Business Loans

Cheapest Bank Loans in Kenya – All You Need To Know

September 11, 2023 by hakeem

The Central Bank of Kenya’s (CBK) decision to raise its benchmark rate in March 2023 sent shockwaves through the Kenyan banking sector. As expected, most commercial banks followed suit, raising their lending rates. But amidst this rise, a different story emerged – one of smaller lenders defying the trend and offering borrowers a glimmer of hope with lower interest rates.

This blog post dives deep into the world of Kenyan bank loans, uncovering the cheapest options available and empowering you with the knowledge to make informed financial decisions.

We’ll reveal the banks extending a helping hand to borrowers with rates as low as 9%, while also exposing those charging a hefty 17.6%. So, buckle up and get ready to navigate the Kenyan loan market like a pro!

Cheapest Bank loans in Kenya

Based on our research, we came up with a list of banks that offer the cheapest loans in Kenya. Some of these banks are highlighted in the table below:

Bank	Overall rate
The Central Bank of Kenya	9%
First Community	9%
Ecobank	10.7%
HFC	11%
Access	11.2%
Consolidated	11.6%
Habib	11.9%
DTB	12.1%
Citibank	12.2%
KCB	15.6%

1. First Community Bank (FCB)

Standing out from the crowd, FCB boasts the current lowest average interest rate at an attractive 9%. This makes them a compelling option for borrowers seeking the most affordable loan. They offer various loan products, including personal and unsecured loans.

2. Ecobank Kenya

Following closely behind is Ecobank Kenya with a competitive average rate of 10.7%. This positions them as a solid choice for budget-conscious borrowers. They cater to a wide range of loan needs, making them a versatile option.

3. HF Bank

Offering a competitive rate of 11%, HF Bank provides a good balance between affordability and an established presence in the Kenyan banking sector. They specialize in mortgage and asset-backed loans, making them a good choice for those specific needs.

4. Access Bank Kenya

Rounding out the top contenders, Access Bank Kenya comes in at a slightly higher average rate of 11.2%.

Other Options to Consider

While not the absolute cheapest, these banks are still worth exploring depending on your specific needs and loan product:

Consolidated Bank
Habib Bank
DTB Bank

International Players:

Citibank: International banks like Citibank often cater to a different market segment and may have higher interest rates to reflect their operating model.

Traditional Powerhouses:

Kenya Commercial Bank (KCB): KCB loans often attract a 13% interest rate. They offer different categories of loans. Ranging from Masomo loans, personal unsecured check-offs, salary advances, etc. The only extra fee you pay is a negation fee of 2.5%. Interest rate comprises CBK rate at 9% and bank variable margin of 4%

Common Types of Cheap Loans Offered by Banks

Factors That Cause a Change in Interest Rate

The factors that cause changes in interest rates include:

Monetary Policy: Central banks, such as the Federal Reserve in the United States, have the authority to set interest rates. By adjusting the benchmark interest rates, central banks can influence borrowing costs for businesses and consumers.
Inflation: When inflation is high, central banks may raise interest rates to curb inflationary pressure and maintain price stability. Higher interest rates can reduce borrowing and spending, which can help slow down inflation.
Demand and Supply of Credit: Interest rates are influenced by the demand for credit from borrowers and the supply of funds available from lenders. When demand for credit is high compared to the supply of funds, interest rates tend to rise. Conversely, when there is less demand for credit or an excess supply of funds, interest rates may decrease.
Economic Growth and Financial Markets: Interest rates can also be influenced by the overall state of the economy and financial markets. During periods of economic expansion, interest rates may rise to control inflation and cool down the economy. Conversely, during economic downturns, central banks may lower interest rates to stimulate borrowing and spending to boost economic activity.

It’s important to note that interest rates are complex and can be influenced by multiple factors, and the interplay between these factors can vary depending on the specific economic conditions and policies in different countries.

How Commercial Banks Choose Their Interest Rates

Commercial banks determine interest rates using several factors such as:

Market demand: The bank’s cost of obtaining funds is one of the most significant factors in determining the interest rate. The bank’s cost of borrowing affects its lending rate to customers, as the bank needs to earn enough interest to cover its cost of borrowing and also make a profit.
Operational costs: Operational costs such as overhead, administrative and personnel expenses, and other costs of providing loans also contribute to the interest rate charged.
Yield curves.
Additionally, commercial banks assess potential borrowers’ credit scores, credit history, and assets to determine the risk of lending to them and the appropriate interest rate.
Finally, commercial banks also consider market conditions, for example, the prevailing interest rate trends, the demand for credit, as well as, the economy’s overall health and stability.

In conclusion, interest rates are influenced by various economic factors, including market demand and the bank’s operational costs. Banks aim to maximize profits while still remaining competitive by striking a balance between profitability and affordability to their customers.

