Getting funds for business is a hurdle many women entrepreneurs struggle with. Plenty of research shows that this is the biggest challenge for women entrepreneurs in Kenya. So you can imagine the excitement that comes with having your loan application approved. Even so, it is important that you review some terms before accepting the loan.
READ: WHY YOU SHOULD USE YOUR SAVINGS INSTEAD OF BANK LOANS
READ: 5 WAYS TO FINANCE YOUR BUSINESS FROM YOUR OWN POCKET
Interest rates
Interest is paid towards covering the principal and an extra amount that is income for the financial institution and an incentive to the saver for forgoing consumption. You are smart so you definitely compare rates among banks to choose the lowest; although, the rates are capped at the moment. You can pay fixed interests or variable interests. Fixed rates do not change so you may opt to for this for your business’ long term loans. But you will lose out when the lending rates go down. Variable rates change with interest changes and your smart ass can play the bank by preferring them for short-term borrowing – when rates are down.
READ: GOVERNMENT FUNDS FOR KENYAN ENTREPRENEURS
READ: LOAN PRODUCTS FOR WOMEN ENTREPRENEURS
Hidden fees
Financial institutions may take advantage of your lack of due diligence and burden you with hidden fees on your loan. If you take another careful look at your loan documents you may negotiate on some of them. One of the fees is of course a processing fee. Can you believe that they make you pay back on them charging you for administrative work of processing the loan?
You should also be keen to see what the consequences of late payments are or if you got grace periods on your loan payment schedule. Lastly, remember to negotiate on the early repayment penalties. Unlike you and me, banks don’t like it if we repay our debts early. It deprives their business of interest stretched over the life of the loan.
If you have any concerns always ask. Never rely on the financial institution’s representative to disclose everything to you.