Stats show that more than 400,000 Small Medium Enterprises (SMEs) are collapsing annually in Kenya. More than 60 percent of these SMEs that are closing down do so before their second birthday.
Kenya’s economy thrives mainly on the wheels of SME. The sector employs more than 86 percent of Kenyans and contributing more than 45 percent to the country’s Gross Domestic Product (GDP).
In a country where the unemployment rate is at 39.1 percent (no actual figure has been released), the closing down of SMEs should raise a red flag.
Most of the SMEs that have closed down have blamed the difficulties in accessing credit as the main reason behind their woes. Some have blamed commercial banks for tightening the rules and requirements for an SME to get a loan especially after the implementation of the Interest Capping Law.
But what are banks and investors looking for before deciding whether to give a loan to an SME or not? According to Inuka, these are the things investors and banks are likely to look at:
Investors and lenders also look for the next of kin, business location, business license and the security of the money they intend to give.
According to the Kenya Bankers Association, the best way to attract funding is by having a clear business plan that shows your project is valuable and is going to succeed. No one wants to invest in a business that shows no signs of great return.
A successful business plan should be clear, practical, and realistic and have a long-term vision. It should also be composed of financial, human resource and market dynamics in a clearly stated manner.