Business

Small to Medium Enterprise loans in Kenya (SME)

Small and medium enterprise loans fund businesses to help them through their business journey and would be refunded back within a given period.

The long waiting process for businesses to get their loans from banks or investors can be a daunting task to indulge in, but it is worth it. The sleepless nights will come to an end once you realize your loan has been approved, and you are good to go. 

In this article, we go in deeper to better our knowledge of what are the necessities you need for all these approvals to go through and what you require as follows;

  • What are SME loans?
  • How to get loans for SMEs in Kenya
  • Who is eligible for SME loans
  • Types of SME loans
  • Conclusion

What are SME loans?

Small and medium enterprises loans fund businesses through their business journey and are to be refunded back within a given period. Most entrepreneurs and start-ups looking for starting capital for their businesses without a place to get help from would go for funding from various banks and investors that will help them through their journey.

How to get loans for SMEs in Kenya

Getting a business loan for your company would be a great deal if you are legible for it. It's not easy getting these loans, especially for SMEs, but your loan maybe approved with a good business pitch that will stand out. It won't hurt trying as long as you know what you want and are determined for what you will be going for. You will be at an advantage if the whole process goes through since your business operations will be funded and ready for work. Let's look at how you can get your SME loan while at it as follows;

  1. Research

The first thing you need to do when looking for a loan lender is to do your research on where you will find one or even more. You can start by checking, if it's a bank, then you will need to find out if it supports SME loans, such as Bank of Africa, and on what terms they are granting these loans for. Having an idea would be great since you won't be starting from zero but from a familiar point of view.

  1. Create a business plan

Before meeting up with any investor or a bank, you should always be able to structure what you want to do for your business. What kind of money you need to start your business with, among other vital factors that will be used to pitch your business to the funders.

  1. Have supporting documents

The most important thing to attach are supportive documents that will help you show you are a legit person to be granted the loan for a start. Most would want to see whether you pay your taxes, have any outstanding loans, if you are a Kenyan citizen, among other factors.

  1. Submit your loan application

Take time to read, fill in, and submit your loan application with the needed information. If you agree to their terms and conditions, then you can comply with them. 

Who is eligible for SME loans

In order to get a loan as an SME business owner, various factors need to be put into consideration, and these factors include the following;

  1. Business profitability

In most cases, business loan lenders would like to get a clear picture of your business and its reasons, whether it's a type they can invest in or not. Based on the economy and current market, they would question whether the business would be profitable before wiring their money to your account.

  1. Business turnover

Depending on the type of loan funders you will get, some will want to know your business turnover to see if they would wish to invest in it. If the amount you are receiving from the business is worth it, then they would fund it. Otherwise, they wouldn't want to take the risk.

  1. Business experience

Business experience is also another factor they would look into. How long have you been in business, and how many years of experience do you have? All these questions to know if they would want to invest or loan you their money. 

  1. Business registration

This is also a determinant regarding SMEs getting loans for their businesses. Those who are to fund in their money would want proof to show they are not being scammed and the business you are pitching to them about is or would be legal.

Types of SME loans

We have different types of loans that SMEs can go for, and with us are the types you might want to check and determine which one you'd prefer as follows;

  1. Short term loans

This type of loan is granted to businesses over a short period of time for entrepreneurs to make payments. For the payment to be made, SME entrepreneurs are given a period of six months to one year to pay up the loan. These loans should be repaid with an interest rate within the required time.

  1. Invoice financing loan

While searching for a loan, an invoice financing loan will grant you a loan against your pending account receivables. This funding is best for SMEs looking for quick ways to fund their businesses and allows businesses to use unpaid invoices as collateral for financial purposes.

  1. Business line credit loan

This type of business loaning is borrowed ideally on a fixed amount needed and repaid back in a specific time. Businesses can use these loans to buy and expand their projects, among other necessary reasons they need them. Usually, the money borrowed should be paid back with interest on top.

  1. Equipment financing loan

This type of loan allows businesses to get loans for them to purchase equipment and other tools they need for their business on a credited lease. The SME will then pay the amount given in a given time as agreed.

How to apply for SME loans

Applying for an SME loan is a procedure everyone must undergo for processing. How is it done? Let's find out down below the procedure as follows;

  1.  Have financial documents that you will provide your loan lender with for proof. These documents include bank statements, tax returns, cash flow statements, and financial projections, among other supportive documents. 
  2.  Contact a lender after you have secured the required supporting documents to show them and discuss the loan you wish to get from them.
  3. Submit your application once you have contacted them and let them review it and see if they would be impressed with what you have for them. They will keep in touch with you.
  4. Once the loan has been approved, review the terms and conditions they offer you for loan purposes. This is to show you how much interest they'd want and how long you'd need to repay the loan, among other conditions set. 
  5.  Sign the loan agreement once you feel it's fair on your side and send them back.

Conclusion

If you are a business owner, sometimes you understand the need to go for that much-needed loan to help you grow. SME financing in Kenya has helped the economy grow and, at the same time, saved small entrepreneurs with big dreams to accomplish through their businesses.

It's not easy repaying back these loans, but with determination, you will be able to sum up the needed amount for your business loans to be repaid in full. Help your business grow and see change with the above-stated ideas for a better future.

Last updated
April 18, 2023
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