Many a business operators complain about lack of funding, and yet many more squander the little cash they have, including bank loans, which eventually leads to their collapse. It is no secret that an entrepreneur is as successful as their money handling habits.

According to Claude Harerimana, a loan officer at Equity Bank, credit is sometimes the spark a business needs to start its growth journey and become sustainable. However, this will be determined by the skills of the borrower in dealing with money and having requisite management skills.

Harerimana says it’s important that borrowers have a clear plan on how they are going to use the money and also understand why prudent money handling practices are a must.

"Some people borrow money but later divert the money to other activities for which it wasn’t planned. This always results in issues of default and poor performance of the business they were trying recapitalise,” he says.

He says that’s why it is important that lenders conduct proper assessment before deciding to give credit to any customer. Harerimana says borrowers should also consider the interest rate charged, adding that higher rates may create challenges for new businesses with a small customer base.

Pamela Bigirimana, a business owner, says any enterprise has its own risks, but it’s worse for the start-ups. However, money discipline is fundamental and more so when one is using a loan. So, one must find ways of dealing with the many risks that may arise to safeguard the business and also be able to service the loan without fail.

Paul Munyaneza, a Kigali-based financial expert, advises business operators, especially start-ups, to be vigilant and monitor their cash flow closely to avoid unnecessary expenditures that could trigger business failure.

Ensuring proper management of the resources at hand is also crucial toward business survival and profitability.

He advises business operators to always engage the services of professionals to help with financial matters, including drafting a tailored monthly cash flow projection for the business. This will help you control spending and stay focused on only activities or items for which the loan was borrowed.