Conclusion

Most borrowers fall prey to banks that offer expensive loans. The reason is that they patronize the ease of getting the loans rather than knowing the interest or other fees attached.

In urgent situations, borrowers may not notice some features. Some banks exploit Kenyans at this point of vulnerability.

Note that it is better to conduct proper research for the cheapest loans before taking one. This would enable you to make your repayments easily.

UBA Kenya Loan- All You Need To Know

June 12, 2023 by hakeem Leave a Comment

UBA Kenya loan is an unsecured personal loan that is designed to help customers meet their personal finance goals by providing them with access to affordable loans. The loan product offers competitive interest rates and flexible repayment terms, encouraging customers to take control of their finances.

What you need to know about UBA Kenya loan

UBA, a leading provider of a wide range of financial services in Kenya, is focused on delivering a highly personalized customer experience. The full name for the abbreviation is United Bank for Africa Kenya limited and is a commercial bank in Kenya. The Central Bank of Kenya, the central and national banking regulator, licenses and supervises it. Visit the website to find out more about the array of financial services they offer across Personal, asset finance and mortgage loans.

UBA Kenya will always offer you loans to suit your needs, whether you are looking to buy a car, motorcycle or even houses. Loans are available for any purpose you have in mind, within the limits. It also extends loans to small businesses on easy repayment terms.

How do I apply for a UBA Kenya loan online?

Learn more about your UBA Kenya loan online application process. Simple steps to complete medium to long term loan requirements. The steps are below:

Login to their website
Locate the “Personal” tab and see the “loans and payments” link and click on it.
Select the type of loan products you want
Fill the form below it and supply all personal and necessary information like your name, phone numbers, location and loan request type, etc
Wait for further response
Get your loan

You can apply offline by visiting their office and filling the hard copy of the loan application form. Then wait for approval and disbursement.

4 UBA Kenya loan products

Looking for a personal loan that won’t put your credit score at risk? At UBA Kenya, they will provide you with the best possible financial services tailored to suit your needs. Contact them online or offline to get the best loan that suits your needs. Below are the various loan products:

Hakuna Matata loan/personal unsecured loan
Asset finance
Mortgage loan and
Salary overdraft

Hakuna Matata/Personal unsecured loan

At UBA, they take an innovative approach to solving our members’ financial problems by providing personal loans. Through extensive research and rigorous testing, they designed the UBA Kenya Hakuna Matata loan to be the first of its kind – a loan specifically tailored to the Kenyans to solve personal and emergency needs. You can borrow up to ksh. 5,000,000 with interest of 13% per annum, which is payable in 60 months.

Benefits

You do not need to pay a deposit or invoice
Processed quickly, easily, and conveniently
A convenient repayment schedule
The availability of competitive interest rates

Target Audience

Applicants must be confirmed by employees of either a public or private organization.
Those whose salaries have been paid through UBA for at least three months.

Asset finance

UBA Kenya avails opportunities for individuals to own assets they have longed for. They believe that this loan is putting more money in the hands of more people by offering flexible repayment terms; it gives borrowers options on how they want to repay their loans, allowing them to make regularly scheduled installments that fit into their monthly budgets. UBA Kenya loan helps customers achieve their dreams today, while building for tomorrow.

Moreso, you can get finance up to Ksh. 5,000,000 with 90% financing which is payable in 60 months for new cars and 70% financing repaid in 36 months for used cars. Enjoy also a flexible repayment schedule on insurance premium cover for up to Ksh. 5,000,000 for a maximum of 10 months.

Benefits

Has a suitable repayment terms
Makes it possible to get your hands on an asset without saving for a long time
Comparable interest rates.

Target Audience

Employees confirmed by reputable public or private sector organisations
Employees whose salaries must be paid through UBA for at least one month
Account holders at UBA Kenya
Businesses that have been operating for at least a year.

Flexible Mortgages

UBA Kenya is a mortgage provider in Kenya focusing on providing finance to high net worth individuals. Your dream home could be yours for ksh. 25,000,000 which is payable in 15 years, with up to 70% Forced Sale Value (FSV).

UBA Kenya equity release program also provides up to 50% of FSV for purchase of land and untitled properties, medical bills, and school fees.

Salary overdraft

UBA Kenya loan gives you a salary overdraft to employers. You can get up to Kes. 300,000 or 50% of your net salary to sustain you for the month before the pay day. It is available to only UBA customer account holders with up to 3 month account operations.

How to contact UBA Kenya loan

You can contact them via email @cfckenya@ubagriuo.com or through their phone number @ +254 711 027 099. If you wish to visit their office, locate them at the 1st floor, Apollo centre, Westlands, Nairobi, Kenya.

Many loan options abound in Kenya. Some of them include Watu kenya loans, Letshego, Pesazone, Loanbee amongst others.

