Steps to Qualify for a Small Business Loan
In applying for a small business loan, there are several steps to follow. In this article, you will learn of the things to do to get the loan and grow your business. Whether you end up applying for a business loan through a bank or any other financial institution, you must be familiar with the lender’s requirements. If you know the lender’s criteria before you apply, then you can save your time and effort. Here are some steps to qualify for SME Loans.
Build Your Business or Personal Credit Scores
Your credit score evaluates your ability to repay your debts like car loans, credit cards, and mortgage. It ranges from 2,000 and AA rating.
A credit score is a number that the financial institutions like banks consider before approving your application. In Singapore, it is a joint effort of the major financial institutions. The data regarding the consumer’s credit history is pooled together. Within the data collected, the financial institutions can now have access to the records that will show the number of accounts on various financial institutions and your payment history.
With the data gathered, you will be assigned a credit score. It will indicate how good or bad you are to the financial institutions as a customer.
Indeed, paying your SME loans on time is very important in building your score. However, even if you pay your bills, there can be credit report errors that can damage your score.
You can have a copy of your credit reports free once a year. You can report any inaccuracies that you find through the website of the authorities.
Businesses that are more established and wish to apply for bank loans can check their credit scores at the credit bureaus.
You will need to have an excellent business credit score and good personal credit score to qualify for a traditional loan from Capitall Business Loan. This will depend on the business factor and individual lender. Examples would be cash flow and revenue of the business.
In general, online lending companies will look at personal credit scores. However, they can be more lenient when it comes to credit score requirements. They can place more emphasis on the record of accomplishment and the cash flow of the business.
Review your Business
It is also important to review your business with a holistic look. Determine how much is your cash flow. Know if your business is up-to-date. Check how much is your budget for monthly payments if ever the loan is approved.
Moreover, you have to identify if you are prepared to put up a collateral or backup a personal guarantee for SME loans. Indeed, all of the things are important to know. You must know this information beforehand when you approach the lending company and submit your application.
Identify the Startup Financing that you Like
Furthermore, you have to identify which startup financing you like to have. Before you gather documentation for your business, make sure that you know the type of lender that you are looking for. Indeed, the application for Capitall Business Loan will differ from a business credit card. If you have a budget in mind for monthly payment, then it can help you narrow down the financing products that you are interested in applying for. This is also the best time to determine the lender that you like to do business with.
Know the Requirements of the Lending Companies
To make you a stronger applicant, you must learn to meet the minimum requirements and qualifications of the lenders. If you are under performing in one area but over-performing in another, some lenders may offer some flexibility. However, your best chance of getting approved is when you meet or exceed all of their minimums.
Borrowers will have to meet the minimum criteria that are related to your credit scores, years in business, and annual revenue. Lending companies will frown past delinquencies and bankruptcies.
If you are trying to find loans backed by the government, then you have to meet their additional loan requirements. Your business must meet their standards. Borrowers will have to have strong business revenue and personal credit. They must be current on all loans without any past defaults. As such, if you are late on a student loan or mortgage, then you will be disqualified.
Your business must operate for a profit company. You must not be a business that offers life insurance.
Indeed, qualifying for online lenders can be easy. Although online lenders can underwrite loans based on traditional factors, the loans have less stringent requirements. For example, some online lenders may qualify you with strong credit or an established business. The lending company may be more lenient with a recent bankruptcy. On the downside, this speed will typically come with a more expensive loan.