How to make loans work for you: Loans are commonly vilified. In fact, no one will shake your hand for being in debt. Consequently, there are people who fear taking loans, others who take loans and end up paying through the nose, and yet others who take loans and end up defaulting. But are loans as bad as they are popularly painted? Today, we hear from leading business luminaries we have previously interviewed on how they handle loans and how you can make loans work for you.
Loans can create you wealth: Throughout my banking career, I have seen many small business owners take small loan amounts and proceed to build large enterprises. This means that a well utilized loan can turn out to be your quickest route to wealth. Nonetheless, you must avoid misusing loans or taking bad credit. Before a bank gives you a loan, there are things I’ll look out for. These include your level of income, the nature of your employment, your credit rating score from the Credit Reference Bureau, and the quality of your collateral or security. – Lamin Manjang’ former CEO, Standard Chartered Bank Kenya.
Roselyne Njoki: What I learnt after using a loan to start my business
Don’t fall for the debt-myth: I used to believe that debt must be avoided at all costs. This is a myth I overcame when I had a business discussion with industrialist Dr. Manu Chandaria awhile back. He advised me not to shy away from borrowing money to build my business. From that point onwards, I have never held back from borrowing money to fund my business. Overtime, I have come to appreciate that businesses are usually built on credit. The only harm is in the inability of the business or its refusal to repay the debt. – Jane Kagiri, entrepreneur, founder of IT firm Creativedge Solutions, and Order of Grand Warrior recipient.
Getting a loan may not always be easy: You may find yourself moving from one lender to the other in search of a loan for your business, especially if you are just getting started. Personally, I didn’t have enough savings to fund my startup capital when I launched my business in 2015. Getting a bank loan, though, was very challenging because many of the banks I approached were not willing to fund my business. When I finally managed to get the loan I needed, I ended up spending my first financial year juggling between loan repayments and making profits. – Roselyne Njoki Nthiga, founder and CEO of Angie’s Tea, an exporter and local distributor of a purple tea.
Loans can be more efficient than savings: There are times when loans can work more efficiently than savings. This is especially common in the construction sector, where I work, and where projects demand huge amounts of capital to implement. In my own experience, getting a building loan is more efficient than waiting on your savings. Your projects will never stall. However, you must not take a construction loan simply because you’ve heard of other developers taking them. – Nassim Kassim, executive director of Sweet Waters Affordable Housing Services Limited, a commercial and residential property developer.
Crooked KRA employees taking home Sh. 500,000 in bribes daily
Settle you loan: If you have a loan, your mission should be to get out of it as soon as possible. You can do this by putting extra money into your loan repayments. By doing so, you will be out of debt in a much shorter time. You will also have paid less interest on your loan. – Waceke Nduati-Omanga, a personal finance expert and founder of Centonomy.