How to Finance Your Small Business in Kenya

By Arnold Mutugi
Introduction

Ask any businessman on the hardest part when starting up a business and the likely answer will be starting up a business.
However, you do not have to sleep on your business idea just because your pockets have the proverbial holes. What you just need is to pay a visit to the nearest bank branch and share your ideas with the bank’s loan experts. And don’t be the folks who believe that loans are for those who are gullible enough to commit to their terms and conditions. Anyway, there is a degree of risking with this financial option, but what is business without a certain degree of risk on its tail? There comes a time when loan is the only way out. However, there are also other ways of obtaining cash to fund your new business.

Questions You Need to Ask Yourself First

What are Your Chances of Success?

They are called gut feelings. You should ask yourself often what are your chances of striking the bull’s eye. This is because with loans, there is no room for trials and errors. These may cost you if you are not careful. Once your speculations hint to you that your chances of success are high, then you can proceed and obtain the loan. However, if your mind’s sixth sense tells you that the idea might need some time to bring in some decent returns, then I guess it is time you forgot about the loan.

Will you be Able to Repay the Loan?

If there is a moment you can bite more than you can chew is when you are obtaining a loan blindly. Even if the loan officer is your cousin, you should not be lured by the quick access to money while you have no idea on how to pay it. Always get a loan that you can pay comfortably. The best thing is to use a loan to supplement your capital.

Financing Options

Unsecured Loan

Obtaining an unsecured loan from a Kenyan bank can turn out to be a big blessing to your hatching business. However, note that repaying an unsecured loan my take longer than repaying a secured loan. This is because an unsecured loan comes with higher interest rates because it is not tied to any assets outside the business. For this reason, the lender must cover for the risk involved in case your business does not hit off as it was dreamt to.

Lending From Family and Friends

Family members may be very resourceful especially if you are capable of convincing them about your business plan. Note also that it is here you can get very good business partners. The lopsided truth is that the family can also turn out to be a curse in disguise. Some family members may doubt or judge you by your past conduct. The best bet here may be friends. They may truly prove to be the friends in deed as the going goes.

Lending From Other Lending Institutions

There are also other lending organizations and merry-go-round groups. For instance, there is this group called emerging Africa capital. It finances entrepreneurs through their Biashara fund group. There are also some venture capital firms like Sacoma and Growthfin that are very helpful to the beginner. You should however be careful with these groups. Some of them have very stringent lending rules. You should be sure to repay their money as agreed upon.