Within 20 minutes of my request, I was having a one-on-one interaction with Mr Clement Wafula, 51, an engineer, and proprietor. He told me about his background and products. His products include potato choppers, deep fat fryers, food display warmer, hot water urn for boiling tea and many others commonly used in Mbale hotels.
Last year, he borrowed money from PostBank to enhance his business activities. It was under the small business loan facility, and he has made regular monthly repayments without any defaulting.
“I am now with one instalment of Shs206,968 which I am supposed to pay on November 7,” he said.
Wafula dampened fears that loans are not good for business. Pointing out that his business has survived using loans since 1985 when he secured his first loan from Barclays Bank in Nairobi.
So what trick can one use in order to avoid defaulting?
“You don’t need any trick, but you must be sure of what you are working on,“ he replied adding, “I think the manufacturing of workshop tools training I received from Kenya Research Institute helped me a lot.”
The training programme, which was sponsored by the British Council and Fredrick Ebert Foundation, had seven key elements: standardisation, strength of material, quality control, costing, and research, marketing; and, handling of money.
All these elements are important, but Wafula’s focus on the last one largely explains his success. “When I borrow money it is strictly for buying materials and paying the labourers,” he explained. “Other people are failing to pay back the money because they use it for other things like buying clothes, financing their weddings and so on. “When they fail to pay, they tell lies that they have now gone to Sudan.”
Wafula said that most financial institutions in Uganda do not offer their borrowers financial education training. If borrowers are equipped with the right information, they will be a better position to repay the loan; and, on schedule.
If you need money to start a business, do not be afraid to borrow from a financial institution (it has to be a credible one). You can approach your local bank for a loan. If going to the bank is time consuming, apply for the loan online (using the inter net).
Whichever option you choose, remember that loans are important especially for new businesses because it’s good to have a smooth cash flow.
Today, most banks offer small business loans. These loans have several advantages. They can help you go through tough times before your business breaks even. You can use the money to purchase new machinery and for paying your employees.
The writer is Managing Editor, www.myfinance.co.ug
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This article originally appeared in the Kampala-based Daily Monitor newspaper.