Conclusion

The UBA Kenya loan is a simple, hassle-free way to borrow according to your capital. 100% of the proceeds of the loan go directly to the borrower for small business or personal use, on property or equipment. It works like this: you decide on the amount you want to borrow and the term you wish to repay. They will keep it simple by giving you one repayment of principal and interest of 12 or 36 monthly installments.

Trade Credit- All you Need To Know

May 23, 2023 by hakeem

An important barrier to the growth of businesses and companies in Kenya is finance, especially for SMEs that contribute to the large share of the economy. Working capital is also the key to the success of every business. There are several instruments you can deploy to finance business and, thus, the likes of trade credit.

Trade credit is an essential tool for financing business growth. To get this trade credit, you need a properly prepared financial plan and an established relationship with the supplier.

When you are first starting a business, however, suppliers won’t be disposed to sell to you on credit. While this is a fairly normal tradition, you can still negotiate with the supplier. Depending on the terms, trade credit is favourable to buyers because it is a credit given to you by a supplier who allows you to buy now and pay later.

What is a Trade Credit?

Trade credit is a business arrangement where a buyer accesses products from the supplier without immediate payment. The buyer pays on a scheduled agreed date. Usually, businesses that deal on trade credit have limits of up to 30 days to 90 days to pay up.

They record trade transactions through an invoice and have a 0% financing. Goods are exchanged between two parties, called the buyer/customer and the supplier/seller.

The customer then supplies to the consumers and pays up later. This process of exchange of goods and extension of payment is called trade credit.

Understanding Trade Credit

Trade credit is offered to a buyer by a supplier in which they make payment on a later agreed date. The platform is a significant advantage for the buyer. In most cases, buyers negotiate a longer trade credit repayment date, which provides even more advantage.

Suppliers have criteria for qualifying for trade credit, which includes the capacity to pay back and an established mutual relationship between both parties.

Number of days for the credit is determined by the supplier or the company offering the credit. Then is agreed upon by the two entities. Trade credit is a good way to finance short-term growth and maintain a consistent supply of product when you lack finance.

Relatively, trade credit requires no interest and also encourages sales. Sellers often see it as a disadvantage to them, but they fill the gap by offering a discount. They offer a certain discount amount for buyers to pay up early.

How does trade credit work?

Trade credit is an advantage to business to business, which helps a party get, manufacture and sell goods before ever having to pay for it. The platform allows companies to receive a revenue channel that can cover costs of goods sold. To go further, different ways that trade credit works are:

The supplier/seller sets and defines the trade credit terms and repayment date.
Suppliers and buyers agree on that date before they seal a contract.
The deal often includes some type of penalty for late repayment and a bonus for early payment. All these terms depend on the supplier.
Sellers usually send an invoice along with the orders made by the buyer, letting the buyer know how he owes.
These processes are properly recorded and appear on the balance sheet for future references.

Trade Credit in the Real World

Trade credit mostly helps businesses to find avenues to maintain trade flows and growth. New firms that do not possess an established flow of income yet can get a trade credit, but it all depends on the suppliers.

Some can get it through a mutual relationship with the supplier. Once the buyer is sure of selling off the products immediately to the consumer and paying off the credit, he goes for trade credit.

The rise of trade credit as an alternative means of payment has brought growth to some businesses. They have also found that trade credit has financed an approximate 20% of all investments and businesses in Kenya.

To sum it up, trade credit in the actual world of Kenya is doing great and putting smiles on every business that encounters it.

How can I get trade credit?

If you are looking towards opening a trade credit, approach your supplier first. A supplier you currently work with and have developed trust with. You can also start with the vendor equally.

Advantages

An agreement on trade credit has a lot of advantages for both the buyer and the supplier. The advantages are:

Easy to arrange and operate
Proves and increases supplier’s reputation
Gears towards business growth
It is a tool used by most business, for supplies of goods or services
Enjoyment of discounts and bulk buying
No payment upfront
The buyer enjoys a competitive edge and adapts to market demand.
A yielding and potentially low-cost form of working capital finance.
An easy and straight source of short-term finance.
Trade credit reduces the huge capital requirements of businesses
Helps companies and suppliers focus on core activities, which is manufacturing and immediate sales.
It serves as a strategy for winning new customers, increasing sales

and keeping customer loyalty

Disadvantages

Access to robust trade credit can seem a lifeline for a cash-strapped business. Also note that if the root of your business means you are likely to not pay back, think again about relying on trade credit. The disadvantages are:

Hard to get for startups and businesses without evidence of cash flow
Penalties and interest await the buyers when they cannot make payments.
Legal action can occur parenting the supplier to sue the buyer.
The buyer can get a negative impact on credit rating
If the buyer meets up with the bargain, he can lose the supplier
Cash flow issues. Late repayment and default can lead to a serious cash flow for the supplier.
Problem of prolonged customer assessment
Presents a serious challenge of bad debt to the supplier.

