Why Biashara Loans must be guarded to support businesses.

 

18 May 2023

Why Biashara Loans must be guarded to support businesses.

Business advisory services are critical for any micro, small, and medium enterprises (MSMEs) who have accessed the all important Biashara loan from the county government. All businesses require any form of loan to grow business and make profits, however it’s not a walk in the park for most business owners. Loans can come with good and bad tidings. You need a proper road map to withstand any eventualities as you do your day-to-day business activities.

I would like to offer some guidance to these lucky business owners that got the opportunity to access Biashara loan which in my considered view is a step in the right direction by the County Government to support economic growth through the business community. There are several issues to consider for every business to manage the loans and mitigating risks.

Here are some prudent ways to manage the loans and ensure timely repayment,

Create a comprehensive business plan, develop a detailed business plan that includes financial projections, cash flow analysis, and strategies for growth. This will help you understand how the loan will be utilized and how it will contribute to the overall success of your business.

Loan allocation and tracking, allocate the loan funds wisely by prioritizing essential business needs such as purchasing inventory, upgrading equipment, or expanding operations. Maintain a system to track the usage of funds, ensuring they are utilized for the intended purposes.

Cash flow management, proper cash flow management is crucial for loan repayment. Keep track of your income and expenses, maintain a reserve fund for emergencies, and ensure that your business generates sufficient cash flow to meet loan repayment obligations.

Debt service coverage ratio, calculate your debt service coverage ratio, which measures your ability to repay debt. Ideally, your business should generate enough cash flow to cover both loan repayment and interest costs. A higher ratio indicates a stronger ability to repay the loan.

Risk management, identify and assess potential risks to your business, such as market fluctuations, competition, or changes in regulations. Develop strategies to mitigate these risks, such as diversifying your product/service offerings, building strong customer relationships, and staying informed about industry trends.

Timely repayment, make loan repayments a priority and ensure they are paid on time. Late or missed payments can negatively impact your credit history and future loan eligibility. Set up reminders, automate payments if possible, and maintain open communication with the lending institution in this case county government in charge of department of trade.

Establish a good relationship with the county government, maintain regular communication with the lender and keep them informed about your business's progress. If you encounter challenges or foresee difficulties in repayment, proactively communicate with the lender to explore potential solutions or alternative repayment plans. I want to believe there are officers who will coordinate and support these businesses continuously providing reports on loan utilization and to seal any gaps identified.

Seek professional advice, consider engaging the services of a financial advisor or accountant who specializes in small business finance. They can provide expert guidance tailored to your specific circumstances and help you make informed decisions regarding loan management and repayment.

By implementing these prudent strategies, you can effectively manage the loans received from the county government, minimize risks, and increase your chances of accessing future loans.

Remember, responsible loan management and timely repayment are key to building a positive credit history and strengthening your business's financial position.

Access to loans is one step, the rest is up to you as the business owner track every single transaction however small and have a dashboard of all activities and generate daily, weekly, ,quarterly, half yearly and yearly reports, you will be surprised how informed you will be about your business performance. The insights from the reports will be a useful tool to guide you to make informed business decisions, lenders consider this approach critical, making due diligence process seamless and will you will be ahead of others in accessing loans.

Grow positively.

 Author, Ekaale Ekuam is an Entrepreneurship and Innovation Management Consultant

"Driving Growth and Success for Businesses."

ekaaleekuam@blogspot.com

Twitter @EkaaleEkuam

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