By Daniel Mwesigwa
Centenary Bank Managing Director, Fabian Kasi, says that financing a business during a pandemic comes with opportunities as well as challenges.
Speaking during the second year since the outbreak of Covid-19 in March 2020 (in Uganda), Kasi says that an entrepreneur needs to understand how their business is doing before opting to finance it.
This was during the first session of the URA eBomba ya Business Summit 2021 at the taxman’s headquarters in Nakawa on October 15, 2021.
Kasi raises key questions for entrepreneurs to consider before running to banks for a loan.
“Is your business going to be able to generate enough cash flows?” questions Kasi.
Besides, Kasi says one has to understand the loan tenure. The period, Kasi says.
“You want a loan that you think you can pay over a one year period or is it one you think you can pay over a six month period. The kind of business you are dealing with. Is it one where you need a grace period so that you apply for it because in most cases you will borrow today and after a month, you are expected to pay back? So, you need to go there and say, look, given the nature of my business, I want to negotiate that I don’t make a payment until after 6 months,” Kasi says.
Kasi says Banks do that a lot especially for agro-lending business.
“You need to debate and understand the kind of period that you need to negotiate. You need to know the interest rate. As you negotiate the interest rate, you need to know whether it will be floating or it will be fixed. All these things need to be understood so that you negotiate what you truly understand and which you feel you will be able to pay given the nature of your business,” says Kasi.
According to Kasi, you also need to know the amount that you will be able to afford.
“You don’t just go and say I want a billion. You need to approach a bank when you are very clear in your mind about the amount of funds that you will be able to afford. No bank will give you a loan before you sign on what we call a key fact document. That document is the one which stipulates all the terms and it confirms that indeed you understood those terms and that’s why you need to sign it,” Kasi advises.
Kasi says that a client has the liberty to go and consult with their lawyer or somebody who is knowledgeable before appending their signature to acquire a loan.
“The terms you don’t understand, you are at liberty to go and consult so that you make an informed decision,” Kasi notes.
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