SMEs to access unsecured working capital

Consumer and business finance company afb has launched an innovative Business Cash Advance product for Small and Medium Enterprises (SMEs) in Kenya.

A first of its kind, the product offers eligible SMEs unsecured cash advances of up to KES 5mn, to help them with working capital for their business growth and expansion.

The product will go a long way in helping businesses access simple, fast and convenient capital to replenish stock, improve their business premises or even launch a new business line or branch.

Speaking during the launch, afb’s divisional MD Johan Bosini said. “We understand the difficulties of running a business, and appreciate that the stringent rules imposed by financial institutions do not satisfy the real and immediate needs of SMEs. We want to empower businesses in Kenya and Africa towards achieving their dreams and full potential. This product has been established to provide SMEs with an accessible and flexible alternative to traditional business loans.”

SMEs are a driving force of the Kenyan economy and it is estimated that this sector accounts for over 90 per centof Kenyan businesses. However, the World Bank Kenya Economic Update 2013 noted that the high cost of loans to SMEs by banks is constraining the growth of the sector.

“Although in great need of credit, most SMEs are reluctant to request loans. Fast and easy access to credit will make SMEs ‘think big’ to expand their businesses, which in turn will create more employment for the local economy. As a result, we will see demand multiplying, fuelling growth,” added Bosini.

Eligible business owners will be able to access the Business Cash Advance facility, with advances ranging from KES 50,000 to KES 5mn. There will be no security required and the full application process takes as little as 24 hours for businesses to access the cash. To qualify for an advance, a business needs to have been trading for more than 6 months, have an average turnover with one of afb’s partners of more than KES 50,000 per month, and have a company registration document, whether a partnership or a sole proprietor. Currently, afb’s channel distribution partners are Kopo Kopo and afb Credit Card Division, with more partners to be announced in the coming weeks.

The Business Cash Advance will be offered based on a business’s turnover and the repayment will be in the form of a percentage of the daily turnover, meaning no fixed monthly repayments. Since repayments are based on future sales, it perfectly aligns with a business’s cash flow for any given period.

“For example, if a business is unable to trade for a month, then no repayment is made to afb that month. There is no repayment term, just a small percentage of future sales paid across to afb until the agreed amount has been repaid,” explained Bosini.

Currently, the product is available in the market to over 15,000 Kopo Kopo and afb retail card merchants. The market response in the pilot indicated the demand, with over KES 100mn given to small businesses already.

AFB Chief Executive Karl Westvig commented on the launch of the product, saying, “As a company, afb will continue to deliver innovative financial products that resonate with our customers and address the ever-changing needs of our consumers in this market. At the end of the day, access to credit should have a positive impact on people’s lives.”