Cash is King!
No business will move forward without a working capital, especially for its first three years. Being an entrepreneur, you dream to make your business better to get more clients, earn and expand.
We all know getting a business loan is not something you just do out of whim. It requires planning and preparedness.
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Here are 10 things to consider when taking out a small business loan in Singapore.
- Why do you need a small business loan?
Of course, the simple answer is to maintain or even make your business bigger. Well, that is the bottom line, but you need to be more specific with your purpose.
Some people get a loan to keep up the production. Let’s say you are selling cupcakes and you get high demands on occasions such as Christmas or Valentines’ Day. You’ll need additional working capital to meet the demands without sacrificing the quality of your product. You might even have to hire extra staff.
You can also use a small business loan to purchase equipment, pay existing loans, or rent a new place for expansion. No matter how you use the loan, you need to specify it in your business plan to keep focused.
Consider that your loan now can be your investment to help your company grow in the coming years.
- Can you afford to get a loan?
When people get a loan, they are too focused on the interest. They get surprised when they discover the other fees banks and financial institutions can charge. When you take a loan, you need to conduct a financial analysis to know if you can handle the repayments.
Compare loans and ask for quotes. Consider online lenders as banks can only offer what have been already set in their loan packages. It lacks the flexibility to be fitted on your business’ unique needs.
- How quickly do I need the money?
When do you need the money? Let’s say you have come across a business opportunity. You may have been eyeing a certain equipment which has suddenly gone on sale. Your savings may not be enough, but purchasing it now can help you save more. Bank loan process will take weeks and this does not even guarantee a positive result.
Online business loans provided by licensed moneylenders have shorter process. You can even get you loan approval within the day.
- How much working capital do you need?
Consider seeking financial advice from your accountant or bookkeeper. Make a realistic financial plan which does not overestimate nor underestimate your needs. Borrow only the amount you need. Getting a loan is having a financial responsibility which you must meet to avoid long term consequences (bad credit score etc.).
Use a loan calculator to have an idea how much you have to pay in full and a number of repayments on your chosen loan term.
- What type of lender are you looking for?
There are different types of lenders, and they have various loan products. Traditional banks are not your only option. Remember that banks offer business loans with specific purposes and strict lists of eligibility. Registered moneylenders also offer small business loans which may best fit your needs.
- Are you ready to tell your story to your lender?
Moneylenders will want to know the nature of your business, previous ventures, credit experiences, and goals. You may need to share who are your clients, how you manage your business, how you handle your credits and the achievements you have. You need to prove that your business has a potential to generate enough income for you to pay your loan.
- Are your documents prepared?
Most moneylenders are stringent when it comes to qualification. Honestly, nobody will bother to lend to someone who does not have anything to prove that the business is thriving. You will need to provide documents to prove that you are worthy of the loan. This may include your company’s current bank account statements, Income Tax Notice of Assessment and other financial statements.
- Do you have a good credit score?
Save your time by getting a copy of your credit score first before applying for a loan. Knowing where your credit score stands can help you consider which lender can help you best. You may also take some time first to build up your credit score before application. Why?
A borrower with a bad credit score is usually declined. This would be a waste of effort and times. Aside from this, the loan application could make your score worse since every loan application is also accounted for.
- Do I have other debts?
In case you have an existing debt, you need to prove that you have enough cash inflow to handle additional financial responsibilities. It is best not to hide any existing debt from your moneylender because it will be discovered once they check your credit report. And in case you get away with it, you will have a hard time with your repayments.
- Have you maintained a good relationship with your previous moneylenders?
Maintaining a positive relationship with your lender can give you benefits such as getting into the preapproved list. Your building trust between you and your moneylender can earn you a financial partner which you can easily turn to when you need another loan. Also, expect faster loan process and perhaps higher loan amount.
Applying for a small business loan is not an easy task, but being prepared and knowing what to expect makes the process more bearable. This also helps you to find the best option to fit your needs.
If you are looking for a small business loan, you can get the best one from Cash Mart. Cash Mart has experienced loan managers to help you process your loan. Feel free to drop by the Balestier Road office or give them a call at 6397 4111 today.
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