17 Tips Entrepreneurs should know about Securing a Bank Loan in Kenya- Steve Biko

By Amina Faki,

Accessing suitable financing is a perennial problem for entrepreneurial business.

While the private equity market may be booming for tech startups, companies that need a line of credit or money for factoring have a hard time getting banks to put up cash.

Getting a bank loan approved is not the easiest process. In the light of recent economic troubles across the nation, lenders are looking for a lot more in a loan applicant and are more strict.

While there are several key areas lenders will be focusing on, it is important that you are ready to present the perfect, complete package for review if you hope to get approved.

Below are 17 tips by @SokoAnalyst that entrepreneurs should learn to be able to secure bank loans:

1. Well set financial records

Every business needs an accountant to set your financial records right. An accountant will be able to write a well-detailed business plan. Banks need to know your information, and they want to know you can come up with the answers. A person who knows what they are doing will give the illusion that you and your business know what you are doing.

Accountants are everywhere and in plenty, negotiate with one.

2. Understand your business

Understanding your business will give you an upper hand when it comes to getting bank loans. In accounting, sales make up one component of a business’s revenue. They are the proceeds from the provision of goods or services to the consumer but doesn’t capture all sources of income for most firms.

Revenue is the total amount of money taken in by a business during a set period of time.

It’s important to distinguish between sales and revenue since not all sources of income are equally reliable or repeatable

Revenue and sales figures are used to build financial statements which are important when it comes to securing a bank loan.

3. Ensure you have audited accounts

More than one-half of all small-business loans applications are being rejected by banks.

In such a tough lending environment, companies in need of capital might find lenders more receptive if they invest in audited financial statements.

Business owners should make sure the bank is comfortable with the auditing firm in advance, as the bank may have standards of expertise that the auditor needs to meet.

No Renown Brand or Government will consider you if you have no audited accounts

4. Nurture a relationship with your Bank/lender

Having a good relationship with the lender or bank of your choice may result in greater chances of securing a loan.

Having an agreement with the bank is like having a covenant with women, well, financial covenants with the bank vary across loans.

5. Hopes of immediate bank loans.

Most individuals open bank accounts and expect to be given bank loans immediately. Sorry to disappoint you, son take a seat. It takes at least six months after the date of opening and account to be able to apply for a loan from any lender.

6. Banks don’t finance side hustles

Banks will finance your day to day business i.e. your run through business. Banks do not finance any other side hustles apart from your main business. It’s important to work on your business with vigor to be able to be considered by any lender for a loan.

7. Physical business

Banks finance physical or tangible businesses with well-illustrated business plans. I mean, how do you expect a bank to finance a business that is managed on a phone with no physical data at all?

8. Banks are not for charity

Banks are in the money making business, in giving out loans to individuals and businesses, they make an interest out of it. Are you running a business or just a hobby? Banks are not a charity organization to support your hobby. Cementing the relationship between your lender and yourself is key to getting finances for your business.

9. Readiness and availability

Banks loans require audited documents like CR 12, bank history, profile, client list references, logos. And this documents must always be readily available upon request by lenders. Cooked up documents will further you from being considered for any bank loan and will also break the trust the lender has in you hence deteriorating the long built relationship.

10. Never Belittle Clients

It’s a small world especially with the emergence of the internet. Social media has made the world a global village, words run around. Long term clients often put their best foot forward until the going gets tough, the best way to deal with an irritating client id through reason. Intervene, diffuse, mirror, inquire and resolve rather than badmouthing a client or a lender who might be of use in the future. Belittling a client or a lender will only fuel the flame which will burn you.

11. Secure two or more different bank accounts

Register your business with at least two different key bank accounts. Preferably with a small and big lender. This will provide security for getting a loan with either bank when in need of finances. Nurture the relationship with the key banks, this will guarantee a loan from either bank when in need.

12. Business Location Trips

It is important that any business person who gets financial aid from lenders to invite them (bank manager/RO) to the business location. It’s key for the lenders to see how they have managed to support your business and how the relationship that you have with them has helped you grow.

13. Cash Back facilities.

Unsecured loans have been scrapped by the interest cap law, cash back facilities are better and easier to get.

Cash back is a perk that is offered by many credit card companies on some of their rewards credit cards. It refers to earning back a percentage of the money you spend.

It often has its limits too, on how much cash you can earn on quarterly promotions and rewards.

14. Embrace saving

Saving can sometimes be inconvenient and a hard task to bear especially when you are in need of the cash. You need to keenly watch your cash flow, start saving to have enough when need arises. These days, most lenders have a mandatory genuine savings policy for anyone who wishes to apply for a loan. It might come in handy when you are in need.

15. Signatories

Majority entrepreneur are poor at cash flow. Make your accountant a mandatory signatory to your business account. The accountant will be able to evaluate if you are able to pay the loan or not. They will be able to tell whether you are good to go for a loan or not. Having a person who understands financial matters when it comes to understanding the cash flow of a business.

16. Streamline Cash flow

A mandatory signatory will help streamline cash flow and help create better financial records. This will be beneficial in the overall wellness of a business for it will nurture the good relationship between the bank and your business. Well set financial records are key to securing a bank loan.

17. Persistence

Insist on getting feedback from your lender on credit worthiness even if they keep turning you away.  Giving up is not an option when it comes to getting feedback from a lender regarding a placed loan or a future loan. One day it will work.