Example

A retailer that sells solar panels and inverters under which the distributor agrees to provide him with panels and inverters under agreement of “Net 80”. The supplier offers the retailer a 10% discount on payment within 50days and a 20% discount on payment within 30days. Meaning that the retailer has 80days to pay up the invoice in full. When so many consumers request the panels and inverters, the retailer may pay up in full or part within 30days and enjoy a 20% discount on the panels and inverter. However, if sales are bad, the supplier can pay up within 50days and enjoy a 10% discount.

The supplier of the panels can also do the same thing. Receiving trade discounts from the manufacturing company that produces inverter components. They may agree to a term and the supplier gets them on credit,if sales are good, the supplier pays up early and enjoys the discount.

Why Companies Offer Trade Credit?

Trade credit is a common way to finance small businesses to generate income to circulate in the economy. The reasons companies offer trade credit are:

It is an alternative to other expensive loan applications. Sellers also use it to boost buyers.
Trade credit is a sale tool and strategy
It serves as a signal from companies to businesses showing that they offer high-quality products.
A means to sell off a product by the companies who are in a competitive and tight market.

Where can I find companies that offer trade credit?

Much of the businesses in Kenya run on trade credit. But many companies or suppliers might not offer trade credit to new businesses. While it’s easier to get the supplier’s credit, it is also easier to become one if you are into product manufacturing.

Fortunately, many companies in Kenya offer trade credit terms to businesses. You see these companies by:

Locating different manufacturers in Kenya.
Locating a Vendor
Visiting a previous seller.

How is trade credit different from bank credit?

Banks and financial institutions offer cash through loans, credit cards, etc. But a supplier offers a Trade credit to a business with specified terms where the buyer pays later. Trade discount involves selling off products while bank credit involves lending loans.

What is the formula for the cost of trade credit?

Trade credit is represented by three numbers, viz:

The first indicates a discount percentage
The second shows discount period while
The last portrays the final due date.

Features

The features of trade credit are the different things that make up the trade credit. It also includes how, where, and what trade credit is. The features are:

It operates on an informal legal instrument or debt acknowledgement.
An arrangement between the buyer and the supplier/company
It follows purely an internal arrangement system
It is basically a spontaneous source of financing for businesses.

Trade Credit Instruments

They offer most credit on open accounts or mere written agreement. But as time went on, because of failure to keep to a binding agreement, they deployed different instruments. The different instruments used are:

Invoice: this is an instrument generated by the supplier and sent along with the goods. The buyer therefore signs as an evidence of receiving the goods
Account books: the supplier and the buyer have different accounting books they keep for record purposes. They both record series of trade credit transactions on this book
Promissory note or IOU: the platform is used when the buyer offers a large product and when the supplier expects problems in fund collection. It is signed after delivery
Commercial draft: commercial draft is a written document which serves an instrument to trade credit. It is written by the supplier to the buyer to pay an amount of funding on a particular date. The supplier sends the draft and the invoice to the buyer or the buyer’s bank. It depends on the supplier. When the bank receives and accepts it, they invite the buyer to sign the draft.
Banker’s acceptance: this is also a trade credit instrument which is written by the bank when they accept to pay for a customer’s product and the customer paying them on a later date.

Conclusion

Trade credit financing is encouraged globally and in Kenya by regulators and can create so many opportunities. Opportunity for new financial technology solutions and growth. Bearing this in mind, trade credit is a means of financing businesses. As a buyer, you can enjoy trade credit to the fullest.

To the suppliers, you will need to get professional legal help to write binding terms and conditions. You also need dedicated account handlers to ensure that outstanding invoices are chased up and payment recovered. Setting clear invoice agreements and ensuring good communication can help encourage buyers to pay promptly and regularly. Check out new instruments and updates on trade credit and follow the trend.

Finally, deploy capable hands to investigate online accounts software with CRM and invoicing. These modes are ways of ensuring healthy trade credit.

Business startup loans in Kenya – Meaning and how to apply

April 26, 2023 by hakeem

Business Startup loans in Kenya are affordable and accessible. You have been thinking of starting up a business and you don’t have the cash to fund it, think no more. This article is for you. Kenya has different modes and channels a borrower can source for funds to start up a business.

In addition, as a startup, taking up a loan is one thing, repaying is another. Go for loans you can wisely utilize and repay within a short while and have your business still moving.

We will take you through business startup loans in Kenya and how to access them.

What are business startup loans

Business startup loans are loans made available by different financial institutions and private lenders in Kenya for the purpose of funding a business.

The borrower qualifies, applies and then gets approved and has the loan for the sole purpose of starting up a business.

