Top Considerations When Getting A Business Loan

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Firstly, what is SME loan?

SME stands for Small and Mid Enterprises. Loans for SMEs are given to a company based upon the number of employees, revenues or assets based upon the maximum number or threshold allowed to qualify for these loans. They are usually entrepreneurial in nature and are present in large numbers as compared to large enterprises. SME loans are made to fit the needs and requirements of SME companies and can be used as working capital, expand or even for the acquisition of raw material.

Reasons to take a business loan Singapore:

For a business loan, there is usually a reason for getting it. And the type of loan to be taken depends upon the reason for getting it as well as the business owner’s credit score, financial credit history, rate of income, etc. It is advised that the business owner taking these loans be completely truthful about the reasons for it, regardless of what it is. These are possible reasons one has to take a business loan:

  • Expansion of Businesses:

Expanding the business is a great step for any SME business. One can use the loan to buy new offices in different locations, increase the number of employees or assets, increase the number of branches, the number of stores and store chains, etc. This way, the company can reach out to more customers at a time and generate more income at a faster pace and pay back the loan in no time.

  • Acquisition of Work Equipment:

The importance of acquiring the best quality and fastest work equipment is a good step for the business. Good quality equipment creates better quality products more efficiently and is cheaper. It is fast and initially may not seem like a big deal, but it makes a huge difference in the long run. A better product quality gives the business a better name, and a faster processor makes sure the demand is kept up with.

  • To Stock Up on Inventory:

Stocking up on inventory with rising demand, especially for seasonal products, is increasingly important as one could completely sell out and miss out on potential customers and potential revenue. One should never wait until the last moment to stock up on inventory. The manufacturing processes take time, and it is important to know the limits of the company.

  • Working Capital Increase:

Working capital is essential to an SME. Working capital is required to start a business and supports the everyday working of an SME. The big amount of money required to initially start a business and keep it going can be taken as a loan. Licensed money lenders are capable of providing a variety of flexible working capital loan plans that can be ideal and deviate from the standard ones set by a bank.

  • To Secure Good Business Opportunities and Deals:

A lifetime business opportunity does not come easily, and one has to know it when they encounter it! Good businesses with unbelievable benefits could be missed out on if the business owner does not have the money needed to make that decision. But fortunately for them, a business loan can be taken out for just this purpose! These business loans can save one from missing a deal that could or would make a significant difference for the company.

  • The Occurrence of Unexpected Expenses:

When running a business, a lot of unexpected expenses come along with it, whether it be emergency building infrastructure problems or equipment breaking down, to needing a different raw material, to having unexpected maintenance costs, to a lot of other things. These things could overwhelm the company’s finances. To save the company from unexpected expenses, one could get a loan to pay for these. And once the company is stable again, they could pay back the loan easily when expenses are smooth sailing again.

  • Improving Credit Score:

If afraid of having a bad credit score and unexpectedly going bankrupt when an expenditure occurs or scared of running out of money completely and later unable to pay for something important, one could get a loan to improve their credit score. This is important to pay attention to so that the money is not spent recklessly afterwards. It could put one at a greater loss if this money is used recklessly rather than for required purposes only. The spending of this money has to be prudent, or one could be on loan and still have a bad credit score.

Eligibility for a business loan:

Checking the eligibility of getting the loan is the top priority of a business owner before applying for one. The eligibility requirements needed for the loan varies from different banks and licensed money lenders, but generally, for most of them, it requires a minimum of these things:

  • The business has to act in the industry for a minimum of six months, or the company should be at least a year old.
  • Since a bank offers business loans based on the business owner’s credit score, financial history, and good predictions, it’s important to have a good one if applying to a bank, but with a licensed moneylender, the rate of income generated is more important. And it would not matter even if the business owner has no credit score or clear credit history.
  • The company would have to a registered ACRA private limited company to qualify for these loans.
  • Some documents are necessary to confirm the details required to process the loan, so to qualify for it, these documents are needed. Required documents for the business loan application include:
  1. The ACRA profile of the company of the last three months.
  2. The latest six months’ worth of bank statements.

For Quick Processing Services:

A bank takes 2 to 3 weeks for processing an application for a business loan. They sometimes take even four if the case is a little tricky. On the other hand, a licensed money lender will reply to it in 24 hours or less, which is only a single business day, making must be more convenient.

Quantum:

The loan can from S$10,000 to S$400,000 depending upon your financial institution.