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Personal Loans
September 4, 2024
EDITOR'S NOTE: This article is part of our Money254 Partner Series and is produced in partnership with Avenews Kenya. For more on Money254’s editorial policy, read here.
Are you an entrepreneur with a sharp eye for agri-business opportunities? If you are, you have landed in the right article.
For decades, shrewd Kenyans have been making a killing linking farmers to the urban markets and exporting some of the country’s highly demanded commodities to international markets.
Kenyan tea, for example, is highly sought across from supermarkets in Europe to the Afghanistan mountains where it is transported in donkeys. Kenyan avocados are increasingly gaining worldwide demand.
In fact, according to the latest World of Statistics study, Kenya has risen to become the only African nation in the top 10 producers of avocados worldwide (position 7).
Now, you don’t have to be a farmer, own a farm or cattle to benefit from the profits to be made from agriculture. You can own an agribusiness and reap from the agriculture value chain.
Agribusiness refers to all businesses that aid in the production, processing, distribution, and marketing of agricultural products. It includes all the economic activities that are involved in the production and distribution of food and other products from agricultural commodities.
Thus, there are numerous business opportunities across the food production and supply chain, from adding value to produce to the manufacture and distribution of finished products. This can include everything from the production of animal feed to the sale of final food products to large retailers like supermarkets.
Despite the potential of agribusiness, entrepreneurs still face a number of challenges to achieve the desired profits. The most common challenge is access to working capital.
If you are already in business, there may be many instances where you may have missed out on a profit-making opportunity because you didn't have the cash needed to facilitate the transaction.
For instance, you have a tender to supply fresh produce to a supermarket chain. The arrangement is that you buy from farmers and pay them instantly, then you deliver them to the supermarket’s warehouses and wait for payment which may typically come after two weeks or so.
The supermarket is willing to buy more of your stock but you have limited resources to purchase from the farmers and transport the goods to the warehouse.
Now, imagine a lending partner who was willing to fund your business on a short-term basis - but instead of charging a fixed interest regardless of whether you make a profit or not, you come up with a win-win arrangement where you only pay them a percentage of the profit you have determined you will make.
That is as compared to a conventional loan where you are required to pay a certain fixed amount whether you make a profit or not.
The difference being that the loan is priced based on the projected profits - so you will always be left with a profit from every transaction you finance using this type of lender.
If this sounds like a great opportunity, then you may be delighted to learn that there is a lender offering this exact type of loan - Avenews.
Avenews is a financial technology company (fintech) that provides short-term working capital loans to agri-businesses in Kenya. The company issues short-term loans of up to Ksh10 million.
It also supports agri-businesses in formalising their operations, managing cash flow, easing payments, and other support information to enhance their growth. This is possible through the company’s innovative Avenews Super App.
If you regularly purchase stock and sometimes face liquidity issues, this product can be a good option to consider since it is designed for exactly these kinds of situations.
You can qualify for Avenews short-term agribusiness working capital loans if your business falls under these two broad categories.
These are all businesses that facilitate the acquisition of agricultural inputs by farmers. That is local businesses that buy inputs from importers and manufacturers, and sell it to produce SMBs, smaller inputs suppliers, farmers, etc.
Examples include; agrovets, fertiliser suppliers, seed distributors and farm equipment sellers.
These are all the businesses that facilitate the transfer of produce from farmers to the marketplace (Note: not the final consumer).
That is local businesses that buy produce from farmers and smaller produce SMBs, and sell it to supermarkets, manufacturers, etc.
Examples include; aggregators, wholesalers, exporters and suppliers.
Short-term working capital refers to funds that a business needs to finance its day to day operations.
To calculate the working capital of your business, you subtract any current liabilities your business may have such as monthly loan repayments from the current assets such as cash in hand.
For instance, in the example provided above of an entrepreneur buying farm produce and supplying to a supermarket chain, the money required to purchase the stock from farmers and transport them to the warehouse is drawn from the business’ short-term working capital.
If the business owner was to invest in a bigger lorry to transport more goods and recover the money in the long run, this would not qualify as short-term capital since these funds are not recoverable quickly to be redeployed.
The traditional loan model has been the use of a fixed rate during the term of the credit product. This is the case with Kenyan banks, Saccos, and most microfinance institutions.