What you need to know about business start-up loans

There are things you need to know about business startup loans. They are:

Quick loan application procedure
Easier to qualify
Easier to meet up with the requirements
Transparency and honesty of lenders in revealing extra hidden fees.

How to apply for business startup loans in Kenya

To apply for a business startup loans, follow the procedure:

Avail yourself, study and compare lenders
Visit the financial institution or lender’s website
Find out the eligibility and requirements
Know the documents to submit and get them ready
Fill the application form either online or offline
Visit the lenders branch and submit the application
Attach your documents
Wait for approval and loan disbursement

Ways of accessing business startup loans

There three basic ways of accessing business startup loans in Kenya. They are:

Mobile lending
Micro lenders and Credit union
banks

Mobile lending business startup loans in Kenya

There are different mobile lenders offering loans to business startups in Kenya. They as follows:

M-shawari
Tala
Branch
KCB M-pesa
Grofin
Equitel
Kopa Chapaa

Micro lenders and Credit union for business startup loans in Kenya

Micro lenders and Credit unions also give out business startup loans. They include:

M-co-op cash
Bitband- peer-to-peer lending
Kiva- Peer to peer lending

Banks for business startup loans in Kenya

Banks for business startup loans are:

Equity groups
Chase banks
Family bank
Kenya commercial banks
Standard chartered banks
Barclays banks
Prime bank

Credit score for a business startup loans

Generally, you need 680 and above for banks to give you a business startup loan. But you will still find lenders that will give you a short-term loan to start your business at 550 and 600 credit score.

How much loan can you get as a business startup

The amount given by lenders to borrowers for starting a business differ from lender to lender. Typically, you can borrow from ksh. 1000 to ksh. 30000. It depends on the lender or the financial institution.

Documents needed for business startup loans

The documents needed for business startup loans are:

National ID
Proof of address and recent passport
Certificate of registration for some lenders.

Is it difficult to get a business startup loan?

It is not hard to get a business startup loan. The issue is that some banks believe that lenders require cash flow to be able to make payment and not default.

General ways of repaying business startup loans

Repaying business startup loans differ from lender to lender. The general way of repaying it includes:

Open you M-Pesa account
Choose paybill
Enter the business number of the loan platform
Input the amount you want to repay
Enter your M-Pesa pin
Click ok and send.

You can also choose to transfer from your bank account. It all depends on the lender’s mode of loan repayment.

Conclusion

Failure to access bank loans should not be the end of the road for your small business. Check out other means. Carry out your study well. Thanks to the various online lending options that exist in Kenya today.

Government Programmes For Agricultural Loans in Kenya

April 19, 2023 by hakeem

The increase in the country’s population and the call for higher-value agricultural production gave the need to invest in agriculture. Also, the constant demand for food and change in dietary preferences of citizens turned the agricultural market as the most sorted for.

There are several ways you can apply for a loan in Kenya, but in this article, we will explore some of this government agricultural loan programmes in Kenya. However, before we go into that, let’s take a quick look at what agricultural loans are..

What are Agricultural Loans?

Agricultural loans are a type of loans designed or mapped out for farmers and Agribusinesses. The loans are used by farmers and Agribusinesses in ways like farming, farm implement purchases, crops for cultivation, and other agriculture-associated activities.

What are Government Programmes for Agricultural Loans

Government programmes for agricultural loans are a set of related measures or activities or schemes with a peculiar long-term aim of giving loans to farmers. The program is set up by the government intending to support farmers and Agribusinesses in food production.

The programme caters for all Agro-entrepreneur who are ready to work and boost the economy through mechanized agriculture.

List of Government Programmes for Agricultural Loans in Kenya

1. Agricultural Finance Corporation: Agribusiness Loan

They set this programme up to support and encourage beginners in the agricultural sector. They design it to provide capitals for Agribusiness traders and start-ups.

2. Youth Enterprise Development Fund

The Youth Enterprise Development Fund helps in the provision of mechanized tools to farmers. They have partnered with agencies like smart solutions in Africa (SSA) to support young farmers and beginners in accessing greenhouses and mechanized implements.

Their aim is to provide a shift from traditional farming methods to the modernized methods.

3. Uwezo Fund

They established it in 2013 geared towards mentoring entrepreneurs which young farmers are inclusive towards eradicating poverty. They off loans between the range of sh. 50,000 and a maximum of sh. 500,000.

It is mainly for youths, women, and people with disabilities. They are also known as Mirroring the youth fund. They also help in achieving gender equality and self-independent.

Contacts: info@uwezo.go.ke/programmes@uwezo.go.ke

4. Women’s Enterprise Fund

Women’s enterprise fund is an initiative tied to offering women entrepreneurs loans to start up something and be self independent.

