The year-end season is the most profitable window for many traders, but it can also wipe out working capital if poorly planned. In this exclusive interview with Business Focus, William Kayongo, Head of Enterprise Banking at dfcu Bank, explains how retailers, wholesalers, importers and distributors can position themselves for the peak demand while managing cash flow, supplier payments and stock financing. Excerpts;
Q: The festive season is the most profitable but also the most cash-intensive period for traders. Why do even profitable businesses run into cash-flow problems during this period?
Kayongo: Most traders look at the festive season as a bumper harvest. Everyone wants to make a killing, depending on the business they run. If it is not well analysed, you eventually fall into problems.
Right now, everyone has been importing, but we have felt the impact of the Strait of Hormuz due to the conflict involving Iran, Israel and America. Goods passing through the Strait have been limited, which has extended the gestation period between ordering and arrival in Uganda.
Big, profitable businesses also suffer cash-flow shocks because they fail to analyse the window. Which goods are really on demand? What are the current fashions, designs and consumer preferences? If you don’t analyse that, you risk stocking old-fashioned products or overestimating demand.
It is critical to analyse your current business status, why you are importing or adding stock, and how you will manage that stock once it arrives.
Because traders anticipate strong cash flows, some resort to debt without analysing their cash conversion cycle. That is where the trouble starts.
Q: Many traders rush to borrow when a big order arrives. Beyond seeking finance, what does proper preparation involve?
Kayongo: As an importer or trader, you need to benchmark with people in the same line of business. Sometimes traders see each other purely as competitors, yet there are economic shifts that you need to review and discuss with peers.
Involve experts like banks and business advisors. Be clear on your objective, document it, and have clear projections for cash flows and margins.
Ask yourself: does this season really require you to import, or can you arrange with other traders in your line to supply you at a lower cost?
You must let your records speak to the demand, and introduce clear policies if you give out goods on credit. The festive conversion cycle is short, it runs from September to December. Communicate appropriately to your customers.
I urge traders and SMEs to bring in business advisors and benchmark with peers. That helps you make informed decisions and adjust policies that may not work in the current season.
Q: Overstocking locks up cash, understocking means lost sales. How can traders forecast and time orders more accurately?
Kayongo: This is where most SMEs get excited. If you asked how many SMEs do proper stock-taking from January to date, very few can. They may see that they are meeting operational costs and the business is profitable, but they don’t cluster inventory.
You must cluster inventory into fast-moving, slow-moving and festive-specific stock. Which portion should you hold more of?
Track fast-moving products to ensure quick returns. This is a critical period for stock management. Hold yourself accountable. When you open your shop, know the actual value of your stock position. When you close, know what you have sold, what remains, and which stock gives you the best margins.
Take ceramics, for example. This is a peak construction season, as many homeowners are keen to complete their houses before year-end. Tiles and paint are currently in high demand. What market intelligence or data is informing that observation? You need trend analysis on your performance and a well-aligned customer list you can reach out to.
Importers and traders must do stock aging. How much stock has been with you for more than 180 days? That is six months of holding Capital . What is your plan to move it? Then, what is your fast-moving stock, from one day to 60 days? You have only four months to push it out. Whatever overstays holds your money, limits your operating cash and impacts your business.
Stock projection and balancing is very critical.
Q: dfcu offers a wide trade finance toolkit, from Letters of Credit to Import Loans, LPO Financing and Invoice Discounting. Tell us more about these financing options and how should a business owner know which instrument fits their specific need?
Kayongo: When an SME or trader comes to the bank, they say they need a loan. But we ask: what is your business story? Every business has a different cash conversion cycle. You might want a loan for two or three years, yet your need is specific to one season. If we give you long-term debt for a short-term need, it becomes expensive.
We ask, what is the purpose of the money? We look at your end-to-end cash conversion cycle and draft a solution that matches it, so you don’t tie up a lot of capital or incur a high cost of financing.
For instance, all importers can use Letters of Credit, especially when importing from overseas for the first time.
It manages importation risk and ensures right purchases, quality and quantities. An LC can run for one to two months – from ordering to arrival in Mombasa and then Kampala.
