Level 10 · Part 4
Borrowing, saving and group finance
Any borrowing is a promise to pay. Count the full cost, and borrow only what you can repay.
Money from outside can help a business grow, but it can also trap it. Think carefully, and take time.
- Savings come first where possible: even small, regular savings build a cushion for slow weeks.
- Group savings and lending schemes can help, if the rules are clear, written down and fair to all members.
- Before borrowing, ask: what exactly will the money pay for? How will it bring in more money? When will I repay?
- Ask for the full cost in writing: the amount repaid in total, any fees, how often payments are due and what happens if you are late.
- Compare more than one provider. Prefer lenders that are regulated and open about their costs.
- Be cautious of anyone who asks for fees before giving a loan, pressures you to sign quickly or will not explain the cost.
- Borrow for something that creates income, and never more than you can repay in a slow season.
Do not borrow to cover a loss without a plan
Borrowing to cover a loss does not fix the cause. First find why the money is short: costs too high, prices too low, losses, or late payment.
Funding support
Some countries have programmes, grants or advisory services for small agricultural businesses. Ask your cooperative, your local agriculture office or a development agency which ones exist and what they require. Tools such as FAO's RuralInvest toolkit show how a clear business proposal is built for fundable projects.
Exercise 10.4 · Questions before I borrow
- Write what you would use the money for, and how it would help you earn more.
- Write the questions you would ask the lender about total cost, fees, due dates and late payment.
- Write the largest repayment you could make in your slowest month with your own figures, and what you would do if you could not pay.
- Write one alternative to borrowing, such as saving, a smaller start or a shared tool.
Background reading for this part:
- RuralInvest: Fostering Access to Finance for Small-scale Entrepreneurs — Food and Agriculture Organization of the United Nations (FAO)
- Start and Improve Your Business (SIYB) — International Labour Organization (ILO)