Credit is important in a business because it helps to finance business transactions when the business is short of funds. This lesson aims at providing knowledge on how to manage credit given to small scale enterprises to enhance their performance. We will use the case of Hosea Enterprises to understand the sources of funds, process of sourcing for funds, effective utilization of borrowed funds and the repayment process.

Sources of Funds
An entrepreneur can obtain funds to start up his business from various sources, some of which include:

• Family savings/personal savings:  This is what an entrepreneur has been able to put aside to start the business. However, it is typically a limited source since most people are not able to save large amounts.
• Banks:  This is main source of finance for business organizations but usury banks have stringent conditions that make it difficult for small scale businesses to access funds. Banks, for example, might require collateral which most businesses do not have.
• Savings and credit cooperatives (SACCOS): This is a source of funds that is cheap and also easily accessible. However, one has to be a member of the SACCO.
• Donations:  This is money that one can be given by friends or relatives to enable him/her to start the business. This is not a very reliable source.