Starting your own company can be a challenging but rewarding process. While a great idea and business plan are important, financing remains the most critical element for business success.
Financing a startup or small business is often a difficult, drawn-out process, especially in Africa. Small business borrowers are treated with suspicion and the default position for most lenders is to reject loan requests at the earliest opportunity.
Why is it difficult for small businesses to get loans from banks?
Capital is difficult for small businesses to access for several reasons. It’s not that banks are against lending to small businesses – they want to – but traditional financial institutions have an outdated, labour-intensive lending process and regulations that are unfavourable to small businesses. Digitization in the banking sector has done little to alleviate this problem.
The difficulty of accessing capital is worsened by the fact that many small businesses applying for loans are new, and banks typically want to see at least a three-year banking history of a healthy business before considering a loan request.
Why small businesses are turning to alternative financing options
Alternative financing is any method through which business owners can acquire capital other than traditional banks. There are several reasons why small business owners are turning to alternative business loan providers. Here are three of the most common.
- Lower credit requirements: Traditional banks are almost certain to decline loans to borrowers with unfavourable credit history. For instance, individuals listed on Credit Reference Bureau (CRB) stand little or no chance of getting bank financing until they are de-listed.
- Easier qualification: Not all small business owners meet the additional requirements to apply and be approved for traditional loans. In these cases, business loan alternatives are helpful.
- Faster approval: Traditional bank loans can take weeks to be approved, whereas some business loan alternatives give you access to funding in a few hours or days.
Sh. 100,000 to Sh. 5 million loans providing lifeline for small businesses
Introducing Bizna Loans
Bizna Loans is a special facility by Bizna Kenya and partners to provide affordable financing solutions to small businesses when they need them. Here are the Bizna Loans features:
- Target: Micro and Small business
- Loan amount: 10,000 – 5,000,000
- Processing: 3-48 hours
- Security: Required
- Repayment: 1 – 6 months
Types of Bizna Loans
- Working capital – This is a loan that is taken to finance a business’s everyday operations. Working Capital loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company’s short-term operational needs.
- Asset finance – Asset finance is a loan to facilitate the acquisition of movable assets, such as Boda Boda, taxis, office furniture, motor vehicles, pickups, buses, lorries and other business equipment.
- Bridge finance – This is an interim financing option used by businesses to cover short-term financing needs as a long-term financing option is being explored or finalized.
- LPO finance – This is a facility that enables businesses to adequately service local purchase orders. It ensures continuity of operations as immediate working capital needs are met.
- Invoice discounting – This is an invoice finance facility when a business’s unpaid invoices are used as collateral for a loan. It enables businesses to leverage the value of their outstanding payments.
- A business line of credit – this is a revolving line of credit, so rather than receiving a lump sum, you can access the money as and when you need it, as many times as required. There’s no pressure to borrow the money, but it’s always there for business emergencies such as buying stock, paying outstanding invoices, taxes or salaries, you’ll only pay interest on the exact amount of money you use.
Requirements to apply for Bizna Loan
Applying for financing is a commitment that requires a good understanding of what the borrower is committing to. To increase your chances of getting a Bizna Loan, you should understand the process and prepare adequately.
Here are five tips to help you prepare your business for financing success:
- Know how much you need to borrow up front. You can apply and get any amount between 10,000 and 5,000,000 from Bizna Loan. However, don’t borrow more than you need. If you need additional funds in future, you can borrow again after you have repaid the current loan facility.
- Write a business plan with financial projections. While it is not a requirement to get a Bizna Loan, it is important to prepare a business plan to have clarity of your business operations and the future prospects of the business. It also helps you to gauge the capacity of the business to borrow and repay loans.
- Do market research and know the current trends of your industry. Bizna Loans are targeted at borrowers in growing and sustainable industries. Having this information demonstrates your knowledge as an entrepreneur and business foresight.
- Avoid Credit Reference Bureau (CRB) listing. Being listed on CRB is indicative of bad borrowing history. Ensure that you are up to date with other loan repayments and if you are having difficulty paying, renegotiate terms with loan providers to ensure you remain on good terms.
- Business registration and compliance. Many small businesses operate informally with little or no form of registration. This reduces your chances to transact as a business and access Bizna Loans. Obtain the necessary registration and comply with government and regulatory institutions to increase your chances to access borrow and increase your limits.
Need a Bizna Loan? Apply for a Bizna Loan today.
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