The Finance Act, 2023 is markedly unique compared to previous government budgets.

The Act has elicited animated debate on the impact of the taxes introduced by the government in a bid to meet its financial obligations.

For the first time in Kenya’s history, the High Court suspended the implementation of a Finance Act already assented to by the president following a legal challenge filed by Busia Senator Okiya Omtatah and others.

A three-judge bench of the appellate court, however, lifted the suspension of the Act placed on June 30, pending the determination of an appeal filed by Treasury Cabinet Secretary Prof Njuguna Ndung’u.

As the court process plays out, it should not be lost on us that Kenyans have become more fiscally aware as evidenced by the in-depth debate before the enactment of the Finance Bill, 2023.  

Owing to the prevailing tough economic environment both at home and globally, Kenyans’ interest in monetary policy has peaked.

Kenyans walked into 2023 faced with a fading low base effect and severe droughts. This was coupled with a contraction in the agriculture sector, decelerations in the transport and construction sectors, currency depreciation, dollar shortages, and interest rate hikes.

Unlike many big businesses, which have more elbow room to navigate such tough times, Small and Medium Enterprises (SMEs) are more at risk.

Kenya’s informal sector currently employs 85 per cent of non-farm workers, making it a significant contributor to the economy.

A meltdown of SMEs at a time when unemployment is soaring high would be the final nail in our economy’s coffin.

Despite facing dwindling credit, SMEs are resilient and have come up with ingenious ways of raising capital to stay afloat.

One dependable way to secure funding for both new and existing businesses is through bank loans.

However, SMEs need to evaluate financial institutions to get the best deal in these challenging times.

The first thing to consider is the amount of money your bank is willing to advance you.

Considering the prevailing economic conditions, a good bank should be able to offer SMEs a wide range of products, depending on their needs. The repayment period should also be reasonable.

A bank that offers up to a maximum of, say, Sh3 million with repayment periods of up to 36 months is ideal for SMEs.

The business owners should also confirm the bank’s flexibility concerning the facility. If the bank offers top-ups and refinancing, it is a good pick.

User-friendly and low-interest rates are the first consideration for any businessman in picking their financier.

One disadvantage that SMEs have is that they might lack substantial collateral or relevant guarantors to secure a loan.

It is, therefore, prudent that they identify financial institutions that are ready to advance them money without demanding a backbreaking security.

A good financier will visit the SMEs business, carry out an assessment of the business’ potential and value and through this, offer the business the right loan at the right terms without burdening them with unnecessary guarantors or unattainable collateral.

While choosing a financial partner, SMEs should also examine the institution’s onboarding process.

Establishing a relationship with your bank should be easy and your preferred financial institution should provide you with straightforward and easy-to-follow requirements as they perform their due diligence or Know Your Customer (KYC) procedures.

While at it, SMEs should also consider the cost of maintaining the facility, including facility fees, service charges and transactional charges, all of which should be manageable.

Despite banks primarily being money lenders, they should believe in the business’ dreams, aspirations and capacity.

As such, your financial provider should be able to offer you extra services like financial advice, seminars or business clubs where members share ideas.

The tough economic stretch the world is currently facing can be scary for any small business owner.

However, identifying the right financial partner and strengthening the relationship can give you the confidence and resources needed to survive the storm.

By Ochieng Oyugi 25 mins ago
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