Monday, December 5, 2022

Financing options offered by Co-op Bank and how to access them

Are you an MSME or entrepreneur looking to grow your business in Kenya? There are several MSMEs like yours that were in your position before but were later sorted with the wide range of Co-op Bank Financing products. Bizna Kenya has taken time to assess the different financing products for MSMEs that have  lower access to capital bottlenecks. Most of these financing products no only make access to capital easy but also give you an accelerated push to grow your business. These are:

1. Asset Financing

Assets are critical to any business. Expand your business with asset finance from Co-op Bank without tying up any other property or asset as collateral! Our Asset Finance gives you the flexibility to finance your moveable assets without tying up any other property or assets as collateral. This is because the asset being financed becomes the security.

Asset Finance frees up your cash and helps you acquire much-needed assets with minimum fuss while paying for the asset in easy monthly rentals of up to 48 months. With the asset acquired generating income for you, it practically pays for itself!

What’s more, with Asset Finance, you automatically qualify for insurance premium financing under our Co-op Insurance Finance product! You will no longer have to worry about funds to pay your annual insurance premiums on the asset we finance.

Product Interest rate Application / negotiation fees Appraisal fees Max. tenor
Asset finance 13% pa  reducing balance None 1% on negotiated schemes

3% on non-schemes

60 months

2. MSME Term Loan

Co-op Bank MSME term loan

This is the money you can borrow for your business for a period of time to help your business expand or to raise business supply capabilities. The amount can be repaid up to 60 months based on your level of business and the type of security you provide to us as outlined below:

Features Bronze Silver Gold
Amount of unsecured term loan Ksh 600,000 Ksh 6,000,000 Ksh 10,000,000
Amount of partially secured term loan Ksh 3,000,000 Ksh 8,000,000 Ksh 15,000,000
Period of payment for unsecured borrowing up to 24 months up to 24 months up to 24 months
Period of payment for secured borrowing up to 60 months up to 60 months up to 60 months

3. Supply Chain Financing

This is also referred to as payable finance or reverse factoring.  Supply chain finance is a solution to MSME Anchor customers to pay the suppliers upon delivery and submission of invoices. This facilitates financing for suppliers to the Anchor customer to obtain early payment once they submit their invoices

 

 

 

Key Product Features

Parameter Features
Product Type Supply Chain Financing
Maximum Loan 100% of the invoice value
Tenor Minimum Tenor – 7 days
Maximum Tenor – 180 days
Party For Booking Limit Anchor/supplier
Disbursement Fee / Structuring Fee 1%
Loan Repayment Party Anchor /MSME customer
Late Payment Fees 1.25% of the outstanding amount on Anchor
Interest The prevailing bank lending rate is currently at 1.08% per month
Payment Processing Fees Kes. 250
Appraisal Fee Nil
Fees All fees are recovered upfront to the anchor
Security For limits up to 2M – Chattels i.e. motor vehicle discounted at 150% cash and land for exposures above 2M
Benefits of the Parties Involved Benefits to Anchor

  • The solution allows the Anchor to maintain or extend the payment terms with the Bank
  • Ensuring the Anchor suppliers have access to working capital.
  • Negotiate better pricing for purchased goods and services and enjoy cash discounts

Benefits to Suppliers

  • Alleviate the cash flow challenges of suppliers by accelerating the conversion of receivables (invoices) into cash.
  • Extend financial access to suppliers who lack collateral – using approved invoices as a form of credibility and surety.
  • Help businesses to grow with enhanced access to finance
  • Reduce days of sales outstanding (debtor’s days).

4. Mkopo Wa Kujengana

Mkopo Wa Kujengana Loan

Achieving stable finances is central to achieving stability in other areas in life. We are your ideal partners in that journey. Mkopo wa Kujengana Loan is available to individual group members. The group must be registered as a self-help group by the relevant government authorities. With this loan, you get more than just financing; you also receive training on how to manage it.

