Today, where can you get a loan of up to Ksh10 million for your business?
Hold that thought.
And let me tell you why… It’s all about opportunities. And in Kenyanese, you will have heard of popular phrases such as “grabbing…”, “taking advantage of..” or “pursuing opportunities” and quotes such as “nothing is more expensive than a missed opportunity.”
There is quite a lot of truth in the beliefs expressed in the above phrases. To make a profit, build wealth and achieve the dreams you have set for yourself, you need to have the ability to identify income-generating opportunities, have the capacity to utilise those opportunities and manipulate them to your advantage.
One crucial thing that may not be emphasised enough is the level of difficulty that exists for most people in accessing the resources necessary to fully take advantage of opportunities. Simply put, in Kenya, the ability to identify an opportunity is only useful if you can raise the funds to turn the opportunity into a money-making project for yourself.
And when this opportunity is in agribusiness, you are faced with a unique set of financing challenges that you have to navigate if you are to earn a living from the sector that employs about 60% of Kenyans - Agriculture - without necessarily being a farmer.
The fact that agriculture accounts for over half of the country’s total jobs is telling enough.
But perhaps what is even more instructive is the fact that everybody needs to eat to stay alive. Which then means somebody has to produce this food, somebody has to transport this food, someone has to provide the seed, the fertiliser, the agrochemicals, protective gear plus anything and everything between the farming and when the food is served on your table.
And that essentially is what agribusiness is. All the businesses that facilitate the processes that culminate with food on your table.
And contrary to what most of us would assume, agribusiness is actually differentiated from farming. While a farmer grows and sells their produce in the marketplace or directly to the consumer, what is considered formally as agribusiness is all the other businesses that are either in the input side or produce side of farming.
Hence, and for the purposes of this discussion, agribusiness encompasses the following types of businesses;
1. Input-side Agribusinesses - 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.
2. Produce-side Agribusinesses - 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, exporters, etc. Examples include; aggregators, wholesalers, exporters and suppliers.
If indeed everybody needs to eat to stay alive, then surely there must be lots of profits to be made in agribusiness - since the demand for food is “always on” - come rain, literally, come shine.
But also, as we can deduce from the types of businesses described above, agribusiness can be capital-intensive and the money is not always available when it's needed. That is why access to financing is critical to the success of any agribusiness - especially if you are an SME.
And this is where the challenge we alluded to earlier emerges. According to a 2018 study by the global management consulting firm, Dalberg, despite agriculture contributing 33% of Kenya’s GDP, Agri-SMEs in the country receive only 2-7% of total bank credit.
One of the reasons cited by commercial banks for the low credit levels to Agri-SMEs is the difficulties in assessing creditworthiness due to informal practices such as poor record-keeping and small size. Local commercial banks, the report says, tend to favour larger enterprises.
Data from the Kenya Association of Manufacturers (KAM) shows that the country has over 7.4 million SMEs but only 1.56 million are licensed. This effectively means nearly 6 million businesses, including agri-SMEs, find it hard to access the much-needed credit so that they too can share in the profits to be made from agriculture.
The good news is that there are new microfinance lending models that are coming up to cater to the lending needs of Agri-SMEs that for years have had their growth prospects dimmed by traditional financiers.
One such intervention that is providing customised financial services to Agri-SMEs is Avenews. Founded in 2017, the company's platform enables digitisation of the agricultural supply chain and enables agri-businesses to run their entire business operations through a set of financial management tools that control inventory, generate trade documents, and initiate payments directly to counterparties.
Remember that thought you held at the beginning of this article? Now complete it. Where can you get financing of up to Ksh10 million for your agribusiness?
With the definition of what type of businesses “agribusiness” refers to, you will appreciate the realisation that much of the financing targeted at ‘agribusinesses’ actually goes to farmers.
There are commercial banks that have a bias to larger enterprises, then there are many microfinanciers that have lending products targeted at farmers and then there is Avenews, one of the pioneer microfinanciers innovating a lending model specifically suited for agribusinesses.
Launched in 2017, Avenews has created what the company describes as the financial super app for the agricultural industry in Africa. It is in cognisance of the challenges of access to financing as well as the record-keeping inadequacies agro-SMEs grapple with that the Avenews Super App was designed.
With Avenews, you get all the tools an agribusiness would need in one app. From money and trade management tools to digital payments and access to financing.
To fully understand the opportunity for your agribusiness with this unique solution from Avenews, in this section we will break down the affordances of the Super App.
