Getting funding is not easy especially for transport business. There are many attributes to this, some of them being that the amount of risks involved is high and also the vehicle tend to lose its value on a day to day basis.
If you are looking to request for a bank loan, you will need to make sure you have the expertise in the transport industry in order to bring confidence to the lender and also you will need to give a collateral through your personal assets to act as a security for the loan. The value of security needs to be more than the amount being borrowed. Without it collateral, your chances of getting a bank loan is less likely.
The bank will expect you to provide financial plan on how you will use the borrowed money and how you are going to make the repayment to avoid any defaulting on payment.
You need to know that banks tend to perform a credit record search to check your creditworthiness before lending you the money. So if you have business partners whom you are starting the business together, then their credit records will also be checked before the approval of the bank loan. Make sure that you are in touch with your bank and see how you can improve your credit record that will enable you to have a better chance in getting the loan.
It also helps if you have a business partner who will also use their personal assets as part of the borrowing.
Perform your research on what documents you require to provide the bank and collect them in advance so to make a good impression on the loan officer.
Some banks require proof of contracts secured before they lend you money, also known as LPO financing. This is usually hard for those just getting started in their transport business, but if you secure a contract whether in Government or private sector, this will be an advantage for you.
Cash Flow Forecast
Make sure you know how much money you want to borrow. Don’t just say between Ksh. 1,000,000 – Ksh. 5,000,000. Be specific and show the bank that you even know all the cost that you will incur when starting your business, use your cash flow forecast to back-up your pitch.
Resources for Government Funding
Here are some various financing facilities provided by Kenya Government to small medium enterprises businesses;
- Uwezo Funds – provides financial supports to businesses and enterprises at the constituency level particularly youth, women and persons with disability
- Youth Funds – provides financial support and business development services to youth owned enterprises
- Women Enterprise Fund – empowers women entrepreneurs by providing them with affordable financial and business support services
- Agricultural Finance Corporation – support entrepreneurs in the agriculture sector
- IDB Capital – offers project finance, asset finance, working capital finance and bridging finance.
- Kenya Industrial Estates Ltd – supports micro, small and medium industries
- ICDC – supports Manufacturing, Agro-processing, Financial services and Education sectors.
Photo Courtesy of Silent IVM