You pay a smaller commission, and it then crystallizes into a short-term loan. By the time you complete your conversion cycle, you are able to pay back. You share the margin between the bank and your business, and you avoid long-term debt.
During this period, demand for corporate gifts increases significantly. However, many companies do not make upfront payments to suppliers, instead payments are made upon successful delivery of the orders.
We provide Local Purchase Order (LPO) financing and invoice discounting solutions to help bridge liquidity gaps, whether you are executing an order or have already delivered and are awaiting payment.
For taxes, some businesses seek long-term debt, yet a temporary overdraft can cover a three-month tax obligation. By then you have paid the tax, cleared the loan, and the goods are already in high demand, so your finance cost is limited.
We also offer the dfcu Maali Loan, a financing solution specifically designed for local traders and growing businesses. Customers who have maintained a banking relationship with us for at least 24 months can access up to UGX 200 million for a period of 12 months, with no collateral required. The facility is cashflow-based, allowing us to assess your business’s ability to repay rather than relying on traditional security. It is an ideal solution for business expansion, whether you’re opening a new branch, increasing inventory, or seizing new market opportunities, enabling you to grow your business without straining your working capital.
.Q: Trade finance is often seen as complex and for large companies only. How are you making it accessible for SMEs and traders in places like Kikuubo?
Kayongo: That perception is quickly changing. At dfcu, we believe trade finance should be accessible to businesses of all sizes, including traders and SMEs in hubs such as Kikuubo.
We have invested significantly in customer education and awareness to help businesses understand how trade finance solutions can support their growth, improve cash flow, and enable them to seize new business opportunities. At the same time, we have digitized and streamlined many of our processes to make access faster and more convenient.
Today, a customer with a strong banking relationship can obtain instruments such as bid securities, performance guarantees, advance payment guarantees, and import financing within a much shorter turnaround time than was traditionally possible. Our focus is not just on the size of the business, but on understanding the customer’s trading history, cash flows, and ability to perform.
For traders in Kikuubo and across Uganda, trade finance is no longer a product reserved for large corporates. It is a practical business tool that helps SMEs access new contracts, import goods, manage working capital, and grow their businesses with confidence. At dfcu, we are committed to making these solutions simpler, faster, and more accessible to the businesses that drive Uganda’s economy.7
Q: For importers who pay suppliers in dollars but earn in shillings, what is the biggest risk during the festive rush and how can they mitigate it?
Kayongo: That is one of the biggest risks importers face, particularly during the festive season when demand, inventory requirements, and supplier payments increase significantly. The fundamental challenge is a currency mismatch: your obligations are in US dollars, but your revenues are largely in Uganda shillings. Any weakening of the shilling immediately increases your repayment burden.
Our lending principle is straightforward: where possible, dollar obligations should be matched by dollar inflows. However, many SMEs earn exclusively in shillings, exposing them to foreign exchange risk.
Consider this example. If a business borrowed USD 277,778, equivalent to UGX 1 billion at an exchange rate of UGX 3,600 per dollar, the repayment obligation remains USD 277,778 regardless of currency movements. If the exchange rate subsequently moves to UGX 4,150 per dollar, the same dollar obligation translates to approximately UGX 1.153 billion.
This means the business would need to generate an additional UGX 153 million, or approximately 15.3% more revenue, just to settle the same debt. That increase comes before considering interest, operating costs, or any margin pressures.
To mitigate this risk, we advise customers to borrow in local currency whenever their cash flows are predominantly in shillings. We also offer foreign exchange hedging solutions. Through a forward contract, a customer can lock in today’s exchange rate for a future transaction, providing certainty over costs and protecting profit margins from adverse currency movements.
While dollar loans may sometimes appear cheaper because of lower interest rates, exchange rate volatility can quickly erode those savings. The true cost of borrowing is not just the interest rate; it is the combined impact of interest and currency movements. That is why businesses should only take on dollar-denominated facilities when they have reliable dollar revenues or a well-structured hedging strategy in place.
