As we continue looking at financing options for farmers and agripreneurs, let us touch base on the SME Recovery Loan scheme and other loan options that are being offered by banking institutions to fund operations and investments. 

A few, if not most banks have recently announced the availability for SMEs with less stringent criteria and in some cases a no-interest charge for a certain period of the duration of the loan. Registered farming businesses may qualify under the classification of SMEs. It is up to us as farmers to review the options out there to be able to manage our business and secure their survival. However, due diligence must be undertaken to ensure we understand the terms and conditions, and most importantly the fine print within the requirements/agreement. Understand why you need the loan and whether you can do without it.

It’s imperative for farmers and agripreneurs to be aware of several things before taking out a loan from a bank. Here are some of them:

Interest rates: The interest rate on a loan can vary widely depending on the type of loan, the amount of the loan, and the creditworthiness of the borrower. Farmers should compare interest rates offered by different banks and understand the impact of interest rates on the total cost of the loan.

Collateral: Banks often require collateral for loans, which means that farmers may need to pledge assets such as land, equipment, or livestock to secure the loan. Farmers should ensure that they understand the value of the collateral if any is required and the risks associated with pledging these assets.

Loan terms: Loan terms can vary widely, including the repayment period, payment frequency, and prepayment penalties. Farmers should understand the terms of the loan before accepting the loan offer and make sure they are comfortable with the repayment schedule.

Fees and charges: Banks may charge various fees and charges for loan processing, late payments, or prepayment penalties. Farmers should review the loan agreement carefully to understand these fees and charges and factor them into the total cost of the loan. 

Loan purpose: Banks may have restrictions on the purpose of the loan, such as limiting the use of funds to specific agricultural activities. Farmers should ensure that the loan purpose is aligned with their business goals and that they have a clear plan for how to use the funds.

Farmers should carefully consider their options and understand the terms and conditions of a bank loan before taking on debt. They should compare rates and fees across different lenders, understand the collateral requirements and loan terms, and have a clear plan for how to use the loan proceeds.

There is hope for farmers, but we have to ask questions, go to the right places, talk to the right people, and then get the information and answers we need to be able to make informed decisions. Don’t forget to ensure that your business statutory documentations are in place, such as a Good-standing certificate from NamRA, Social Security Commission, and Founding statement to mention a few.

Mekupi Kambatuku:

Managing Consultant at Simpli Business Advisory

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