to capital at low interest rates will spur Bola to take on more opportunities to make sales and expand her business.
Depending on what type of company you are incorporating, the steps may differ. The barrier to business registration has been significantly lowered by the CAC. You can now register a business name without a lawyer and entirely online. It is still advised that a solicitor is consulted before incorporating your business or Non-Profit Organization.
If you’ve registered a business before, you can share your experience with us in the comment section.