A report carried out in 2018 had indicated that close to three-quarters of small business owners in Singapore have access to a source of funding to expand their businesses. Since loans are an essential part of expanding any business, learning the common mistakes that could deny you the chance of acquiring an instant loan is essential. Once you are aware of these roadblocks and take active steps in avoiding them, you can be able to obtain a business loan that best suits your business.
Here are 4 factors you need to know to find the ideal business loan for your business.
1. Amount of Paperwork
Most licensed moneylenders will not ask for too many documents on first meeting when seeking a business loan. The documents you will be asked to produce are your credit reports, bank statements, tax returns, and business plans. You should seek prior information on which documents you will be asked to produce before making your application. Make sure that you have all the documentation with you on hand when you meet up with licensed moneylenders. It is best to remember that many people seek a loan similar to yours, and if you have the right documentation with you when you apply, you could stand a better chance of obtaining the business loan.
2. Personal Liabilities
Often, licensed moneylenders will ask for collateral from small business owners, which many of them may not have. For this reason, small business owners are personally liable for any losses. For example, before offering a debt consolidation loan in Singapore, banks or licensed moneylenders may ask business owners to put down their mortgage or car as collateral. Such an arrangement can magnify the risk of loan taking, making most small business owners shy away from taking a quick loan or any other loan.
3. Credit Score Checks
It is common for licensed moneylenders to check the credit score of their borrowers before issuing a quick loan approval. While some look at only the business credit score, others may be more interested in your credit score as well. Small businesses may not have a strong credit history to begin with, leaving banks with no option but to seek personal credit checks before issuing a loan. Hence, do not simply focus on building a good credit score for your business at the expense of your personal credit score. One common thing you should avoid is failing to make payments for your credit card on time.
4. Approval Process
Another hurdle that you will have to deal with when you apply for a business loan is the approval process. Once you have completed the application process, the bank will take their time to review your application before accepting or rejecting your application. Sometimes, the lender may approve your application, offer a different figure, or outright reject your application altogether. As such, seeking the right licensed moneylender is important. Once the loan approval is accepted, you have up to three business days before the money is transferred into your account.
Financing is a critical aspect that can make or break any business. All types of loans are available for small business owners. However, most of them come with contingencies that can do more harm than good to your business. If you are new to the world of business, the four mentioned factors above are what you will most likely encounter when borrowing a loan to expand your business.