You have a great startup idea, but ambition alone is not going to make it a reality. You will need cash to bring your idea into a reality. There are different options, you can choose to borrow from friends and family or look for investors. You can also get a loan from a lender.
One mistake many people make is going to the bank before they are properly prepared. To make it even worse, most people don’t know the right amount of money they should borrow for their business. You need to avoid such mistakes. The tips below will go a long way helping you secure a business loan and make your ideas come to life.
Having a good business plan
Your business plan is going to be your road map according to Singapore lenders to Katong Credit. This is what defines the business, its goals, and a plan for meeting those goals. For the business owner, it offers a cohesive vision and helps them in overseeing the business. It is also important for bankers because they are able to know more about the business and how it is going to make a profit.
The banker will be able to know more about the stability of the business, which will help them determine whether to give you the loan or not.
You don’t have to worry if you don’t know how to write a business plan. There are a lot of resources online that can help you learn more about writing business plans. There are business plan templates online that will make things easy for you.
Once you have the business plan ready, double-check it to make sure it answers three very important questions.
Does the business plan have measurable objectives and clear goals?
Are there strategies to be used in meeting the goals (have you explained the strategies)?
Does the business plan cover the competitive landscape?
When applying for a small business loan, you must consider a variety of factors before deciding on a loan. You also need the ability to assess whether or not you actually need the loan, your working capital and the financial situation of your business. According to working-capital.com, this affects not only your application process, but also your decision as to what you need and when you should apply for the loan if you commit to it.
Identifying the long-term business goals
Just saying “making money” is not going to be goal enough. You need to have a vision for the future.
The banker is interested in knowing the plans the business has for its growth. For example, are you looking to double the size of the business in five years? Are you looking to expand the product line of your company?
The banker will have a look at your long-term goals and see whether you can reach the goals, and also recommend the best products for the business.
Bringing the right documents
You will also need to bring bank statements, tax returns, proof of business and personal insurance, registration or trademarks, letter of incorporation, and applicable business licenses.
Be ready to talk about numbers
You should know your expected revenue and current cash flow. The banker is interested in knowing whether you have a revenue stream and how you track it. Be prepared to talk about your business costs such as rent, payroll, utilities, equipment, and supplies. For a seasonal business, you have to talk about what you do about the slow months.
Another thing you have to talk about is financial contributions. Banks feel comfortable lending business owners who have skin in the game. They will ask what you have invested in the business, and how much you are ready to contribute in the future.
The information the banker gets from this discussion will help them decide whether you have the ability to pay back the loan. You need to try your best so you can be seen as a great investment.
Your credit rating will have a significant impact on whether you will receive a loan and what amount will be granted to you. All lenders pay a lot of attention to this and it affects how they view a particular business. So first make sure your credit scores are good. You will do this by regularly repaying all your installments and other things. Because remember that lenders also check your personal credit rating, as the owner of the company, and do not view the business as something separate from you. It will depend on each individual lender what your score must be to get a loan, but you will not get money from anyone if you have a bunch of unpaid installments, bills and the like.
Cash flow is a guarantee that you will be able to pay installments regularly. Cash flow shows if your business is doing well and that customers are paying regularly. Landers will also check whether you regularly pay salaries and other financial obligations, because all this speaks of the company’s solvency. Take care that you do not have any debts in at least the last six months, otherwise they can cause you a problem due to only one unpaid salary, for example. And it’s best that you haven’t had any late payments in the last year. Then you can count on a bigger loan.
If you are asking for a larger amount, it is very likely that they will ask you for collateral. It would be best if your business has enough things that it can use for collateral, like equipment, real estate and everything else. In case the value of everything the company owns is small, then you will have to put personal belongings as collateral. It’s even riskier, so be careful. It’s better to have things like jewelry or a car than your house. Be prepared that you can potentially lose every thing that is collateral.
Now all you have to do is wait for approval. If you have done everything right from the beginning and listened to our advice, your chances of success are great. Don’t worry if you don’t get any response for weeks or even months, the higher the amount you ask for, the longer the approval process will take. And once you get a loan, use it wisely and pay the installments regularly. Only in this way you will make most from the loan, instead of making it an unnecessary burden.