They also help in marketing goods and services produced by these women entrepreneurs. It is a social motivation fund by the government to women entrepreneurs.

contacts: +254 0714606845-6

5. ICDC

The Industrial and Commercial Development Corporation is a 64-year-old initiative. Moreso, ICDC offers capital, joint-ventures, commercial loans and asset financing to entrepreneurs.

The aim of ICDC is to boost agriculture and industrial development in Kenya. They also offer medium and long-term loans.

Email: info@icdc.co.ke, customerservice@icdc.co.ke

6. Kenya Industrial Estate.

They joined Kenya Industrial Estate to the Ministry of Industrialization to boost the economy. Boosting all aspects of industry, both Agriculture is the key to reaching developed status.

Hence, Kenya industrial Estate is driven to indigenize all sectors of industry in Kenya. They provide subsidized loans and improved entrepreneurial skills to the citizens. They also offer loans of up to 14 million shillings.

Email: admin@kie.co.ke Contacts: +254 0722 297 636/+254 0733 279 861

7. Industrial Development Bank

First Industrial development banks help to establish or expand the business and younger farmers. Their loans come in different forms ranging from projects, assets to tools financing and hire purchase.

They established it in 1973 and disburses secured loans to large industrial enterprises like Agribusinesses. They are capital heavy venture initiatives.

Email: bizcare@idbkenya.com Mobile: +254 0733 221 111; 0728 970 750

Pros and cons to government programmes for agricultural loans in Kenya

Pros:

Low interest rates
Opportunity to attend seminars and lectures by the organizing officers of the programme
Enough fund to achieve your aim
Longer repayment duration
Constant advice and briefing on the current situation in agricultural sector

Cons:

Lack of access to modern instruments of risk management like insurance
When farmers don’t meet with demand, nobody cares. You must fulfill the contract agreement
Might not see a guarantor to stand for you.

How to apply on each of these government programmes agricultural loan

The steps in applying for any of these programmes are:

Visit their website online and or their physical location
Fill the application forms online or download the form and fill it.
Take the filled form to their office
Submit all necessary documents and details
E-Sign if it is available online or meet the loan officer to share necessary information on how to start your loan process.
Click enter if it is online. When it is offline, submit all necessary documents and wait for approval and disbursement.

Who is eligible for Government programmes for agricultural loans in Kenya

The programme is for all kinds of farmers such as small and marginal farmers, tenant farmers and entrepreneurs in agricultural sectors or business. Concisely they include:

Farmers who are more than 18years and above and possess a national ID and active phone number
Agribusinesses
Entrepreneurs in the agricultural sector.

General required documents for government programmes for agricultural loans

The general documents required include:

National ID
Proposed business plan
Bank account statement

Note: Each programme has peculiar additional documents they require.

How to be part of the government programmes for agricultural loans in Kenya

To be part of these programmes and also benefit from it, you need to be:

Be a farmer or a young entrepreneur in the agricultural sector.
Start a Horticultural projects
Establishment of dairy units and be ready to feed the country.
Establishment of small poultry units and need a working capital for expansion.

Note: There are other criteria included. Contact the program organizers or visit their head office to get more clarifications.

Importance of government programmes for agricultural loans in Kenya

The importance of these programmes are:

The programme plays a key catalytic role in strengthening the farm business
It helps in augmenting the productivity of scarce resources.
Bridges the gap between macro and micro agricultural systems.

Conclusion

Having food reach every nook and crannies of Kenta is the concern of government and agriculturists. Also, the government being aware of the need of agriculture amongst other sectors of the economy, they consented to improve agriculture by venturing into government programmes. These programmes give loans to both farmers and Agribusinesses.

Commercial Loan Process – Application And Documentation

December 26, 2022 by hakeem Leave a Comment

The commercial loan documentation process in Kenya is established by, and tailored to suit the needs of all borrowers, their requirements, and target markets.

The commercial loan processes are developed by diverse parties such as banks, financial institutions, and private funding agencies, who have come together to create a lending platform that best meets the needs of borrowers within the country. These kind are usually secured loans.

Understanding a Commercial Loan Process

Commercial loan in Kenya can be availed from financial institutions like banks and microfinance institutions (MFIs). Banks on their part lend small businesses education facilities loans like student loans, micro credit services and any commercial money that is less than Ksh 10 million.

Going further with the process, even where a financial institution or bank is operating in compliance with the law, there are still times when an application for a loan will be turned down.

While this can be disappointing, it is important to note that many of these institutions adhere to strict criteria when it comes to reviewing loan applications. This is for the protection of both the bank and the client, as well as to ensure that funds are used responsibly and loans repaid.

In the loan application process, the business must specify what the commercial loan will be used for. Then go further to supply other necessary information and adhere to all instructions.

What is Commercial Loan Process

Typically, commercial loan process is the agreement and other legal closure between a bank and a business to fund both operating costs and capital expenditures of the business. They usually require collateral and financial statements to prove the company’s ability to pay.

