You’ve got an idea, put together your business plan, and already have your first customers lined up. However, before you start looking into small company loans, you should be aware that even for starter business loans, you must have been in operation for at least six months to qualify. You can still register your company and begin operations on a small scale for six months before applying for a small business loan.
How much are you looking to borrow?
If you are looking to borrow less than $200,000, you can apply directly. However, if you are looking to borrow more than $200,000, it would be best to get help from an accountant. Accountants can help minimize paperwork and find alternative loans that meet your requirements. They will also work closely with banks to ensure that they understand what you need and how they can make their service better for your needs.
There are many types of small business loans: The most common small business loan is a term loan or revolving line of credit. These options allow businesses to access funds as needed up to a set limit over time.
What industry are you in?
What industry are you looking to invest in? The first step is deciding on a sector that you want to focus on. Do you have specialized knowledge about a specific industry, or are you looking to diversify your investments and increase your returns by spreading your portfolio across different sectors? Are there any industries that stand out as investment opportunities or riskier areas that investors might want to avoid putting all their eggs in one basket and be prepared with contingency plans if everything goes wrong?
What stage is your business at right now?
How long have you been operating your business, or are you currently starting up? Has it been six months or longer since you started operations, and are you now looking to expand your business through financing options? This section of your application will determine whether you can qualify for a Business Loan. If it has not been more than six months since you launched, we recommend waiting until six months before applying.
What should I think about before applying for a loan?
There are four main reasons why you may need to consider taking up a loan:
- You need to manage your cash flow
- You want to start a new project or expand an existing one
- You want to buy equipment or property but don’t have sufficient funds
- Other personal reasons.
Regardless of your reason, make sure you thoroughly evaluate your decision before borrowing money. This includes having all your finances ready and knowing what you will use them for.
The top 5 questions you should ask yourself before applying for a small business loan:
Do I need it?
How much can I afford to pay back monthly?
What is my source of income?
Will my income be stable enough over time?
How long do I plan on staying in business (and what happens if things go wrong)?
If you can answer these questions confidently, then go ahead and apply! After doing so, remember that most banks require at least six months of operation and good credit history.
Who is the lender giving you the cash injection?
Many small business owners fail to secure adequate cash flow from their credit facility, which can be attributed to them lending money to those who are unable or unwilling to pay it back. However, there are several things you can do as an entrepreneur to improve your chances of securing finance.
For example, work out whether you’re eligible for bank funding; explore alternative sources such as friends and family, and get advice on how you can create better collateral. The first thing to note is that it’s crucial to understand what lenders are looking for when assessing applications. Otherwise, you may miss out on opportunities that could significantly improve your business finances.
Here we look at some factors you should consider when applying for loans:
One thing to note is that most banks want businesses with sound financial history. While banks will lend money based on potential revenue streams, they also want evidence that your business has been profitable in previous years – even if it was self-funded. For example, if you’re applying for a business line of credit (LOC), you may need to provide three months of bank statements showing profits and income.
An excellent way to demonstrate profitability is by having at least three months of profit and loss statements (P&Ls) from your accountant or bookkeeper.
Have you been trading for at least six months?
That’s one of our first questions when you come to us looking for a new business loan. Our reasoning is simple – it takes at least six months to determine whether your small business will be profitable and whether you’ll be able to meet all your financial obligations. If we agree that you can, then we’ll discuss your options. If not, we might suggest ways you can go about growing revenue and cutting costs or debts before applying again.
What should I do after being granted a loan?
Whether starting your startup or simply seeking out more funding, it is vital to ensure that all administrative tasks are completed appropriately. Following up on your new cash injection will help keep your company moving forward into a success!
Can the Registry of Moneylenders help to negotiate with licensed moneylenders?
The Registry of Moneylenders is not designed to mediate or negotiate between borrowers and licensed moneylenders. If you have an outstanding loan from a licensed moneylender, you should approach them directly to arrange repayment arrangements. Licensed moneylenders are regulated by law and have registered contact details. You can check on their registry page at www.moneylendersregistry.gov.sg if there are any complaints against your lender and determine whether they will be able to work with you to restructure your payment plans.
Getting startup funding, even small business loans is not easy. It requires time and effort to ensure that you’re putting together a credible business proposal so that you can get your hands on some startup capital. OT Credit is a licensed money lender in Singapore which offers easy loan options for business and personal needs.
Talk to us to understand where you want to go with your company, know what it will take to get there and establish which loan is right for you.
