Credit and Financing: How Mwananchi Credit is facilitating business
The recent growth of Small and Medium Enterprises (SMEs) has been attributed to the access to readily available and affordable credit and financing options that are provided by commercial banks and micro-credit finance institutions such as Mwananchi Credit. Among the factors that have been identified as the contributors to the potential expansion of the SME sector in Kenya, improved access to credit and financing through the provision of credit reporting capabilities, secured lending or loans and the continued practice of insolvency guidelines are highly guaranteed methods that deliver the anticipated financial outcomes.
However, most businesses in Kenya have limited access to the types of credit and financing they need in order to enable the efficiency of business operations which affects their ability to meet set objectives such as improving profitability and attaining sustainability. This limited access arises from various factors that include the lack of tangible security to guarantee applied credit or financing and the perception that SMEs are high risk sectors and commercially unviable hence are constantly ignored for the larger enterprises.
Regardless of these prevailing and limiting factors that make small and medium enterprises low priority markets for banks and lenders, micro financiers particularly Mwananchi Credit have stepped their efforts to facilitate the growth in business among SMEs and large enterprises through the provision of fast, reliable and affordable lines of credit and financing options that are easily accessible to businesses. These forms of credit and financing are offered to businesses with an aim of facilitating normal daily operations, meeting customer demands and other financial expectations.
How does Mwananchi Credit facilitate business?
It’s simple, the best logbook loan provider in Kenya offers business credit and financing to eligible applicants through a range of products including cheque discounting, trade finance (bid bonds, performance bonds, advance payment guarantee & letter of credit), import financing, invoice and cheque discounting.
1. Cheque Discounting in Kenya
Cheque discounting is a service offered to both individuals and businesses where cheques drafted from reputable organizations are deposited, discounted and then paid into the customer’s account after confirming with the drawer’s bank. This type of credit and financing service is usually with recourse to the cheque owner as businesses that receive their payments through post-dated and current cheques resort to paying a small commissions to have their funds paid out immediately after drafting rather than waiting for the standard period taken to process cheques by commercial banks. When issued with a post-dated cheque, businesses that need the cash immediately can discount their cheques to access it on the go and sort out business requirements as they await their cheques to clear. Most creditors can discount up to approximately 80% of the entire amount depending on the credit terms that include the annual interest rate and the commission as per the agreed period. The standard requirements are usually :-
2. Trade Financing in Kenya
As the name goes, trade finance involves the financing for trading activities or transactions at both the domestic and international level. The main function of trade finance is to remove the payment and supply risk between a supplier and buyer thus enabling seamless transactions between both parties. Some of the common trade finance options include:-
I. Cashless Bid Bonds
These are types of debts that are secured by a bidder for a construction tender or a similar contractual job that follows the bid-based process of selection. A bid bond provides a written guarantee to the owner of the project that the bidder shall complete the work when selected based on the price and duration terms stipulated in the contract. Also bid bonds prevent contractors from submitting very low bids in order to win the contract.
In Kenya, a significant percentage of public organizations, especially government institutions require one to submit a bid bond when making applications for a specific tender. Therefore, you shall always be required to attach your bid bond when submitting your tender application as the document protects the organization in case you as the supplier or contractor breaches the contract for any given reason.
So where can you get a bid bond? Bid bonds are issued by banks and other authorized financial institutions including micro-financiers. An example is the cash-less bid bond provided by Mwananchi Credit Limited within 30 minutes of application, without the need for cash cover and based on a negotiated fee. Apply here !!!
II. Performance Bond
A performance bond is a guarantee that a contractor or bidder will complete a project as per the required standards and is usually issued by a banking institution or insurance company to act as surety. These bonds are common in the construction and property development industry where the project owner requires the service provider or developer to give an assurance that the value expected from the work shall be delivered and thus not lost in case of unfortunate events such as the inability of the contractor to pay due debts (insolvency).
In simple terms, the performance bond protects the owner against any possible losses when the contractor is unable to deliver the underlying project or perform based on the pre-established contract provisions. Therefore, if you are a contractor who has been awarded a tender and requires a performance bond, then paying your trusted financial partner a visit is the best way to go as you are guaranteed to secure the bond especially if you have a good track record.