What is a Commercial Loan?

The term “commercial loan” refers to any loan provided by a financial institution such as a bank to businesses. A commercial loan is a type of loan made to a company or an entrepreneur for funding their business or commercial projects. These loans help widen the reach of business enterprises by providing them with capital to fund their activities.

Moreso, commercial loans help entrepreneurs grow and expand their businesses, by providing them with the required funds that they may lack through current assets. It is typically used to purchase long-term assets or to fund day-to-day expenses in a business.

Process for Securing a Commercial Loan

Commercial lending process steps is as follows:

Qualifying stage and presentation of pre-approval documents
Loan application stage
Review of loan application document stage
Loan underwriter approval stage
Presentation of the term sheet by the underwriter to the company stating everything about the loan for reconfirmation
Completing the loan packages, presenting the closing documents and signing.

What are the four loan documentation requirements banks need when granting a commercial loan request?

There is a lot of documentation required by banks when giving commercial loans. We are quite used to these requirements and they are usually provided while taking a business loan or home loan. When disbursing a commercial loan, one is required to produce certain documentation like:

Documents for existing businesses
Income statements and business balance sheets for the past three years.
Projected balance sheets and income statements for two years.
Cash flow forecast or Projected cash flow statements for at least the next 12 months.
Personal and business tax returns for the last three years.

What other financials are needed for a commercial loan?

Before you can even think of getting a business loan, you have to know what financial documentation your bank requires. We have put together a comprehensive list of the most common financial banks require processing an application of commercial loan:

Business Credit Score
Basic Personal Information
Basic Business Information and Permits
Two Years of Tax Returns, Both Personal and Business
Recent Business Bank Statements

How long does it take to process a commercial loan?

Two to six weeks is an acceptable time for many commercial banks and microfinance banks. There are still banks that process it faster.

3 Factors influencing the time to process a commercial loan

There are various factors that will influence the time to process a commercial loan. If a business has:

Good financial standing
Bankable and investable projects and
Capacity to service the loan

Here, the process is supposed to be faster.

3 Limits to the processing time of commercial loans in Kenya

Getting a commercial loan in Kenya is not an easy feat. Among the factors that affect the processing time for a commercial loan in Kenya are:

The length of the borrower’s credit history
The financial institution where the borrower chooses to apply for a loan and
Constant reminder by the borrower.

How much is a down payment on a commercial loan?

Most commercial lenders require a down payment of 30% before they consider or approve a loan.

Conclusion

Commercial loans are designed to promote business development in the country. However, with so many similar programs available and the ever-increasing demand for these loans by various organizations, banks and financial institutions have put in place conditions that have made it a little challenging for those looking forward to starting up a business.

Just like any other form of lending, getting a commercial loan requires an extensive application process. Just go through these processes keenly and you will get your money within a short while.

Credit note explained

December 20, 2022 by hakeem

One of the crucial techniques when carrying out invoicing procedures is to use credit notes. A lot of persons and businesses are yet to harness this important tool when performing invoicing workflow because of inadequate knowledge of credit note.

The aim of this article is to educate our readers about credit notes, showing when and how to use them. In this discussion, we will reveal robust and helpful information needed to give credit notes. In addition, we will provide examples and samples and also differentiate credit from debit notes.

What is a credit note?

Credit notes are commercial and legal documents which empowers someone (a seller) to nullify completely or partially an invoice given to a buyer. This is usually done by the seller because of mistakes, damaged goods or when a transaction is canceled. The importance of credit notes in business transactions cannot be over emphasized, as mistakes are bound to occur more often than not.

An example of where it is used is when a seller discovers that they damaged the supplied goods. He then issues a credit note to the buyer, reducing the amount to be paid for such goods by the buyer. It also provides a negative balance of an invoice.

For instance, assuming a customer initially paid the sum of ksh. 600 to the seller and the seller wishes to end such invoice, he or she will issue a credit note to the buyer for the negative value of – ksh. 600. Also, from the example above, if the seller overcharged the buyer in error by 10%, he will issue a credit note of -ksh. 60 (I.e. 10% of $500) to the buyer which corrects the mistake made in the amount issued originally to the buyer. Credit note is a way of compensating the customer for the defective goods supplied. provides the seller the room to delete his financial records without erasing the invoice

Common Reasons for which Credit Note is issued

These are some circumstances under which they can issue it are:

When the buyer discovers he has been charged by the seller below the actual price of product.
If the seller discovers, he has overcharged in the transaction’s cause.
The seller issues it when there is a return after sales.
When the occasion of discount or benefit is to be given by the seller

Examples

The examples done below regarding credit note to show that the procedure for issuing it is not complicated as it might seem. Let us explore more with examples

Example 1.

