10 KEY Requirements That Banks Need From SMEs To Advance Them Credit In Kenya

By Steve Biko Wafula / Published March 22, 2023 | 10:42 am

KEY POINTS

SMEs need to have a solid business plan. This means having a clear and concise description of their business, a detailed analysis of their target market, and a strategy for achieving their objectives. A well-crafted business plan will demonstrate to banks that the SME has a clear understanding of their business and the market, which can increase their chances of accessing credit.

KEY TAKEAWAYS

SMEs need to have a good credit history. A good credit history demonstrates that SMEs have been able to manage their finances well in the past, which is an indicator of their ability to repay loans. Banks will assess the SME's credit history before approving any loan applications, and SMEs with a poor credit history may be denied access to credit.

Access to credit is a critical challenge faced by Small and Medium Enterprises (SMEs) in Kenya. Banks often cite the inability of SMEs to meet their requirements for credit as the primary reason for denying them access to finance.

In this article, I will endeavor to elucidate the requirements that SMEs need to meet in order to be eligible for credit facilities from banks.

SMEs need to have a solid business plan. This means having a clear and concise description of their business, a detailed analysis of their target market, and a strategy for achieving their objectives. A well-crafted business plan will demonstrate to banks that the SME has a clear understanding of their business and the market, which can increase their chances of accessing credit.
SMEs need to have a good credit history. A good credit history demonstrates that SMEs have been able to manage their finances well in the past, which is an indicator of their ability to repay loans. Banks will assess the SME’s credit history before approving any loan applications, and SMEs with a poor credit history may be denied access to credit.
SMEs need to have collateral. Collateral is any asset that can be used to secure a loan. Banks require collateral to reduce the risk of lending to SMEs. The collateral can be in the form of property, machinery, or other assets that can be sold to recover the loan in case the SME defaults.
SMEs need to have a stable cash flow. This means having a steady income stream that can be used to service loans. Banks assess the cash flow of SMEs before approving any loan applications. SMEs with an unstable cash flow may be denied access to credit.
SMEs need to have a good management team. Banks assess the management team of SMEs before approving any loan applications. A good management team demonstrates that the SME has competent leaders who can manage the finances and operations of the business effectively.
SMEs need to have a good relationship with the bank. A good relationship with the bank can increase the chances of an SME accessing credit. SMEs can build a good relationship with the bank by maintaining good communication and transparency, providing accurate financial information, and making timely loan repayments.
SMEs need to have a realistic loan amount. Banks will assess the loan amount requested by SMEs to determine if it is realistic and within the SME’s ability to repay. SMEs that request unrealistic loan amounts may be denied access to credit.
SMEs need to have a good business record. Banks assess the business record of SMEs before approving any loan applications. A good business record demonstrates that the SME has been able to operate successfully and can repay loans.
SMEs need to have a good reputation. Banks assess the reputation of SMEs before approving any loan applications. A good reputation demonstrates that the SME is trustworthy and reliable, which can increase their chances of accessing credit.
SMEs need to have a good financial record. Banks assess the financial record of SMEs before approving any loan applications. A good financial record demonstrates that the SME has been able to manage their finances effectively, which can increase their chances of accessing credit.

In conclusion, access to credit is a significant challenge faced by SMEs in Kenya. Banks require SMEs to meet several requirements to be eligible for credit facilities, including having a solid business plan, a good credit history, collateral, a stable cash flow, a good management team, a good relationship with the bank, a realistic loan amount, a good business record, a good reputation, and a good financial record. SMEs that meet these requirements may be more likely to access credit facilities from banks.

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

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