Q: Bank guarantees and Letters of Credit are more than just payment tools. How do they build trust between traders and suppliers?
Kayongo: Trust is the foundation of international trade, especially when a buyer in Uganda and a supplier thousands of miles away may be dealing with each other for the first time. Bank Guarantees and Letters of Credit (LCs) bridge that trust gap by giving both parties confidence that their obligations will be fulfilled.
A Bank Guarantee assures the supplier that payment will be made if the buyer fails to meet their contractual obligations. At the same time, it gives the buyer confidence that the supplier has an incentive to perform because the transaction is backed by a reputable financial institution. In essence, the bank’s credibility stands behind the transaction.
A Letter of Credit goes a step further. It is a bank’s irrevocable commitment to pay the supplier, provided that the agreed shipping and trade documents are presented and comply with the terms of the LC. This gives the supplier certainty of payment while assuring the buyer that funds will only be released when the specified conditions have been met.
For example, we frequently see importers purchasing machinery, equipment, or raw materials from overseas suppliers. In cases where payment is made upfront without an LC, there is a risk that the equipment delivered may not match the agreed specifications, may arrive damaged, or may not be delivered at all. Through an LC, the bank verifies shipping documents and works with correspondent banks to ensure compliance with the agreed terms before payment is released. In some instances, we can even identify discrepancies and recommend amendments before goods are shipped.
These instruments significantly reduce commercial risk because the bank oversees the transaction from initiation to settlement. The supplier gains comfort knowing they are dealing with a credible bank rather than relying solely on the buyer’s promise to pay. Likewise, the importer gains assurance that payment is linked to the fulfilment of clearly defined contractual conditions.
Ultimately, Bank Guarantees and Letters of Credit do more than facilitate payments. They create confidence, reduce risk, improve access to global suppliers, and enable businesses to trade and grow beyond their borders with greater certainty.
Q: One of the biggest delays in accessing finance is lack of readiness. What records should a trader prepare now to avoid last-minute frustration?
Kayongo: Access to credit goes back to how ready you are. I look at it like a vision board. How many sales do I want to generate this year? What return do I need? That guides what kind of credit you need throughout the year. If you are a good planner, you request limits in advance.
We look at four cardinal principles. First, have you been banking well? We base our decision on your banking. Second, how well have you paid previous facilities? Third, what is the purpose of the money? Does it align with your business objective and your ability to manage finance costs? Fourth, collateral, although we are increasingly moving away from traditional collateral and focusing on turnover and account activity.
Because you can now access credit based on volatility analysis of your sales and banking, it is a big win for SMEs. Unlike in the past, SMEs can access credit without collateral as long as they have a good credit history.
In a nutshell: plan your credit needs, secure limits early, service previous facilities well, be clear on purpose, and have your documents ready. That way you won’t be in a rush-hour panic.
Q: As we head into the year-end shopping season, what is your final advice to traders who want to maximize sales while protecting working capital?
Kayongo: It’s simple; start early, plan with data, and match finance to your cycle.
First, know your numbers. Separate what is fast-moving from what has overstayed. Clean up old stock before you bring in new stock. Your cash conversion cycle from September to December is short, so every shilling locked in slow-moving inventory hurts your ability to sell.
Second, don’t borrow blindly. Let your bank understand your trading cycle. At dfcu, we are not just lending money; we are structuring a solution – whether it is an LC to de-risk your first-time import, an import loan to pay your supplier on time, LPO finance to execute that corporate order, or invoice discounting to unlock cash tied in unpaid invoices. The right instrument at the right time protects your margin.
Third, protect yourself from forex shocks. If you earn in shillings, think carefully before borrowing in dollars. Talk to us about hedging or borrowing in local currency.
And finally, engage your Relationship Manager now, not in December. Come with your bank statements, supplier invoices, contracts, trading licenses and projections. When we review early, we can put limits in place and you can execute when the opportunity comes, rather than chasing money after the opportunity has passed.
The festive season rewards prepared businesses. Those who plan inventory, protect cash flow and choose the right financing partner will not only sell more, but will enter 2027 stronger.