Assuming company Z made ksh. 700 purchase of products from Company X and later discovered that there was a mistake on the invoice issued, which resulted in an incomplete transaction. How can this be solved?

This kind of situation can be handled as follows: When the error is discovered and company Z has contacted Company X regarding the error, the seller (Company X) issues a credit note on the invoice sent to company Z (the buyer) stating that the issued invoice has been canceled while they also record the status of Ksh. 700 paid as positive in their account payable record. Company Z can then go for a refund or use the amount for future purchases from the same company.

Example 2

Assuming company C bought products of value ksh. 40,000 from company K. Later it was discovered that ksh. 30,000 worth of products out of the entire stock were bad. Then they sent a notification to company K regarding those products at the time of delivery. How can such a situation be handled?

This case is best handled by the seller issuing a credit note of Ksh. 30,000 in the name and details of the affected buyer.

When to issue a credit note?

They issue it based on the situations, type of industry or business you are operating on. Some general ones are:

Note that it is issued whenever there is a mistake in an invoice issued for example when there is an error in the amount on the invoice or damages in the products purchased. It is also employed when there is a need for re-issuance or change of invoice.
They are typically used when there has been an error in an already-issued invoice, such as an incorrect amount, or when a customer wishes to change their original order. In short, it can be used in any circumstances that would require the invoice to be changed and re-issued.
It is also issued when an incorrect item is sent to the customer or buyer.
Also, it is issued when the price of goods and services is wrongly charged by the seller. The seller sends it to the buyer reversing the extra charge.
It is also issued for any discount that has not been applied on goods and services at the time the invoice of such is prepared.
Finally, they are issued by the seller when he wants to terminate pending payment from the buyer.

How do you issue a credit note?

After knowing when to issue it, it is important to know how to issue it to a customer. The process of issuing it is not complex or ambiguous. Let us see how the process looks like.

There are tools and invoicing softwares that makes the process very easy. Example of such software is Xero. This software enables easy issuance against any invoice issued originally.

It is crucial that are kept together with the invoice number in order to keep track of the process. If the affected invoice is number 1, its credit note should be number 2, while the next invoice will be number 3. A credit note should be sent to the affected customers while a copy is kept by the seller. Doing this makes the financial record to be properly kept, and the process organized.

Why you should issue a credit note to your customers

Issuing credit notes to your customers helps your accounting records to be reliable. Once an invoice is issued, it cannot be deleted, but it provides the avenue to do such from your financial records without going against the law.

These cases cited below makes the issuance indispensable. Most times the customer returns goods or rejects services for many reasons when:

There was an error in payment on the original invoice issued
There was a mistake in price such as overcharging of prices of goods and services on the original invoice.
The goods were damaged during transit to the buyer.
There is a need to cancel part, or all of an invoice issued.
There is no refund policy for returned items, credit notes are issued to the customer as a goodwill act and as such, they can be used in future transactions against another invoice for the same seller.

What information should you include on a credit note?

The format ooks like that of an invoice, but its structure is less rigid and strict than a quotation or invoice. It is very crucial to state boldly at the top of the document that it is not an invoice but a credit note. This helps to prevent confusion of assuming that it is an invoice. They should include all the information for administrative and account recording used in the credit notes. Some of them are:

Issuance date
The number of the credit note linked to the invoice.
The reference number of the customer
The terms of payment
Seller’s contact details such as name, phone number, address, email, etc
Customer’s contact details such as name, phone number, address, email, etc
Details from the original invoice such as invoice no, date, etc.
The purpose of issuing it
Value Added Tax (VAT) details if the matching invoice has VAT
Products and their quantities
Prices of products involved as agreed by both parties
A new payment terms

All this will enable the customer to comprehend the purpose of the issued credit notes.

Types of credit Notes

There are two main types and they are:

Credit notes for outgoing payments
Credit notes for incoming payment

Differences between a Credit and a Debit note

Credit and debit notes are not actually the same. Here are some differences between both of them.

Credit notes are commercial documents containing the record of money that a seller owes a customer, while Debit note is a document where the money a client owes a seller is recorded.
Credit notes give a negative balance of an invoice, while debit notes provide a positive balance of an invoice.
The seller of goods and services issues A credit note, while the buyer of such goods and services requesting for a credit note issues a debit note.

Conclusion

Credit note is very essential for account record keeping of business transactions. Errors usually occur in the cause of documenting business transactions. Hence the need to take care of errors and prevent unnecessary hassle for the finance officers when such errors occur.

While preparing it, great care has to be taken to ensure that all the necessary information is captured in . It should contain VAT details for the matching invoice issued together with the amount before VAT. It should be clearly stated that the document is a credit note and not an invoice, as this will confuse the customer when not specified. Armed with this information, we strongly believe that you will be well informed to use credit notes whenever you need to do so.