Categories: South Africa

Bank loans: advice for smaller producers

Commercial banks lend only to businesses that show returns and have the potential to succeed.

This was according to Dr Langelihle Simela, business development manager at Absa AgriBusiness, who was speaking at the 111th AVI Africa poultry conference held recently at Emperors Place in Johannesburg.

Simela said that a small agricultural business had to consider several factors before approaching a bank for a loan.

Because a bank first studied a business’s track record before ending money, sound recordkeeping of all transactions was crucial.

“A bank needs audited financial statements to assess performance. It also needs to see that one is improving or that growth at least remains constant,” she said.

Including high salaries into loan applications when applying for a loan was seen as a definite no-no by banks, as banks financed businesses, not salaries, she added.

A personal contribution showed a bank that a lender was committed to making a success of his or her enterprise. It also reduced the interest burden on the lender. Ideally, a personal contribution should constitute between 20% and 50% of the loan amount.

“However, taking out an additional loan to finance one’s own contribution was another no-no for banks, as the business then had debt from the start,” she said.

Banks usually loaned money to those who could show that they had hands-on experience and management ability, and not those who emphasised their academic qualifications or leadership positions on many boards, she said.

Recent Posts

Rethinking sustainable development

Growing awareness of the interconnectedness between water, energy and food security is resulting in a more holistic way of measuring…

3 hours ago

Taking steak to the next level

Steak can be cooked and served in a variety of ways, but this Asian-inspired marinade can turn even the tastiest…

7 hours ago

Land: access vs ownership

The one crucial point that should not be forgotten by all the organisations and political parties representing, or claiming to…

1 day ago

Agri interventions key to Ramaphosa’s economic stimulus package

President Cyril Ramaphosa announced that government has reprioritised funding towards an economic stimulus package that would focus on agriculture, among…

2 days ago

Biosecurity: your first line of defence against disease

Dr Fambies van Biljon, veterinarian at Sovereign Foods, talks to Glenneis Kriel about the crucial need to establish a well-run…

2 days ago

Local manufacturers seen at Royal Show

Every year, the Royal Show features exhibitors and agricultural equipment quite different from those at Nampo. The Royal Show is…

3 days ago

This website uses cookies.