Many small holder farmers can confess that accessing a loan to finance your agribusiness is not easy. This is attributed to the fact that many banks still consider agriculture as a risky venture. Notwithstanding, there are of course a number of considerations you must make in your businesses operations to ensure you raise the profile of your agribusiness for better ranking.
Some of different banks and microfinance that offer credit to small holder farmers in Kenya Include:
Equity Bank, KWFT, KCB, Cooperative bank, Barclays, Rafiki bank, Faulu, Jamii Bora. Member SACCOs like Teachers, Dairy or Traders Saccos are the best avenues where you can apply for an agri-loan mostly because they tend to offer more customized loans with friendly interest loan.
Let us now explore the key considerations that any bank or micro-finance will use to evaluate your business.
1. Your Bank Account and Statement.
Having an active bank account with good and consistent cash flows i.e Deposits and Withdrawals is the first thing your creditor will evaluate even before you can get that application form. Many banks will require you to have good 3-6months bank statement. In your statement the bank will look for:
- Your Average Deposits – This is the average deposits and withdrawals per a given period. You may make big money but you may not have a good saving history or may be inconsistent.
- Your Average bank balance – Your account balance averages show whether you keep cash on hand. In case of any uneventualities, this helps you make loan repayments in bad months of business.
2. Do you have guarantors?
Your bank will wants to know what they can use to recover their loan in case you fail to repay the loan. The first thing they will ask you is to provide one or two guarantors. This will be the first people the bank can hold on in case you fail to repay.
3.What collateral do you have?
The bank will ask you to provide security for the loan in terms of Assets. This may range from business assets like premises, logbook, title deeds, plant machinery e.t.c Depending on your agribusiness and lender, assets like: greenhouses, crops, Livestock i.e Dairy cow, Poultry, Pigs and goats also can act security. In most circumstances your bank will require you to have your assets insured.
4. Do you have Business records?
Many smallholder farmers rank poorly in keeping business records yet it is a key requirement. Several documents needed in your evaluation here will include: Business sale receipts, invoices, creditors, debtors, income statement and balance sheet, Tax returns business permit and licenses. If your farm is on leased land or property have the lease agreement ready. Hey! and another thing, have a good definition of your market for your produce.
5.Do you have Solid Business Plan ?
In most instances the bank will ask you to provide a business plan for the amount you are applying. For example if it is purchase of new machinery or livestock having a budget and quotation from suppliers will rank you big. Don’t just throw in figures, apply for a realistic amount backed up with justification.
6.What is your Credit History
Are you the guy who has poor credit history with other institutions and creditors? This will put you down. Today, defaulting small loans on your Bank mobi-loan or Mshwari will get you listed on Credit Reference Bureau (CRB). To get your name or business cleared you will of course have to pay.
7. Know when To make that Application
Make sure your business is in operation. No one will want to finance a failing business or a business too much in infancy. Remember 80% of new businesses fail before they reach their second anniversary. Consequently, few lenders will make a bet with a collapsing business unless there is adequate proof of resilience.
8.Approach The bank In Confidence
Don’t go to the bank with a mindset of begging. That will not do you any good. Once you have ensured you have all the above, Approach the bank with confidence of negotiation and prove your business is worth financing. Don’t just throw away numbers. You are the only one who understands your business better and you should communicate details about your business operations i.e finances, production costing, markets and growth consistently and accurately without reading on a paper. I wish you success in your agribusiness.
Do you have experiences to share? Drop your comments on this article here.