A finance company is an organization that loans money to individuals.
There are several types of finance companies in the world today.
We will be looking at the various finance companies examples as we proceed in this blog post.
This article will cover everything you need to know about finance companies – the services they offer and also a full list of all the credible finance companies in Nigeria.
What really is a finance company?
Finance companies
A finance company is an entity that is responsible for giving loans to individuals.
According to Nasdaq, the primary function of finance companies is to make loans to individuals.
Unlike banks, they don’t receive deposits.
So, how do they operate?
Finance companies usually borrow money from sources such as Federal Reserve System and some other commercial banks at a low interest rate, and then lend it to others at a high interest rate.
This is usually how they make their money.
This method is the reason why their interest rates are higher than the interest rates charged by banks.
Companies and individuals turn to finance companies when they are not qualified to take loans from banks.
Finance companies functions
The following are the functions of a finance company:
1.They offer unsecured loans
An unsecured loan is a loan offered without the borrower offering any collateral.
An example of an unsecured loan is a personal loan.
A personal loan is a loan taken to meet borrowers’ immediate expenses, for example: house renovation, wedding, medical emergency or vacation.
Banks extend personal loans only to people with good credit history and people who meet the loan eligibility criteria.
However, they offer personal loans at a higher interest rate to people with poor credit history.
2. They offer secured loans
Collateral is an asset that the borrower offers to the lender when securing a loan.
If the borrower is unable to pay up in due time, the collateral becomes the property of the lender.
For example, a borrower needs 1 million naira, and puts his car up as a collateral. If he unable to pay in the time specified, the lender automatically has full ownership of the car.
The lender also has the right to auction the car in an open market.
They also look at credit history when offering secured loans too.
3. They offer business loans
A company can reach out to a finance company when it wants to lease or purchase some office equipment like electronics or machinery.
Most of these companies also offer factoring services to businesses.
Factoring is a transaction whereby the organization sells its account receivables to a third party at a discount to meet its immediate cash needs.
For example, an organization can sell its account receivables worth $ 10,000 to a finance organization at a discount of 20 percent.
Then, make use of the money to meet immediate capital needs.
See also: Financial Consultant: Everything you need (+ top skills)
Types of finance companies
Take a look at the various types of finance companies below:
1.Commercial finance lenders
Commercial finance lenders are finance companies that make loans to commercial businesses.
They also help finance the sale of a company’s products to their customers.
They are very different from banks because, unlike banks, they do not collect deposits and they are therefore not rigid in their regulations
2. Alternative lenders
They are online lenders that ensure that no business is left behind when it comes to raising capital for a business.
Unlike other finance companies, they do not ask for assets or collateral, they simply find other ways to work with businesses that can’t afford a collateral.
3.Private equity firms
They approach rich investors directly, asking them to invest their money in the firm.
Then, the firm makes use of this money to buy stakes in other privately managed companies.
4. Hedge funds
A hedge fund is a finance company where wealthy investors worldwide invest their money into a business they believe will maximize their wealth.
5. Investment banks
Investment banks serve as the middlemen in the execution of transactions that involve exchange of securities or shares, and would likely not be working with smaller businesses.
Finance companies services
They offer services to businesses, organizations and individuals.
Some of the top 3 services they offer include:
1.Granting of loans to small businesses and firms
2. Grant loans to individuals based on collateral
3. They borrow money from sources such as the Federal Reserve System and some commercial banks at low interest rate, and then lend it at a higher interest rate.
See also: Financial Independence: Easy tips to retire early (+ free ebooks)
Popular finance companies
Below is a list of the top companies in financial sector in the world today (in no particular order):
1.Goldman Sachs
2. Morgan Stanley
3. Bank of America
4. Citigroup
5. American Express
6. Wells Fargo
7. Berkshire Hathway
8. Prudential
9. JP Morgan Chase
10. Google
List of finance companies in Nigeria
Most of the companies operate in Lagos and Abuja mostly.
See the top 20 companies in Nigeria and where they are located.
1.03 CAPITAL LIMITED
LOCATION: LEKKI PHASE 1, LAGOS.
2. AAA FINANCIAL & INVESTMENT COMPANY LIMITED
LOCATION: LAGOS
3. AIQ CAPITAL
LOCATION: LAGOS
4. ALLIANZBRIDGE FINANCE COMPANY LIMITED
LOCATION: ABUJA
5. AQUILA LEASING LIMITED
LOCATION: LAGOS
6. C & I LEASING PLC
LOCATION: LAGOS
7. CAPITAL BANCORP LIMITED
LOCATION: LAGOS
8. CAPITALFIELD FINANCIAL MANAGEMENT LIMITED
LOCATION: LAGOS
9. CAPRI BANCORP LIMITED
LOCATION: LAGOS
10. CASH-LINK LEASING PLC
LOCATION: LAGOS
11. CELOX FINANCE AND INVESTMENT LTD] LOCATION: LAGOS
12. CFS FINANCIAL SERVICES LIMITED
LOCATION: LAGOS
13. CITHOMES FINANCE COMPANY LTD
LOCATION: LAGOS
14. CO-LINK INVESTMENT MANAGEMENT COMPANY LIMITED
LOCATION: LAGOS
15. CONSUMER INVESTMENT LIMITED
LOCATION: ABUJA
16. CORE CAPITAL LIMITED
LOCATION: LAGOS
17. COUNTY FINANCE LTD
LOCATION: LAGOS
18. CREDIT DIRECT LTD
LOCATION: LAGOS
19. CROWNRISE FINANCE & INVESTMENTS PLC
LOCATION: LAGOS
20. CRYSTAL FINANCE COMPANY LIMITED
LOCATION: LAGOS
Conclusion
These companies operate differently from most banks.
These lists of companies in the financial sector above are credible ones you can request loans from.
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