A profit-share loan is a credit product where the lender and the borrower agree to share the profits generated by the borrower's business instead of having the borrower pay a fixed interest amount on the loan regardless of what they will get after the transaction is over. This concept is also known as a revenue-sharing loan or a profit-participation loan.
The terms may vary across lenders, for example, some may offer partial repayments over a long period of term, while others may require the full payment within a short period, say a few days or weeks. Regardless of the specific features, the basic principle is the same and is aimed at increasing flexibility and upholding a win-win outcome.
Avenews has introduced a new model of pricing loans uniquely - with the intention of helping agribusiness owners get more out of the available opportunities. Thus, the price of the loan is not pegged on a fixed rate but on the potential returns.
Avenews helps agribusiness structure their operations in a way that makes it possible to predict income based on backdated revenues, operational costs, overheads, and profit margins.
This means that as an Avenews partner, they will work with you in accessing the short-term capital you need to grow your business and once you have received your payment, you will pay back a share of the profit, promoting a win-win scenario between the borrower and the lender.
The costing of the Avenews loans varies depending on the circumstances of the business or individual seeking a loan. Thus, it does not matter whether your business has a profit margin of 50% or 10%. The loan's flexibility allows for a custom arrangement that accommodates businesses of all strengths - and regardless of whether their opportunities are seasonal or not.
Avenews tells Money254, the win-win scenario is assured in the flexible nature of the loan where the lender commits to ensuring that your margins as a borrower are always higher than the cost of the loan.
Avenews’ risk team uses among other tools an AI-Powered decision tool to come up with a bespoke loan quote that best considers your very unique circumstances. The loan term will vary depending on the potential return, meaning that the higher the profit margins, the more you are likely to pay, and vice versa.
Because of the unique nature of the product, some standard features apply when it comes to eligibility for Avenews loans:
You present the required documents which include:
If you are running an agribusiness enterprise and making a profit, a profit-share loan can be beneficial to you agri-business is a number of ways.
Just like a healthy child grows into an adult, a business needs to grow over time. This can be in the form of increasing its market share or producing new products.
For example, if you have an agrovet and your customers regularly ask for farm fertiliser that you do not stock due to limitation of capital, you could partner with Avenews, purchase the fertiliser using their capital and after selling it to your customers, pay back a percentage of the profit.
This will not only help increase your profits but your sales may increase as other customers who often bought the fertiliser at other agrovets will likely make other purchases.
Avenews is a fintech company that is dedicated to helping agribusinesses grow sustainably. Thus, on top of the short-term working capital, you will benefit from the technological tools that they offer on the Avenews Super App. This will help you improve your cash flow management, manage your team better, reduce overheads, and identify potential areas of expansion.
Some agribusinesses offer seasonable opportunities that may not require a long term investment. Let’s say, for example, the prices of tomatoes in Mombasa may be high in December for the month of January - but remain normal for the rest of the year.
As an agribusiness owner in this field, establishing a new full-time business which is only active in December may not make much sense.
However, with Avenews, you could access financing to buy the produce for two weeks and take advantage of the seasonal demand.
Your agribusiness enterprise may be successful and you may have all the documents to show - but still fail to get the financing you desire. For example, a bank or a microfinance may insist on a minimum one-year loan term, while you are only interested in the money for a limited period of time, say 2 weeks.
The annual interest may not make sense, but with Avenews, the flexibility would allow you to share a small portion of the profits you make and you can continue growing your business without a debt-burden.
Agribusinesses looking to take advantage of money-making opportunities often require speedy turnaround time. A supplier may want an order delivered within days or weeks and the only way available for you to access capital is to go through a lengthy process of selling your assets - or applying for a loan that may take a whole month.
However, with Avenews, the use of enhanced technology allows for speedy assessment after you have submitted your documentation - allowing you to access your loan amount in 3-7 days.]
The question of whether you would consider taking a loan where the condition is to share profits does not have to be imaginative. It is a real question to consider Avenews if you are in the agribusiness sector and you are running a profitable business. Choosing this route could facilitate the growth of your business, boost your income, allow you to create more jobs, and improve the livelihoods involved in your value chain. Start your journey here.
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