For a business to move forward, it needs to have a working capital. This is in particular during its initial three years. Each entrepreneur dreams of building a better business, get more clients, make profits and expand. Being able to access a business loan cannot be done out of impulse. It instead needs lots of preparedness and planning.
Singapore has, however, a very small number of moneylenders who operate strictly independently. These moneylenders ensure clients information is completely not to be disclosed to anyone and that it does not get distributed. Here listed are 10 things you need to consider if you decide to take a small business loan.
Why You Need A Small Business Loan
A straightforward answer would be to expand or even maintain your business. But even then, that would be the end result. However, you will need to be a lot more specific with the purpose. There are business owners who take out loans to help maintain the businesses production.
An example is a business owner who sells cupcakes. There is a high demand for cupcakes during occasions like Valentines or Christmas day. The owner will require some additional operating capital to help meet the demand. This will also ensure the quality of the product is not sacrificed. This may also mean hiring extra staff to help in the production process.
A business loan can also be used for purchasing equipment, paying rent for new premises for expansion and even paying off existing loans. Depending on the intended use of the loan, being specific in your business plan will help keep you focused. You need to consider that a loan is an investment to help grow your business in the future.
Whether You Can Afford Getting A Loan
It so happens that when taking loans, most people focus more on the interest the money attracts. They seem too shocked on discovering the extra charges financial institutions and banks charge onto the principal amount. When you opt for a loan, do ensure you do a financial analysis. This will help you know whether you can comfortably handle the repayments.
Shop around comparing different loans and be sure to ask for quotes. Also, take consider what online moneylenders have to offer. This is because banks can offer you set loan packages which may not be flexible to fit your unique business needs.
How Fast The Money Is Needed
You will also need to think about how soon you need the money. It could be you have found a business opportunity. You may have been looking for equipment which suddenly goes on sale. Your own saving may not be sufficient, but in making the purchase now could lead to you saving more.
Bear in mind that although bank loan processes take weeks, it does not guarantee you will get the loan. Licensed moneylenders provide online business loans and take a shorter time to process. You could even get your loan approved within 24 hours.
How Much Working Capital You Need
You could seek financial advice from your bookkeeper or accountant. This way you are able to come up with a realistic business plan. This plan will be more accurate and not an estimation or underestimation of the business needs. Also only take the loan amount required.
Taking a loan means you have a financial responsibility. Therefore you should meet it to avoid long-term costs of bad credit. A loan calculator will help you know how much you will be paying in full and how many repayments you need to make.
The Type Of Lender You Are Looking For
Different moneylenders offer varying loan products. Therefore you have a bigger choice than just banks. Consider that banks provide loans with strict eligibility lists and for a specific purpose. On the other hand, licensed moneylenders offer small business loans that could be suitable for your needs.
Your Readiness To Tell Your Story To Your Lender
Moneylenders always want to know your type of business, credit experience, goals and previous ventures. You may have to share who your clients are, how you take care of credits, the managing style of your business and achievements you made. This will help prove the potentials your business has to make sufficient income to help repay the loan.
Whether Your Documents Are Ready
Moneylenders are rather strict with a person’s qualification for a loan. You need to be able to prove that your business is thriving to help you get the loan. Provide documents to help prove that you merit getting the loan. This includes the company’s recent account statements, Tax Notice of Assessment and other needed financial statements.
Your Credit Score
Get a copy of the credit score to help save time before applying for a business loan. Your credit score will help know which lender will best help you. You can also build your credit score before taking a loan. This is because bad credit means your loan will be declined. And also the application could lower the score since each application is accounted for.
With an existing debt, you will need to show that the cash inflow is sufficient to cater for the added financial responsibility. It’s better to declare all your existing debt to a moneylender before they discover it. Even when you get a loan without declaring all debt, you will financially strain yourself when making the repayments.
The Relationship With Your Previous Moneylenders
Building faith between you and moneylenders will earn you financial partners. This way you can turn to them should you need a new loan. You can also expect faster loan processing and even a higher loan amount.
It may not be an easy task when applying for a small business loan. Even then being ready and your knowing what to anticipate will make the process manageable. This will also help you get the most suitable choice to suit your needs. When seeking a small business loan, licensed moneylenders are worth considering. And they also have knowledgeable loan officers who will help process your loan.