Factors To Consider Before Applying For A Business Loan
When taking a business loan, there are many factors to consider; from whether the business owner should get it from a bank or a financial institution, to what type of loan to consider depending upon the reasons for it, the kind of loans the business owner can borrow, based on their credit score, financial credit history, income rate, etc. These points are explained below and will the interested business owner choose.
SME loan eligibility criteria:
SME loans are given to business that qualifies to be one of many Small and Mid-Enterprises that have below a maximum number of employees, revenues or assets. Usually, the eligibility varies from financial institutions, but these are the minimum requirements for all of them. The eligibility of the business owners are based on:
- Their credit score, financial credit history and income. If they’re taking a loan from the bank, credit score and financial credit history are checked to make sure both are good so that the business owner can pay back the loan. There are, however, licenced money lenders who can still give loans if their credit score and financial credit history are low or clear. Instead, they check the rate of income and based on that. They provide loans.
- To qualify for the business loan, the business must be at least a year old or have at least six months of being active in the industry.
- The company must be a registered ACRA private limited company to qualify for the business loan.
- Some of this information has to be verified by documents to be submitted by the business owner, they are:
- ACRA profile of the company for the last three months.
- Six last months of bank statements.
Depending on where the loan is acquired from, the application processing for approval of the loan could take several weeks or just a single business day or less. Banks usually take 2 to 3 business weeks to process a loan application, sometimes even four weeks if the case is considered to be complicated. A licensed money lender can do it within only 24 hours, or a business day or less.
The tenure of the loan varies greatly on the bank or licensed money lender and the different business loan plans available that has been chosen by the interested business owner. This tenure can accordingly be from 1 year to 4 years.
The loan can from as low as S$10,000 to S$400,000 depending on the business loan secured and the financial institution one is dependent upon. Getting the highest possible value depends on the business owner’s credit score, financial credit history and rate of income.
The interest rate is charged per effective annual rate, with makes it cheaper and more effective long term, and is 7% to 13% depending upon the financial institution and the loan secured.
These are some important things to remember when getting a business loan:
- Do some research to find the best possible financial institution and loan type.
When applying for a business loan, there are many things to check that indicate that the financial institution in mind is a reliable one or a troublesome one. These include; the time is taken to process the business loan application, the different types of loans, the interest rate of these loans, the tenure of these loans, the quantum of these loans, whether these loans can be applied for with one’s current credit score, financial credit history, rate of income and many more.
- Always tell the truth about why you need the loan.
It’s always better, to tell the truth about why the business owner needs to take the loan. If lied to by bank statements, the financial institution may find out the truth, and that might put the business owner in a compromised state. If a reason is thought to be embarrassing for the business owner, it’s okay. Financial institutions see people in that kind of situations every day and will try their best to secure a conventional loan tailored to the situation.
- Always read the terms and conditions.
The terms and conditions are always to be read by the business loan applicant so that they can make sure that all the terms are understood by them, and the conditions under which they have to pay their loans are understood and accepted by them. If these are not read by the business owner, the conditions under which the loan is to be paid back might be too severe for them and give them a difficult time paying back the loan.
- Read the fine print of loan details.
The fine details of the loan documents to be signed by the business owner are to be read thoroughly, or the signature on the documents, or it could be used against them to prove that they were aware of certain conditions and agreed to it. This is because the signature of the applicant is used as proof that they have understood and acknowledged everything mentioned there. That’s why it is important to read and make sure all the details mentioned on the loan contract are okay.
- Check the interest rates.
The interest rates vary from one type of business loans to another as well as from different financial institutions but are usually from between 7% to 13%. The business owner should want a loan with the lowest interest rate possible and with taking as few risks as possible.
- Ask a professional for help and advice.
If the business owner is unsure of what to do or if in a difficult position where they don’t know what to do, they can always seek professional advice from someone else in the business of loans. A business loan requires a huge amount of money to be transferred to the business owner, and they must pay it back with interest. These huge amounts are a huge responsibility for the business owner, so it’s important to understand all the details about it. These details can be worked out and explained by a professional to help the business owner.