There are so many ways a small business financing loan can benefit your business, from addressing emergencies to providing opportunities for diversification and growth. However, obtaining business financing, especially for the first time, can be a daunting process. Well, rest assured, from improving your credit history to ensuring your documents are in order, we’ll share several steps you can take to help your company qualify more easily for a small business financing loan.
Lenders often factor creditworthiness as a basis for approving business loan applications. This record shows how responsible your company is at repaying your debts, and how you behave as a borrower in general. It is often reflected as a credit score kept by agencies such as the Credit Bureau of Singapore (CBS).
Some SME owners however, lack established credit records. This may be due to the fact that you have never needed financing before be it through credit cards or personal loan.
There are several ways to build a credit history in Singapore, including getting a low limit credit card and paying your bills on time. We also highly recommend acquiring a personal loan too as rates are known to be lower than business loans. All these help to establish a solid credit profile. Additionally, maintaining a low credit utilisation ratio (using a small portion of your available credit) and diversifying your credit portfolio with various financial products can further boost your credit standing.
Though not often required, a detailed business plan can improve your chances of securing a small business loan. Not only does it demonstrate your professionalism, it can highlight your understanding of the market and emphasises your business’s potential for success.
The contents of your business plan might vary depending on your business, but there are few common sections that apply to most that can help lenders acquire a deeper understanding of your business. This includes an executive summary, industry analysis, market analysis, competition analysis, services or products offered, and your finance plan.
Ultimately, the key consideration for lenders is whether your business can realistically succeed.
The documents required for loan applications differ from one loan provider to another. In general, you will need to provide the following information:
For most of these documents, you will need to contact the relevant bodies for a copy. Additionally, you will also have to ensure that your internal accounting is up to date and in order. Your company financial statements should be submitted in the form of profit & loss statements, as well as your balance sheets.
In addition to proper documentation, your company itself has to adhere to certain basic eligibility criteria required for most SME loans. This includes:
Keep in mind that these criteria vary between lenders and financial products, though it’s worth noting that some private lenders tend to be more flexible with regards to companies who don’t fit the usual standards. That being said, the boxes your company ticks, the more options become available.
When applying for a business loan, having clean, well-maintained bank statements can greatly influence the approval process and loan terms. Lenders examine your financial records for signs of stability, such as no bounced cheques and a consistently positive balance, even if an overdraft is occasionally used. Demonstrating solid financial management reassures lenders that your business can handle loan repayments responsibly.
Additionally, it’s crucial to avoid any unusual personal expenses in your business account, such as ATM withdrawals at casinos or other luxury venues, as these can raise red flags. A good rule of thumb is to maintain a balance that covers at least one month of operational expenses, with a minimum of $5,000 at all times. This balance shows that your business is prepared for unexpected expenses and committed to maintaining a healthy cash flow, which helps strengthen your loan application.
The aforementioned steps, while not specific to any single company, will significantly increase your chances of a successful loan application. Since our launch, Lendingpot has worked to bridge the information gap that often exists between borrowers and lenders. We’ve built our platform from the ground up to improve outcomes in loan approvals and pricing. If you’re in need of a loan without the usual hassle associated with applying for a business loan, click here.
Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.
