Ravi Chandran
Met with your SME loan consultant lately? If not, now would be a good time, whether your company is in the market for a business loan or not
By: Hitesh Khan/
Your SME loan consultant can be your best friend when economic times are tough. But, as in any relationship, credibility and trust are key. And that requires mutual respect, honesty and staying in touch.
Contact your SME loan consultant often and keep them posted on what’s happening with your business, even if you’re not looking for money. Bring them into your inner circle and have them visit your operations at least once a year. Ideally, develop that relationship during good times so that you can count on them when times get tough.
SME Loan consultants are much more receptive to loan requests from businesses they have established relationships with. But expect more stringent due diligence and more questions from lenders when the economy isn’t doing well.
SME loan consultants know how to get you that Micro Loan. Micro Loan is cheaper than the other types of loans. All SMEs should explore this option prior to the other types of business term loans, working capital loans or using personal loans in their capacity. As part of the government’s plan to help SME with their cashflow, Enterprise Singapore launched the Local Enterprise Finance Scheme (LEFS). SME Micro Loan is one of the loan programs under LEFS.
The SME Micro Loan is a government assisted financing scheme to help local SMEs access financing. Through the SME Micro Loan, companies can get access to working capital financing to support their day-to-day business operations. Under the SME Micro Loan, you can borrow up to a loan quantum of $100k. The repayment period for the SME Micro Loan can be stretched up to 4 years.
In order to qualify for SME Micro Loan, your company needs to be registered and operating in Singapore. In addition, at least 30% of the shareholdings need to be owned by a local or PR. It does not have to be owned by a single local individual. For example, if there are 4 Singaporean shareholders with 7.5% shareholding each, your company will also qualify for SME Micro Loan.
Your business loan to-do-list
Table of Contents
Borrowing money can make good business sense for well-managed businesses that plan ahead. Here are a few things to consider in preparing for that critical meeting with your SME loan consultant:
1. Decide what type of money you need
Is it equity, working capital or long-term money for fixed assets? Knowing what type of money you need will determine whether you approach a bank, credit union, equity investor or other financier.
2. Two or more lenders are better than one
Part of your planning for the worst should be to shop around and establish additional sources of credit. If you are large enough, divide your financing between different institutions. If you are smaller, split your financing needs into shorter – and longer-term.
This is where an independent SME loan consultant will be most useful.
Loan consultants who have a strong working relationship with several strong lenders, will be your best bet in comparing loans and in getting one which best meets your requirement.
3. Satisfy the five “Cs” of lending
Entrepreneurs should understand what criteria a lender will be applying in its assessment. These can be referred to as the “five Cs of credit.”
- Character: Does your management have the skills, experience and track record to deliver?
- Capacity: Do you have the ability to repay the loan? Banks will be looking at both your track record and your anticipated cash flow.
- Capital: Is your equity base strong?
- Conditions: How are local and even international events affecting your business?
- Collateral: Often mistaken as the most important thing a lender wants, collateral is actually lower on a banker’s priority list, compared to the other “Cs.”
4. Talk to your lender
Don’t be a stranger: keep the lines of communication open. This includes meeting all of your company’s reporting requirements on a timely basis. Sending your financial statements and other reports late to your lender leaves a very bad impression.
Likewise, do not exceed your approved credit limit. If your company is going to need additional money, talk to your lender in advance to inquire about getting a temporary extension. And lastly, be realistic about your short – and long-term cash flow projections and share this information with your lender. This can be used as the basis for your line of credit once it’s required.
5. Do your homework
When a lender asks for more data and more paperwork, don’t put up a fuss. Lenders are in the business of lending money, but their head offices do more thorough due diligence in tough times to ensure the money they loan is for sound business ventures.
It can also be important to firm up your business plan. Bankers often have to improve clients’ business cases and plans before they can lend them money. Entrepreneurs who do their homework and produce a solid business plan are more likely to get funding.
6. Run a tight ship
This is back to basics stuff that not all companies stay on top of: Focusing on activities like collecting accounts receivables promptly, paying bills and tracking inventory. Banks will want assurances that you are taking care of such business fundamentals.
In a nutshell:
- Prepare well and in advance.
- Diversify your risk.
- Ensure you understand what criteria will be used to assess your business.
- Be forthcoming—answer a banker’s questions 10 times if need be and disclose problems early.
- Master your business plan.
- And maintain a good handle on your basic finances.
