Sourcing of Funds... Continued (15 Minutes)

The following day they went to the bank and they were well received. The credit officer accepted Hosea’s father’s title deed and the family and the family land were mortgaged to secure Hosea’s loan. The bank gave Hosea a cheque of 2,000,000. Hosea was over joyed and he promptly started planning how he could expand the business. His father talked to him about the various consequences in case he failed to repay the loan. Hosea promised his father that he would never default on the loan repayment.

When the money was ready and credited to Hosea’s Bank account, Hosea was ready to begin the business expansion. However, before the expansion plan was fully conceived, Hosea had a discussion with his friends and was advised that it was important to get married first so that his wife could help him in managing the business.

This idea appeared to be very good to Hosea. He therefore started plans to marry his long term girlfriend. All the wedding plans went well, he used the bank loan to pay dowry and for financing the wedding. They had a very big wedding, people ate and drank. He spent 1,500,000 shillings on the wedding.

Hosea now had only 500,000 to expand the business. This was too little, given the costs of the things he needed to stock the business. The business income was too low to finance the loan repayment and meet the household expenses. Hosea started lagging behind in loan repayments. Within the first year, their first baby came and the family demands increased. The loan repayment was proving hard to meet.