I am in my late 40s, married, and a father of five. Two of my children are in high school, one is in grade six, and the last born twins are in grade two. I have been a businessman most of my life. However, things have gone very badly for me in recent years.
I took these loans to finance a Sh5 million procurement contract with a government parastatal , buy a new vehicle, inject capital into my pub business , and open a hair salon for a woman I was acquainted with . I own a vehicle that is worth about Sh800,000 and a family home in Ruiru area worth Sh13 million.
I am in this fix because the government contract didn’t get paid so I lost that investment.
Although the bank has been lenient , it appears to have run out of patience and has threatened to auction of my home if I don't start paying off the loan.
My friends on the other hand are up in arms. I now sneak into my home very late at night and leave very early in the morning to avoid them.
My household budget was about Sh50,000 when I had regular income but we have now trimmed it to Sh30,000 to fit into my wife's teacher salary which is now the family's sole source of livelihood. What do I do to get out of this quagmire? Derrick
Dominic Karanja, a financial planning and investments consultant
Your financial challenges stem from over-expansion, debt accumulation, and delayed payments, which have placed strain on your finances.
Immediate attention should be directed towards securing your home, which faces risk of auction due to the Sh3 million bank loan. It is advisable to visit the bank this week to discuss options such as loan restructuring, moratoriums, or reduced repayment terms.
Maintain transparency regarding your financial circumstances by outlining the business setback and noting that your wife’s income is currently the sole source of household support, while expressing willingness to make modest payments. This approach is effective because banks typically favour structured repayment plans over the costly and uncertain process of property auction.
Therefore, it would be prudent to view the sale of your home as an option of last resort, to be considered only after thoroughly exploring all alternative solutions.
Avoiding your friends may exacerbate the situation, particularly given that the Sh7 million owed constitutes relationship-based debt founded on trust. A more effective strategy would be to arrange a meeting or deliver a clear, formal communication outlining your commitment to resolving the matter. Explain that you are actively restructuring your finances and you intend to repay the debt progressively. Provide a realistic repayment plan, even if it consists of modest monthly payments to everyone. This method can alleviate immediate concerns and restore trust, as individuals are typically receptive to transparent and well-defined plans.
It Is advisable to liquidate non-essential assets, with particular consideration given to selling your vehicle valued at between Sh800,000, in order to immediately alleviate financial strain. While this decision may be challenging, it can provide prompt access to funds for reducing bank arrears, demonstrate good faith and commitment toward repayment, and potentially address one or two pressing debts owed to acquaintances. Implementing this strategy could substantially decrease the likelihood of your home being subject to auction.
The unpaid Sh5 million government procurement contract represents a vital opportunity that should be pursued with determination. Consider visiting the parastatal in person and following up regularly, escalating your request through the procurement office, finance department, and accounting officer if needed. Should the situation demand it, seek legal assistance to apply additional pressure for payment.
Even receiving a partial payment could greatly relieve your financial burden and help protect your home from potential loss.
Explore if a financial institution (other than your current bank) would be willing to “buy” that debt at a discount to give you immediate cash, though this is difficult if you are already listed with the Credit Reference Bureau.
Debt burden.
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It Is essential to implement disciplined financial management to mitigate further economic challenges, particularly as your household currently relies solely on your wife’s income. While adjusting your budget provides a solid foundation, it is advisable to suspend any unprofitable undertakings, such as the pub business or other ventures that are not yielding returns, and to refrain from incurring additional debt or engaging in uncertain “quick fix” solutions. Now, the priority should be to minimize losses and establish financial stability.
At this stage, the principal goal is to restore reliable cash flow rather than prioritize developing an optimal business model. It is recommended to focus on practical, income-generating activities such as providing consultancy within your current professional network or engaging in smaller-scale supply and logistics operations. The objective is to establish regular daily or weekly revenue streams to improve immediate financial stability, rather than emphasizing on long-term investments.
Currently, feelings of shame may be influencing your actions and prompting you to avoid addressing the situation, which in turn heightens pressure and stress. It is important to note that many business professionals experience setbacks and achieve recovery, provided they confront challenges promptly and directly. Avoiding interactions and entering or exiting your residence discreetly can be mentally taxing and does not contribute toward resolving outstanding debts; addressing the matter proactively represents the initial step toward a constructive resolution.
Experiencing uncertainty regarding the security of your family’s housing, while managing personal obligations to acquaintances, presents a significant challenge. Although the circumstances are serious, your available assets and substantial receivable offer a viable way forward. The primary objective should be to shift from avoidance to constructive negotiation, as lack of communication often leads to undesirable outcomes such as forced asset sales and strained relationships.
