If you are trying to start up a new business or expand your current company, you would need the help of a business loan. With the help of a loan, you are able to do essential tasks within your business like secure inventory, hire employees, rent space for operations and other expenses for your business to run smoothly.
Some business owners find it a hard time acquiring a business loan for their businesses. This is primarily due to some key factors. If you are having trouble getting your small business loan approved, here are some of the roadblocks that hinder you from getting it from a licensed money lender in Singapore.
Poor credit history
One of the main factors that any money lender considers before giving a borrower a loan is their credit history. If you have a poor credit report in repaying previous loans, the moneylender might disapprove of your loan with the fear that you would not pay them back promptly.
In terms of your credit score, 720 is the magic number that increases chances of getting an easy cash loan, and if your credit score is below the magic number, then your chances decrease. This statistic was received through a study done by Brian Cairns from ProStrategix Consulting, which features small businesses and startups’ services.
To improve your chances of getting your business loan approved, it is incredibly vital to building a powerful personal credit score. One tip would be to pay off any outstanding debt before applying for the next business loan.
Limited cash flow
Cash flow essentially refers to the amount of money and cash equivalents transferred within the business. Moneylenders typically look at your company’s cashflow to observe the amount of cash in hand. This helps them evaluate if you would be able to repay back the loan. Therefore, one tip would be to consider this factor to gauge yourself if you would be able to manage to pay off the loan.
Failing to have an attractive business plan
Another crucial factor that determines if your business loan gets approved is if your company has a solid and attractive business plan. Having such a plan shows the moneylenders that your business has a plan and can bring in revenue, which helps repay the loan. That significantly increases the chances of getting a loan. The lack of a solid business plan reduces the moneylenders’ possibility of giving out the loan for your business as they are putting their business at risk when you have no firm plan on repaying the loan.
A lot of loan applications
Some small business owners apply for several loans from different moneylenders to cover all their business’ expenses. However, most business owners do not know that these moneylenders can check the other loan applications you have submitted. When they see that you have sent in applications for many money lenders, it raises a lot of questions for the moneylender, and they see it as a red flag. Therefore, it lowers your chances of getting a business loan approved.
This factor is something that most business owners ignore. Not being able to present the needed paperwork for a loan application, for instance, can sometimes disqualify you from getting a loan. Especially if you seem unsure of your company’s documents or finances, it gives moneylenders the impression that you may not have legal or sufficient documents on hand, as such, affecting your eligibility when applying for a loan.
Neglecting expert advice
Another thing that lenders take a keen interest on is whether you have sought some guidance with relevant knowledgeable advisors. Some of the sources you get advice from include accountants or business networking groups. You can research their websites too. Essentially, giving off a good impression increases your chances of gaining the trust of the moneylenders and getting the loan approved.
Failing to do research
At times, aspiring small business owners find themselves in urgent situations where they require an urgent loan. As a result, they choose the first moneylender that they come across, without doing any research or analysis. When it comes to loans, proper research is critical as it allows you to find a suitable loan lender that suits the needs of your business.
With a better understanding of what you need to avoid when applying for a business loan, it’ll allow you to obtain the necessary funds you need to finance your business.