Ways of Funding a Business in Kenya

When Funding a Business in Kenya, one should first consider whether he/she wants to borrow a loan or seek an investment. The advantage of a loan (debt) when Funding a Business in Kenya is that one is not giving up any ownership in his/her enterprise, and the lender has no management say or direct entitlement to profits in the business.
The only obligation to the lender is to repay the loan on time and one can deduct the interest payments at tax time. The disadvantage of a loan is the debt - the looming monthly payments and the potential for personal liability (if you guaranteed the loan), loss of property (if you secured the loan by use of collateral), or a lawsuit if you default on the loan payments.
The advantage of an investment (equity) when Funding a Business in Kenya is that you will not have to repay investors if your business goes under, and your personal property is unlikely to be at risk. The disadvantage is that you get a smaller piece of the pie because you are giving up a share of the business. And if an investor seeks to control your business, it may be more of a nuisance than a help.
Look to Family and Friends when Funding a Business in Kenya
Sometimes when Funding a Business in Kenya, your funding choices are made for you. For example, if you don't qualify or have enough resources to get a loan for Funding a Business in Kenya, then you need to find investors. The most common sequence for finding investment;

• Look to your own resources
• Look to family, and
• Look to friends. After exhausting those, look to an interested outsider.

Most likely, obtaining an investment when Funding a Business in Kenya will require some additional expenses incurred by your accountant and your lawyer. For example, if the investment is substantial, the investor may require that you convert your sole proprietorship to a corporation to shield the investor from personal liability.
Why Do You Need the Money?
In general—whether you seek investors or lenders—you need to determine whether the money is needed for a temporary problem or a fundamental problem when Funding a Business in Kenya. Often, temporary problems can be resolved with a simple funding solution such as a merchant card account.
But a fundamental problem—for example, lack of sales, too high cost of sales, too high administrative costs, too much inventory, too much accounts receivable—usually will not be cured by borrowing money. In that case you need to address the fundamental problem and it's not a wise idea to borrow when Funding a Business in Kenya until you have done that.
How to Get a Bank Loan when Funding a Business in Kenya
It is not always the case that one always needs to provide a business preface (plan) to get a loan for Funding a Business in Kenya. Bankers ask five questions mainly when they are evaluating loans.

• How much money do you want
• What is the money being used for
• How will you collateralize the loan
• When are you going to pay me back
• How are you going to pay me back?

Most borrowers will be able to tell you the answers to these questions in a conversation and if they can't then it shows that something is not right about the lender.
The other key element in getting a bank loan for Funding a Business in Kenya is understanding the concept of securing a loan by means of collateral. Collateral refers to the assets that you pledge for the repayment of a loan if payment becomes hard. These assets can be your business's accounts receivable, inventory, or business equipment and they are used to secure the loan for Funding a Business in Kenya (versus an “unsecured” loan which has no collateral).
In the event you default on the loan, the lender can acquire and sell the collateral. If a business does not have any assets worth securing, a lender will look to personal assets, for example, stocks or bonds, personal house or some other form of personal guarantee. A personal guarantee means that the one guarantees repayment from personal assets, rather than from business assets when Funding a Business in Kenya
Key considerations when borrowing a loan for Funding a Business in Kenya

• Be ready to secure the loan.

Expect a request for either collateral or a personal guarantee or both, especially if you're a first-time borrower when Funding a Business in Kenya. If you sign a guarantee, try and limit it to a one year guarantee that can be renewed if necessary. Avoid having your spouse sign a guarantee unless he or she is active in the business. If you have friends or relatives who are willing to guarantee your business loan but they're not willing to guarantee the whole loan for Funding a Business in Kenya, it could be because the guarantee requires them to be jointly and severely liable, meaning they must pay the entire loan if the borrower defaults payment . To avoid this result and to encourage multiple guarantors, a guarantor can simply provide collateral for the portion of the loan they are guaranteeing. So if there are three guarantors, each may guarantee only one-third of the loan.

• Ask for enough money.

One of the most common errors people make when borrowing for Funding a Business in Kenya is that they underestimate the situation and they borrow lesser money than they should. When borrowing with the aim of Funding a Business in Kenya, borrowing less money makes it more difficult. By borrowing less than you need you haven't really solved the problem.

• Establish your company's credit worth.

Here's one tip for building your company's creditworthiness: Don't use a personal credit card for business purposes. That's the single rule that is not followed most often. Most people have personal credit and they figure, well, we've got this card so why not use that to buy for the company. The problem is that it doesn't do a thing to help your business credit when Funding a Business in Kenya.

• Have your credit history.

Are you having a checkered personal credit history? How long has your business operated? (Businesses under two years old tend to be viewed critically.). Do you know your credit score? You can't fix it if you don't know what it is.

• Make sure your financials are correct and accurate.

Don't provide financial reports that were printed at 3 a.m. the night before your meeting. Proof and review any financial documents used for a loan application with an accountant or financial advisor when borrowing a loan with the aim of Funding a Business in Kenya.
Credit Cards when Funding a Business in Kenya
Use of credit cards by small business has increased exponentially during the past decade and for good reason: credit cards provide short term access to cash when Funding a Business in Kenya to help with cash flow management and you earn value through incentive programs. At the same time, there's a potential downside to credit cards. As with all funding solutions, you need to borrow prudently and avoid burdening your business with high-interest debts.
Key considerations when using a credit card for Funding a Business in Kenya

• Stay current.

You shouldn't use a card to borrow when Funding a Business in Kenya with if you can't stay current with your bills. Those perks may not seem as appealing as your debt mounts and you're chasing a high interest rate.

• Pay attention to interest rates.

When shopping for a card, review competitive interest rates and be wary of teaser rates (low introductory rates that jump after a few months).

• Don't borrow if your credit card balance is greater than 80% of your credit limits.

If they are, you've already have a credit card problem.
Business Training in Kenya has more on this.
Conclusion on Funding a Business in Kenya
Whether one decides on a bank loan, investment, or the use of a credit card, the choice should be wise and informed so that Funding a Business in Kenya is easy.