Before applying for a loan there are several things that one needs to consider. Things to think about before seeking for a loan includes:-

i) Nature of the business

Before seeking for loan, you need to know the kind of business you want to engage in. This is essential, because it will help in assessing overall returns of the business and the possibility of being able to repay the loan.

ii) Actual amount required

In this, one needs to know the actual amount that is required to establish the required business. In order to know the amount required, one must have the overall requirements for starting that particular business. For example the usual need item usually includes:

  1. A place- a house/room where one needs to place the required business

  2. Equipment/machinery needed

  3. Labor required and associated charges

  4. The overall cost of registration and licensing

  5. Insurance

iii) Interest rate set and repayment plan

Knowing the interest rate required is essential as it helps in formulating the repayment plan for the loan. By knowing the interest that will be charged will help in understanding the total amount to be repaid, hence making repayment plan easy.

iv) Returns of the business

This also assists in formulating the repayment plan for the loan. Knowing the returns of the business will provide the overall amount that one can be able to pay in weekly or monthly basis. Having in mind the amount to be generated by your business will assist in knowing if only the profit/returns is enough in repaying the loans or one should seek extra source to assist in repaying the collected loan.

v) Collateral required for the loan

Lastly, one needs to know the required collateral for such a loan. This is essential, as failure to repay the loan will result into either sale or confiscation of the item that is placed as collateral. Due to this, one needs to know the actual items that will be taken as collateral and the overall impact one can have due to loss of that item as a result of failing to repay the loan.

The following are some of the challenges hindering MSMEs from securing and effectively utilizing loans

  • MSMEs giving false documents and information

  • Misuse of the provided loans

  • Late loan repayment

  • High interest rate

  • Failure to provide collateral

  • Most banks do not operate an MSMEs financing window

  • Unequal distribution of financial institutions i.e. they are mostly found in urban and sub-urban areas

DO’s and DON’T’s before securing a loan


  • You need to have a business idea

  • A well prepared business plan showing how the loan will be utilized.

  • Have in place the repayment plan for such amount

  • Invest the secured loan to the intended business.

  • Extend the time for repaying. Example if you can repay in 6 months, ask for 12 month just to be on a safer side.


  • Use the amount for personal usage apart from intended business

  • Invest the amount in a different business from envisaged

  • Not having a repayment plan in place

  • Plan to elope without paying the loan

  • Submit false information

Other services that can be offered by Banking and Financial institutions includes

  • Account opening (Banks)

  • Cash Deposit and Withdrawal (Banks)

  • Internet and Mobile banking (Banks)

  • Trainings (All)

  • Others

  • ATM cards