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Sunday, September 20, 2020

Susan Waniru: How I used bank loans to build my wealth

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Susan Wanjiru Mburu is a businesswoman/manufacturer: “Borrowing money and quick loans in Kenya has been a blessing in disguise for me. In fact, right from the beginning, I always knew that I had to borrow to succeed. However, I have never borrowed from friends or family.

“I started borrowing in 2008 when I took a Sh7, 000 bank loan to equip my salon in Kitengela. I repaid the loan in six months, and took another Sh20, 000 loan which I used to stock the salon with braids and hire four employees. I finished repaying this loan in 2009. By then, I had developed an appetite for loans. I took another Sh100, 000 and started buying and selling cereals in Kajiado County. I finished the loan in the same year.

Fortunately, my proceeds from the salon and cereals business were good enough to facilitate smooth repayments. In early 2010, I took a fresh loan of Sh200, 000.

Mabati rentals that bring in Sh. 3.75 million per month

“Six months down the line, the bank called me and asked to top up the loan with an additional Sh400, 000. I agreed.

The money transformed my business and I became a major supplier of cereals, bidding for profitable school tenders. In 2011, I decided to change tack.

I took a loan of Sh500, 000 and began to supply raw materials for animal feeds to Pembe and Unga animal feeds manufacturing companies. I observed how these companies operated and the mega profits they made and saw untapped potential.

I began to contemplate taking a big loan to buy the mixing machines and become a manufacturer.

“In December 2011, I approached my bank and after pitching my idea, they agreed to lend me Sh1.4 million of the Sh2 million that I needed. I topped the remainder from my savings.

After buying the manufacturing machine, I rented a godown in Kariobangi at Sh15,000 and registered my company, Gihon.

I would have wished for a godown in the more industrious Lunga Lunga area, but they were too expensive at Sh100, 000 per month.

“Then things began to fall apart!

“To begin with, the cost of branding eight different bulk bags with my logo was over Sh1 million, and yet, I still needed money to repay the loan, and cover operation costs. At every end month, I was required to cough up Sh239, 000 which included monthly loan repayments, rent and cost of operation.

“To make matters worse, retailers began taking credit lines.

They’d claim that they paid their previous suppliers within 20 days, and since I wanted to win them over, I agreed to their terms.

A few paid but many began to hide and move towns with huge debts. At some point, it became difficult to sustain the business and the bank loans. I scaled down on manufacturing to spare some money to repay the loan. With between Sh140, 000 and Sh200, 000 of my Sh1.4 million loan remaining, I became totally unable to pay.

The bank began to breathe down on me, threatening to auction me off. My business nearly shut down.

“To cool everyone down, I borrowed Sh400, 000 from a different bank to help offset my earlier loan.

However, much of that loan went into running Gihon. Ironically, while I owed the two banks a combined Sh500, 000, the retailers owed me over Sh2 million! Some of them had individual debts running up to Sh300, 000.

To make money from rentals, build bedsitters upcountry

“In 2013 when the banks gave me a deadline to honour the repayments or face auctioneers, I decided to open up on why I was struggling with the repayments.

Luckily, they arranged for auctioneers who began chasing my debtors and within a month, repayments began to trickle in. Late last year, I finally managed to clear the whole debt.

“Within the past few months, I have been without a debt, built my own house in Namanga, and the business has broken even. I have seven employees. But, I’m not done taking loans. Currently, I am planning to take a fresh loan and buy a brand new high capacity FH lorry.

“I have learned that fear of debts will only derail my success. Debts are not bad. You can take a debt and make an investment that will bring you more money than the cost of your debt.

I have made money from debts and I have seen people get rich from taking loans! The trick is to take a debt from which you make more than the cost of interest from the return on asset.

You should never serve your debt; it should serve you. But once it turns from servant to tyrant, you’re on your way to a bottomless debt pit.” Quick loans in Kenya. Quick loans in Kenya.

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