Starting a business in Kenya ....Step 3!

Following on from step 2!

Value your business. In most cases if not all, no one but your parents would be willing to advance you any monies towards a business idea if you have not already started. For Equity bank and many other SMEs, they would want you to be operational for say 6 months. The financial institutions would like to be sure that you are in a position to repay any monies advanced. As such they would like to see the statements you would have drawn to determine if your business is profitable/viable or not. Whilst professionally drawn up accounts aren’t necessary, basic records clearly showing sales and expenses should be expected. Don’t be tempted to understate the costs, after all not many businesses are profitable in the first 2 years of operation. Understatement of costs may signal your naivety in business and could work to your detriment.

For the Cooperative bank of Kenya, the minimum period of account operation prior to advancement of loan is 6 months. They would also need to see that the account is active; as such you need to make daily drawings and deposits. It is advisable to start the business on a small scale until you are able to have some orders/customer to present to the bank. You don’t need to start the biggest spa treatment in town to make it. The trick here is to deposit all your daily takings even though it means you go to the ATM and withdraw the following morning. This way the business development manager in the bank can see that you have actually been making sales and that you are not just claiming to be in business.

For Co-op bank the relevant bank account is Haba na Haba to qualify for an SME loan. Even though you dont need a loan, you might want to take a small amount at the start, this will cost you interest rate but it will earn you credit worthiness with the bank for future loan reqirements.