How to Get a Small Business Loan in Kenya

How to Get a Small Business Loan in Kenya

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Getting finances to start up your business or boost it can be a bit challenging. Most reasons why small businesses in Kenya tend to fail is because of finances. There are different ways that you can get financing for your small business. Securing a small business loan is one of the avenues that most businesses follow.

However, many banks have tight regulations when it comes to small business loan. It is not that obvious that you will get a loan, no matter how good your business idea/concept looks.

This article will take you through 5 simple steps you need to take in order to get a small business loan in Kenya.

Step 1: Do you Really Need a Small Business Loan?

This is a question that you really need to ask yourself. Do you need the money to start your small business? Are there other alternatives you can explore before asking for a business loan? How are you going to use the money that you are planning to get from the lending institutions?

You need to explicitly ask yourself these questions and give yourself convincing answers. This is because, when sourcing for business financing, you will get asked these questions. If your answers are not convincing, you may not get the business funding that you are seeking.

There could be several reasons for getting a small business loan. It could be to cover the starting up cost or help the business grow. It could be for day to day expenditure or for security purposes for your business. Whatever your reason may be, make sure that you really need the loan before applying for it.

You should also be clear on your loan repayment plan.

Kenya Small Business Loans

Step 2: Types of Small Business Loans Available

After you determine that you really need the small business loan and why exactly you need it, the next step will be automatically defined. The reason why you need the load will advise the type of business loan to take.

If you are completely starting up, it will be a bit of a bumpy road if you want to take up loans from lending institutions like banks. Banks normally lend already existing businesses. In their terms, you are mostly required to submit the financial track record of your business to be considered for the bank loan.

If you need the loan to grow your business, this can be a bit easier. Especially if you keep your books well.

But for startups, you would consider alternatives such as taking up a personal loan, asking your family or close friends. There are a bunch of other lending options like crowdfunding that you can consider.

If you keep your records well and have documented the past 6 – 12 months, most banks and microfinance institutions in Kenya will grant you the business loan.

You can find lists of microfinance institutions and banks in Kenya that you can get financing from in this article we earlier wrote on business financing.

Step 3: What Lending Options do you have?

There are different lending options that you can consider. Your decision will largely be determined by the lender’s regulations.

You have the options of Banks, Microfinance institutions or Saccos. All you need to do is gather as much information as you can. Request for meetings with these institution’s agents and ask all the relevant questions you need to ask.

Be mindful of their repayment terms and interests accumulated. Compare and contrast the different plans you have and pick the most comfortable option.

It is important to note that banks do not process business financing that quickly. Therefore, if you are in need of quick cash for your business, it might be wise to consider microfinance institutions.

Banks in Kenya will also give you a loan only when you have collateral. It can be a challenge if you do not have any collateral. You should also have a clear credit record. Check your status with CRB before applying for a bank loan for your business.

Step 4: Do you meet the Lending Requirements?

Requirements may vary from one institution to another. As mentioned, some may require collateral, others may not. Some may need the individual applying to have a clean record on CRB, others may not take this seriously. Another important aspect is also how long your business has been in existence and how well you have kept the records.

For the institutions that you have shortlisted, find out if you meet all the requirements that they have listed. Do not waste your time trying and thinking that one may overlook any aspects. Lending institutions have strict policies and guidelines. If you do not meet their criteria, they will rule you out immediately.

You also need to seriously consider the repayment and whether your business is capable of servicing the loan. Make sure that the business makes enough to pay back the loan within the stipulated timelines.

Step 5: Compile your Business Documents

If you have followed all the steps above, this should be the easiest. You need to compile all the required documentation after identifying the ideal lender.

Common documentation that may be required may include:

  • Business Registration information
  • Tax Returns
  • Personal Identification Documents
  • Recent bank statement
  • Business financial records, etc.

Small Business Loans Kenya - Lenders in Kenya

If you follow these steps, you are almost assured of securing a small business loan in Kenya. What other guidelines can you suggest that will increase the chances of securing a business loan in Kenya? Share in the comment section below.

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