5. Import Duty Financing

Import Duty Finance (IDF) is a financing solution for importers designed to help them have a seamless process during clearing and transportation of imported cargo from the port/airport of origin to the final destination. The solution targets importers of goods and services.

The facility is booked in the customer’s account and payments/disbursements are done directly to the service provider e.g. KRA against proforma invoices.

Feature Terms
Facility name Import Duty Finance (IDF)

• Memo code-016NF

Customer needs / benefits The Import Duty Finance product is a solution meant to facilitate MSME importers to:

• Pay for import duty and other related costs promptly.

• Pay for storage charges and demurrages if any.

• Pay for clearing, forwarding, and other logistics costs.

• Facilitate transportation of goods from the port to the final destination.

• Enable the importer to avoid high storage and demurrage charges at the port.

• Enable the importer to avoid auction of goods imported, due to non-payment of duty.

Purpose Working capital – To facilitate KRA duty payment, clearing costs, or any other logistical costs associated with the clearance of imported goods.
Target market The product will target the following groups:

1. Importers of motor vehicles and equipment:

• For own use (individual or company).

• For sale (motor vehicle dealers).

 

2. Importers of second-hand items for sale:

• These are business people who import second-hand goods for resale in Kenya and other neighboring countries. Business people in the Gikomba market will be the target clientele to take up this product.

 

3. Importers of other goods:

• E.g. manufacturers (raw materials), construction materials suppliers or other businesses, etc.

 

4. Clearing and logistics firms:

• These are firms that offer clearing and forwarding services as well as logistical solutions.

Facility features Amount financed – Up to 100% of the value of invoice or quotation raised by third parties (KRA, clearing agent, freight company, etc.).

 

Tenor – Facility will revolve for 12 months upon which the applicant will be reviewed for renewal. One-off applications allowed.

 

Debt ratio – 50%

 

Limits to be funded – Minimum amounts Kshs. 50,000.

Facility repayment / Tenure Consumers, individuals, and end-users

• Equal monthly installments for a maximum period of 12 months.

 

Car dealers, clearing agents, and other importers of goods

• Bullet payment or monthly installments (depending on the type of transaction).

 

Maximum tenor

• 180 days for bullet transactions or 12 months for monthly payment transactions.

Pricing Loan processing fee: 2.5% of the facility amount

 

Interest: CBR +4% p.a. currently at 13% p.a

 

Late payment fee: 0.25% p.a

Security type / collateral Chattels (motor vehicles) up to Kes.2 million (150% security coverage)

• Landed property for exposures above Kes.2 million.

• Cash cover also accepted.

• Customers importing motor vehicles can use the same vehicle as security (Joint registration of vehicle handled by a bank-appointed clearing agent after disbursement of the facility).

• Collateral management agreement (imported goods are pledged as collateral) on case to case basis.

Qualification criteria Customers in the import business

• The customer must be in business for more than six months and demonstrate having undertaken an import transaction previously.

 

MSME customers

• Importing for purposes of reselling, increasing efficiency, productivity, or own use.

• No proof for a previous import transaction.

Documents required (for appraisal) Customer application

• A quotation for duty (duty entry form) and other related charges,

• Copy of import documents: (Bill of lading/Airway bill, commercial invoice, copy inspection certificate by KEBS certified agent, IDF, etc.)

• For motor vehicles – export certificate (Japanese logbook) & inspection certificate issued by QISJ or any other inspection company approved by KEBS.

• All the other requirements as per the MSME lending terms – strong financials, good account conducts, debt ratio-below 50%  & all KYC & supporting documents.

Process flow Customer applies for facility

• Facility appraised at branch/business unit and forwarded to credit analysis for approval.

• Customer executes offer letter and other contractual documents.

• Branch/business unit sends documents to credit administration for limit loading (memo code 6N7).

• Credit administration approves and forwards limit loading requests to credit operations.

• Credit operations unit marks import duty finance limit.

• Trade services to disburse facility and remit payment directly to third parties.

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