PHOTO | FILE It is very unlikely that a bank would give you 100 per cent financing. Savings are essential. NATION MEDIA GROUP
My workmate and I are planning to start a wines and spirits business. Our estimated seed capital is Sh500,000. My partner earns Sh32,000 and I make Sh38,000 per month.
However, we want to take up a loan since we do not have savings. Kindly advise us on how we can ask for a loan at a favourable interest rate.
It is commendable that you want to start a business. However, since both of you are in full-time employment, it might present a bit of a challenge. You should come up with a business plan before hand to ensure you have covered all the basics of the investment.
You should also come up with a partnership agreement which will clearly state each of your roles and the way you are going to share the returns. This will prevent any disputes that may arise in the future.
The business plan will be a guide which you may use to apply for a loan from a financial institution. Having a bit of savings usually helps as most businesses are made up of equity (shares) and debt. The chances of a financial institution providing 100 per cent financing is not high. You should first try to save with say a bank then apply for a loan. This will help you to reduce the cost of the debt and the time period that it will take you to repay the loan.
You should come up with projections on the expected sales, key expenses and profit margins as well. These are usually conservative figures as the rule goes, always try to overstate expenses and understate revenues. It will give you a feel of what the reality on the ground would be. If you take a loan, you have to consider that businesses take time before they become profitable, a situation that will surely test your patience.
You also need to project how you would service a loan before the business makes profit. You need to have some money set aside for emergencies and other eventualities that acts as a buffer for your business.
Some financial institutions, such as saccos, may provide loans at a more competitive rate. However, visiting as many lenders as possible may provide you with a better picture of the interest rate they may be willing to ask a startup. The government is also providing loans for business startups through the youth and women funds.
Approaching the banks that have been tasked to administer the loans may provide a clearer picture. This should be supported by a viable business plan.
All the best in your quest to run a wines and spirits business.
Hello, I am a young student with a keen interest in creating wealth. So far, my investment portfolio includes: a small number of shares in a company that has not been doing well and an insurance policy that will mature in 20 or so years with a payout clause in the fifth year.
I recently got an internship of about six months that is paying quite well considering that I do not have many expenses. I am looking for an investment that will not require a lot of my time and capital. In this respect, Treasury bills come to my mind, however, I do not understand the technical terms too well.
I am mostly open to long-term investments with low risk.
