How to get a loan as a small business

There are a number of small business ideas, ranging from buying one egg for shs 10, selling it for shs 12, playing back the 2 shillings in profits, until such a time that you can sell a million egg each earning you two shillings hence making you a millionaire. The problem with these small business ideas is how to implement them in real world. In the example above, for instance, the person with the idea fails to account for transport, labor, and associated costs that will immediately eat up the two shillings profits. In addition to lack of business reasoning skills, those with small business ideas also always lack capital, and here I want to share with you a few tips on how to get a loan for your small business, be it already operational or whether it is still at the idea stage.

1. Ask friends/relatives

The beauty with friends/relatives is that they can either give you the capital as a grant (no paying back), or they can give you the loan at interest free. The cost of money from friends or relatives is that there is always a high chance of losing the friendship if you are unable to pay. Actually it is for this reason that most people have opted to fuliza or borrow from Mshwari, Tala, Branch and these other high cost mobile loans.

2. Look for financiers or angel investors interested in that business sector

If your business belongs to one of the sectors with angel investors or financiers, then you can look out for them. In Nakuru for example there is one venture organization by the name Balloon Ventures that is seeking to provide the youth with funds ranging from shs 100,000 to shs 3 million as long as the person applying can prove his or her business case, and there are a number of such financiers across the country. In the film industry, the a number of funding options where a filmmaker can be funded right from the script writing stage all the way to post production. Farmers too have their financiers where nowadays the Agritech sector comes up not only to help farmers gather and interpret information, but to also give them needed funds to get their farming businesses running. The beauty of these types of funds is either they come in as grants, zero interest, or at the lowest interest possible.

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3. Opt for Bank loans meant for small businesses e.g. Stawi

Stawi is a government project done in partnership with five banks to issue loans to small and medium sized businesses. The banks included Diamond Trust Bank, Cooperative Bank of Kenya, KCB Bank, Commercial Bank of Africa and NIC Group PLC. This was motivated by the continuous growth of mobile money. According to the CBK Governor Dr Njoroge Stawi will offer an unsecured loan products ranging from Shs 30,000 to Sh 250,000. The borrower will be able to repay the loan within 1-12 months accumulating an interest of 9% per annum. The loan will also include 0.7% insurance fees, disbursement fees of 4% and excise duty of 20% which is of the facility fee. All you need to do as a small business is to install these apps, answer few questions, and you are good to go.

4. Apply for the youth/women or people with disability fund

Initially the government had set aside funds to finance all the small businesses entrepreneurs. The funds included the Uwezo Funds, Youth Development Fund and the Women Enterprise Funds just to mention but a few. They were to provide loans for any registered business with the government ministry. The problem was that there was no much awareness on the funds existence. All you needed to do was to register your business depending on your constituency level and that was it. I hope it’s still functional .Though according to the 2019/2020 budget proposals, there was a recommendation made by the CS for Treasury about merging these funds into a universal fund to be called ‘Biashara Fund’. Biashara Fund will then cater for all the small business ideas.

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5. Or you can just go for the expensive bank loans

Bank loans still exist, but with the interest rate cap, it has become very hard for small business ideas to be funded, as the risk of funding high risk borrowers can no longer be entertained by the banks. However, if you have some security, maybe a car, or something of value, you can still approach your bank to offer you some capital to start that small business idea that’s eating you up. I remember Equity bank approaching me at one time to help support my photography idea with an up to shs 1 million capital, of which I could guarantee using my household items.

Adrian Opiyo

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