As identified earlier in this article, one of the challenges SMEs struggle with and makes them miss out on funding is informality. With the Avenews Super App, you can transform your Agribusiness into a formal enterprise with proper record-keeping, something that will eventually pay off when you want to prove your creditworthiness to a financier. Here are some of the things you can do to this end with the Avenews Super App;
The Avenews Super App saves you time and the labour of tracking multiple transactions simultaneously as well as the cost of purchasing a software application to do so for you. All your transactions can be initiated and tracked in one app. This gives you an easy starting point to analyse your business performance and importantly, gives a lender a good snapshot of your agribusiness to make a lending decision.
Some of the payment-related things you can do with the Avenews Super App include;
As we discussed earlier on the ability to “take advantage” of an opportunity, in agribusiness liquidity is very important if you are to snap up good money-making opportunities while they are still hot.
It’s planting season and the demand for fertilisers is through the roof? Is it back to school and you have orders for maize and maize meal from five schools in your county? Has your business contact in the UK secured a deal to export a few tonnes of avocados?
You don’t want to be caught unawares without the cash to fulfil some of the orders you predict would be coming your way soon. That’s how important cash flow management is.
The Avenews Super App gives you the ability to;
Now this is probably what you were waiting for. On top of enabling you to formalise your business operations, the Avenews Super App allows you to apply for financing in minutes directly on the app.
Since your business is formalised through the app, with the Avenews Super App, you get immediate and recurring access to short-term credit subject to qualification. Such that if you identify an opportunity with a time limit on it and do not have the cash, you can apply for a loan immediately on the app and “grab” those profits.
Now that you know all that you can do with the one-of-a-kind Avenews Super App, let us go through the process of getting a loan.
And yes, you are finally here, Avenews offers loans to agribusinesses, both in the input side and the produce side up to a maximum of Ksh10 million.
First and foremost, it is important to understand that Avenews provides its users with what is called “short-term working capital loans”. This is aligned with the “opportunity” mindset we discussed earlier as one of the most identifiably Kenyan things.
A working capital loan is one that is availed to fund a businesses’ day-to-day operations including paying wages, clearing accounts payable, fulfilling urgent orders among others.
Whenever your agribusiness needs a quick cash injection towards processes aimed at making the business profit, you are looking for a working capital loan.
To calculate working capital, subtract your agribusinesses’ liabilities from its assets. If the amount you have left is not enough at that particular moment to cover an urgent business need, you can take a working capital loan to sort that need out and repay when your profit comes in.
And as we have said, Avenews, through its Super App, allows you to borrow as much as Ksh10 million in short-term working capital loans to help you maximise returns from the opportunities you are identifying or creating for your agri-SME.
The tenure of an Avenews working capital loan depends on the size of your business, the quantity of products consumed and turnover of goods.
Depending on whether your agribusiness is on the input side or the output side, the size of the business and the transaction you seek to fund, Avenews offers loan tenures of between two weeks to six weeks.
To qualify for an Avenews Agribusiness loan, you simply need to be engaged in a business that falls in the Agribusiness category. That is either;
To enable Avenews determine your loan eligibility, depending on the type of agribusiness (including its registration status) you are running, you will be required to provide specific documentation as discussed below.
If your agribusiness is registered as an LLC, you will be requested to provide Avenews with the following;
If you are operating you agribusiness as a sole proprietor and have registered it as such (Note that Avenews doesn't lend to unregistered businesses), then you will be requested to provide the following with your application;
If your argibusiness is registered as a partnership, you will be requested to provide the following;
Regardless of whether your agribusiness is registered as an LLC, a sole proprietorship or a partnership, you will be requested to provide the followinbg documents as part of the application process;
As long as you are engaged in agribusiness as described above, you can make an application to Avenews and find out if your business qualifies for working capital loans of up to Ksh10 million.
Note that Avenews may conduct a site visit to your agribusiness as part of the loan appraisal process if, for example, your business does not have enough documentation or statements.
Your business has to be formally registered. Avenews does not finance informal/unregistered agribusinesses.
You also need to have a good credit history since Avenews does check your CRB standing as part of the loan consideration process.
Once you are approved for an Avenews working capital loan, the amount you’ve qualified for is disbursed into your Super App Wallet from where you can directly make payments to your suppliers and anyone else you need to pay.
You can also transfer the amount from your Super App Wallet to your preferred bank account or M-PESA as needed.
