Apply loan when your credit status is good and not when it has deteriorated
If you are a business owner or possibly even looking to be one, it is important to understand that there are good loans out there that are meant to help you fund your company. Besides banks, there are other financial institutions that are more than willing to offer loans for small or medium business owners.
These loans for businesses are very similar to personal loans because of the fact they must be repaid in full by a certain amount of time, whether this be some sort of a repayment plan or a large lump sum payment.
But remember, apply loan when you don’t need them
The money being borrowed can be used for a number different reasons. For example, you can use this money to purchase new equipment that is needed, purchasing additional inventory or materials, hiring employees, covering for operational expenses, or even to pay staff salaries.
But as with all loans, it is very important that the borrower takes this money very seriously and plans out first how the funds will be used. Many new company owners make the mistake of borrowing a lot more money than they need because they did not plan ahead of time.
This will make it very difficult to make the payments, especially when the rare loans come with a high interest rate.
For example, think about how you are going to use the funds borrowed:
- Are you looking to start your business and get things going?
- Do you have a business but are now looking to expand?
- Do you just need a little help with this months payroll?
- Have you considered other financing to cover the funds you need?
These are just some of the questions you should ask yourself before taking on this type of rare loans. Remember you do not want to forget about certain risks that come along with owning your own business.
Once you have decided you want to take on this loan you must come up with a business plan to present to the lender. You must come with a business plan and data sheets that are easy enough for the loan officer to understand your field of work.
The loan officer will need to be convinced that you will be able to take on this loan and pay it back with ease. If you can achieve this, then there should be no problem getting this type of loan to help your business. But be mindful that over half of entrepreneurs are expecting to increase their revenues by 50 per cent in 2019, yet many are facing an uphill battle when it comes to funding their business expansion.
An SME Development Survey by DP Info in November 2017 said a major sticking point for entrepreneurs in Singapore is cashflow management, It said that an increasing number of firms struggling with delays in client payments.
The survey found about 35 per cent of SMEs saying they had finance-related issues – 13 percentage points more than a year earlier and the highest since the survey began tracking the issue in 2011. And among these 35 per cent, the proportion experiencing delays in payments from customers skyrocketed from 14 per cent in 2016 to 81 per cent last year.
A separate Spring Singapore poll conducted in Dec 2017 showed that 64 per cent of SMEs said they were facing some form of delay in receiving payments from customers.
Mr Paul Ho, chief mortgage consultant at iCompareLoan said, “businesses need to apply loan when they do not need money.”
He added: “When your business is struggling and you need additional funding to tide over a tough patch, then you will find that your access to funding is completely cut off and end up with very expensive funding.”
It may be wise to plan 6 to 12 months ahead to apply loan for any potential funding needs. Even if you do not need funding now, you may want to quickly refinance your home loans for any potential equity and stand-by cash even if you do not need it now.
When you apply loan, remember that banks assess your credit and affordability at the point of application, so you should apply when your status is good, not when you have further deteriorated. At that time, no banks will lend you.
You can read more about the different types of funding here. If your business is profitable and you only need short term funding, but your access to bank’s working capital is temporarily cut off, then you should consider personal loans as a source.
There are numerous loans programs to assist entrepreneurs with starting, managing and growing their businesses. Thousands of businessmen are turning to such resources because financing remains a formidable challenge. When getting SME loans you must not be disheartened if a lender refuses them loan.
Many small business owners use loans to help rapidly growing businesses, or to help fund change in ownerships for businesses. When getting SME loans, be mindful that the benefits include of taking loans when your business is successful includes increased cash flow, and flexible repayment options (such as monthly installments of principal and interest and no balloon payments).
When searching for loans, it is prudent to work with an experienced loan specialist who understands the ins and outs of the agency and small business financing. All business owners – whether their businesses are large or small, well-capitalized or operating on a shoestring ‑ should develop a working relationship with their primary lender for obtaining business loan.
There are several common mistakes which can hinder the chances of getting rare loans, and it is good to read up about them.