Approval signals a lender’s willingness to provide funds on set terms, but it does not confirm that the borrower’s operating cycle can sustain those terms.

The Central Bank of Kenya’s weighted‑average commercial bank rate, currently 8.75 %, reflects monetary policy, not the price any individual borrower will pay after accounting for fees, security costs and repayment schedules.

A typical amortising loan of Sh1 million at an 18 % nominal annual rate, charged monthly on a declining balance with no fees, results in roughly Sh91,680 monthly payments and about Sh100,160 total interest over twelve months.

Cash‑flow timing matters: a business that receives major customer payments quarterly may find two months of insufficient cash despite an apparently affordable annual debt service, potentially leading to penalties or additional borrowing.

Loan design should align with the rhythm of cash conversion; seasonal agriculture, project‑based work and steady retail each require repayment structures that match their specific cash‑in cycles.

Financing capital assets that generate income over several years can justify longer maturities, whereas borrowing to cover recurring operating losses needs a clear plan for improving prices, costs or demand.

Working‑capital loans are viable only if the full purchase‑sale‑collection cycle is mapped and the margin after cash‑outflows can comfortably cover the instalments.

Stress‑testing should consider combined shocks—lower sales, delayed payments and higher input costs—because a loan that works under ideal assumptions may fail when multiple adverse factors occur together.

Security arrangements, such as personal guarantees or charges over family assets, extend risk beyond the business and must be evaluated for potential downside before signing.

Refinancing may lower the headline rate but can introduce exit fees, new valuation costs and longer indebtedness, so borrowers should compare total cash‑flow impacts rather than just the advertised percentage.

Digital‑credit platforms offer rapid disbursement, yet the speed can encourage treating loans as convenience items, leading to overlapping facilities that strain cash‑flow when repayments coincide.

Entrepreneurs should negotiate transparent repayment illustrations that show cash received, all compulsory charges, instalment amounts, balance after each payment and the consequences of early settlement, enabling meaningful comparison across offers.