On repayment, you can either make a bank transfer to the Avenews Absa Bank account or via M-PESA Paybill to the Avenews Absa Bank account.
As we have mentioned, Avenews short-term working capital loans are issued for a tenure ranging from two weeks to a maximum of six weeks depending on the type and scale of your business.
As you would expect, even when you have identified a great time-bound opportunity to make a profit, things may not always go as planned and your payments may be delayed by a couple of days.
Avenews offers its customers an option to extend the loan tenure in an event like this one. You must be prepared to provide documentation supporting your request to extend your loan tenure such as a delayed invoice payment. The normal extension period is usually between 3 to 5 days and is not charged any fee.
But sometimes, you may face delays that may take you longer than 5 days to resolve and with Avenews short-term working capital loans, you can request for a longer extension based on your unique circumstances.
For this, you would need to do a complete loan restructuring - which is the process of changing the terms of an existing loan to make it easier for a borrower to repay.
With Avenews, a longer repayment extension will be charged a fee that is determined by the projected profit margins linked to the transaction(s) the loan was spent on.
This is one of the most unique features of the Avenews working capital loan that shows how flexible the product can be based on your circumstances. As compared to other lenders who have a fixed rate for loans regardless of circumstances, Avenews says its loan pricing factors in the benefit a borrower is going to derive from utilising the funds.
This means each individual borrower will receive a bespoke loan quote from Avenews based on the specific factors unique to their business.
Avenews says the objective is to ensure a business, given the profit projections associated with the transaction(s) the loan is going to fund, is guaranteed to financially benefit from taking this credit facility.
To understand Avenews loan pricing policy, you can take the example of the “opportunities” we discussed in the beginning of the article;
So, instead of a fixed interest rate as most traditional lenders will impose on a loan regardless of whether you make a profit or not, Avenews charges an “access fee” that is based on the markup (profit margin) per trade cycle.
As such, a higher profit margin - this is something any business has control over - will typically attract a higher “access fee”.
Generally, based on their nature, agribusinesses in the input side attract lower access fees as compared to agribusinesses in the produce side.
In sum, each loan is priced depending on the specifics of the business after reviewing, for example, turnover and profit margin among other factors considered by Avenews internal AI-powered decision engine and their risk team.
To wrap up this article, we take a look at some of the areas where Avenews stands out from other possible financial institutions that you could get a loan from to fund your agribusiness.
Avenews promises its customers quick, near-instant access to working capital loans. This when compared to alternatives such as commercial banks and Saccos that also have the capacity to offer loans of such high amounts is a standout feature.
For commercial banks and Saccos, agri-SMEs and indeed other types of businesses typically have to fill paperwork and wait a couple of days before they can get the cash they need to complete a transaction.
With Avenews, once you pass the eligibility criteria, it’s as easy as getting a digital loan.
As we have discussed in the loan cost section above, Avenews does not charge an “interest”, but instead charges an “access fee” that is based on your profit margin per trade cycle.
Each loan application is cost independently based on what the agribusiness owner expects to earn from the transaction the loan is going to fund.
Smaller profit margins will attract a lower “access fee” as compared to a larger profit margin, generally. This guarantees a favourable rate for each business level i.e. the cost is on a case-by-case basis.
Unlike other loan types, Avenews has structured their working capital loans in such a way that a borrower can always identify the financial benefit they are getting before signing on the dotted line. This is possible because the pricing is based on the profit you are expecting to make.
Perhaps the biggest standout attribute of the Avenews short-term working capital loan for agribusinesses is the specific focus on agribusinesses. We earlier discussed a report that showed agri-SMEs received a paltry 3-7% of total bank loans meaning that there is a huge financing gap for this category of businesses.
It doesn’t help that the majority of microfinance institutions providing agriculture-related financing tend to focus mostly on farmers.
It is a well established fact that this business segment is financially underserved. Save for a few banks and Saccos that are now open to lending to agribusinesses, Avenews is one of the few microfinanciers targeting agri-SMEs.
Finally, how well do you like the ability to fully formalise your business, manage your staff, operations, track cash flow, make payments, track orders, and access financing all in one central place?
The Avenews Super App offers all this to its customers allowing even the smallest agribusiness to start building a trading history that can be used to determine their creditworthiness as well as helping agribusinesses operate efficiently.
Getting this solution for your agribusiness and also being able to get working capital financing from a lender that fully understands the ups and downs of your agribusiness is a unique proposition worth your consideration.