A creditor such as Mwananchi Credit can issue you with a performance bond after applying if you meet the basic requirements. These requirements include:-
III. Advance Payment Guarantee
Advance payment guarantee is simply a down payment issued to a contractor or supplier by a client. However, the provision of this payment requires that the contractor submits a bond thus securing it against any form of default. If you are a contractor especially in construction and property development, requesting for an advance payment in order to start a project is a common occurrence as the capital investments towards such projects are usually huge and thus require one to have a massive capital outlay.
Therefore, having the capacity to successfully request for an upfront payment enables the contractor to meet the significant procurement or start-up costs that may be incurred before the major construction process begins. For these requests to be granted, the project owner may ask for an advance payment bond that protects him or her from any eventuality such as the failure of the contractor to meet the contractual obligations.
To get an advance payment guarantee, you can make an application to a financial institution or lender like Mwananchi Credit and get an on-demand bond that stipulates the expectation that the bondsman shall pay the amount to the client immediately when they make a demand.APG’s are a critical part of credit and financing for any business since they enable overall business liquidity.
IV. Letter of Credit (LOC)
A letter of credit is the promise from the buyer’s bank to the seller’s bank that the payment for goods or services delivered shall be paid in full and on time. The document comes in the form of an instruction that guarantees payment from a buyer to seller and is issued by the buyer’s bank as a promissory note of timely payment. In the case that the buyer fails to perform his or her due obligation, then their bank will be required to pay the seller and the settlement to be done between the buyer and their respective bank. LoC are very popular forms of credit and financing for large trade deals. There are different types of LOCs which include the standby, the revolving, the revocable and the irrevocable letters of credit. Below is the process for acquiring a letter of credit;
V. Invoice Discounting
This type of facility involves using a company’s pending or unpaid accounts receivable as security for a loan that is usually issued by a financing company. By discounting their invoices, businesses have the ability to leverage the total value of their entire sales ledger by utilizing this type of short-term borrowing. However, the credit and financing company has the discretion of altering the debt amount once the value of the collateral provided changes. With invoice discounting becoming readily available, companies do not have to wait for over three (3) months to receive their payments for commodities delivered as the loan facility allows them to control their credit by continuing to chase their payments without necessarily informing their clients.
The benefits of invoice discounting especially for businesses that rely on prompt payments include:-
The most important factors to look out for when selecting a micro-finance company to work with when in need of a discounted invoice are quick funding, access to real-time customer support and the clarity regarding costs thus avoiding the heartache of hidden fees.
VI. LPO Financing
Local purchase orders (LPOs) are contractual documents between suppliers and customers that indicate the quality, quantity, delivery time, payment mode, description of goods, security cheque and the conditions for issuing a bank guarantee. LPO financing enables suppliers who have obtained purchase orders from their respective clients to deliver the required goods and services as per the agreed terms. After being awarded with a letter to supply certain commodities to a reputable organization, service providers then seek financing from banks and credit institutions in order to fulfill the delivery of the goods and services that one had committed to.
In most cases, the financing can be up to 80% of the total goods and services to be supplied with the supplier now expected to supply the goods and services ordered within the anticipated time. Some of the requirements that lending institutions such as Mwananchi Credit will request for when applying for invoice discounting include:-
3. Import Financing in Kenya
Whenever you experience shortage of funds while shipping commodities into the country, the gap in credit and financing is usually sorted out by the import finance facility that settles the pending costs arising from the shipment. As a specialized trade finance solution, import finance enables businesses to purchase goods overseas and then facilitates the movement of these commodities from the country of origin into the country. An example is when you are importing a car from another country, and the product gets stuck at the port due to unpaid duty fees and taxes.
Through an import credit and financing facility, one is able to clear all pending balances due to the availability of funds that allow for seamless processing in terms of clearing and ferrying the imported cargo from the point of entry. If you opt for a microfinance institution like Mwananchi Credit to finance your imports, you will be required to deposit approximately 30% of the total value of cargo that is being imported lets say a car and then await the delivery of your automobile with all costs including insurance and freight being covered by the lender.
This solution allows the customer to avoid the hassle that comes with having to pay import duties and other related costs, storage charges and demurrages, clearing, forwarding and transportation costs. All you have to do is apply here, and wait for your dream car to be delivered to your doorstep at competitive rates and within 45 working days.