Sourcing of Funds... Continued (15 Minutes)

The biggest challenge for Hosea was the startup capital because the 20,000 Kenyan shillings which he had saved was not sufficient to start the business. He therefore approached his father who lent him shs.80, 0000. Now, with 100,000 shillings he was ready to start the business. He rented the business premises for shs.15, 000 per month and was required to pay a down payment of shs. 15,000 so in total he paid shs. 30,000 and he used the balance to purchase the opening stock. The business did very well and he had many customers. He therefore felt that there was a need to expand the business but he was constrained by the lack of funds.

One day a credit officer from one of the local banks came to Hosea’s business to buy some tires. He was very impressed by Hosea’s business and he had a discussion with Hosea on the growth of the business. Hosea explained to him the problem of the lack of funds.  The credit officer invited him to the bank for a further discussion. The following day, Hosea went to the bank and met the credit officer and had a very fruitful discussion and the credit officer agreed to lend Hosea 2,000,000 for business expansion provided he could bring a land title deed to secure the loan. Hosea was in a dilemma because he did not have a title deed. He promised the credit officer that he would be back within a week.

Hosea approached his father to see whether he would allow him to use the family land title deed to secure the loan. His father was very reluctant but Hosea was able to convince him. Hosea promised to work hard and repay the loan without failure. The two agreed to go to the bank to meet the credit officer.