Small Medium Enterprises (SMEs) are often regarded as the engine of an economy, however, many new business owners get frustrated when it comes to the process of business financing, which is an essential aspect of business growth and expansions.
Take a look at how a business loan could be the key to your business growth. In a small and congested Singapore, where competition is always at its peak, it is not easy for anyone to decide that they want to start a business and make it out alive. At some point in their entrepreneurial journey, they will need help. It can get exhausting on both mind, body, and spirit to run a business.
Often times, some financial assistance is needed to support a business on its way, mostly in times of cash flow problems which can happen to the best of any business. Exploring the option of obtaining a business loan is always a viable solution to cash flow problems. It buys you time and space to grow and get things sorted. While some may oppose the idea of jumping in debt the moment cash flow problems arise, debt can also be a wonderful thing if handled properly.
If you should feel the struggle of getting a business loan in Singapore, you may want to consider engaging a business loan broker who will be able to make it a faster, simpler, and hassle-free process for you.
All too often, small companies get “road-blocked” when they try to obtain business loans. Theoretically, there should always be a certain level of difficulty when it comes to funding, as we all know that lenders are in the business for making profits, not charity.
However, the good news is that there are many avenues and measures that can be manipulated to increase the chances of getting a business loan.
Here are some things to consider:
1. Financier’s perspective — why should a financier offer you a loan?
Apply for a business loan like as though you were applying for a job. When applying for a job, you need a great resume. Likewise, when applying for a business loan, you will need a proper track record for an application as well.
It is essential to understand the financial strength and situation of your company to the last detail. As a backup plan, that may even mean deciding what resources can be used as collateral, such as a commercial or residential property that you or the company owns. Any business person who is willing to put up collateral clearly shows that he/she believes in his/her business.
However, before deciding on collateral, a business owner should understand that cash flow and credit quality are two of the greatest factors that all banks and financial institutions base their credit assessments on.
Therefore, always ensure that there is a healthy level of cash flow in the company, and do not delay or default on payments to the banks.
As a bonus, always try to dress professionally as well. Dress like you don’t need the money, and you are more likely to get it. Lenders like lending to people who already have money.
2. Decide how much your business needs
All too often, business owners apply for a loan quantum that is way more than what they really need.
Assess and project for future cash flows, then get an amount that you are comfortable and confident of paying back on time.
On top of that, decide on what you are going to use the additional working capital for. It could be for operational costs, purchasing new equipment or even investments. Ensure that your company is generating enough cashflow to support the monthly installment repayments on time.
3. Solve Immediate Cash Flow Issues
Like most businesses, there will always be a cost incurred before a profit is made. In most cases, these are recurring operational costs – rent, salary, utility etc. It would be a major disaster if all your staff walked out on your business because the business could not pay their wages. Who would help to run the company?
Do not fall into the misconception that these are problems that only arise for new businesses. Seasoned businesses that have been around for years can also run in unexpected trouble that they have no control over. Being ready to weather these storms is crucial to ensuring the survivability of your business.
Cash flow problems seem to come more often to businesses that operate on credit payment terms, where payments could take months to come in. In months where there are more delayed payments than usual, you do not want to be caught in a situation where you have run short of money to continue operations.
In all these scenarios, a business loan can be a good way to tide through the rough patches that every business will face at some point.
4. Expand Your Business
Deciding on whether to expand your business is always a tough decision to make. More often than not, there will be a considerable amount of risk that comes with any expansion.
A business expansion could mean that more capital injection is needed to expand the operations of the company, which has to be readily met with an equal increase in revenue or risk suffering loss.
On the other hand, it could also be a scenario that where an expansion is met with an overwhelming inflow of business. The point is that when a business is looking to expand its capacity, a business owner should always be prudent to ensure that there is enough cash flow to sustain the growth of the business.
A good way to ensure that there is enough capital for sustenance is to take up a business loan.
5. Learn from your mistakes
If a loan application with a bank or financial institution gets rejected, always try to find out why. If you are unable to point out the issue, seek for help from a business loans broker. For what its worth, it would be a business loans broker who will know best the ways to get a small business loan application approved.
If you ask the banker, it can be difficult because of the ‘Banking Secrecy Act’ that prevents bankers from revealing vital information.
However, if you are lucky enough, there are some kind bankers who will tell you the reasons for a rejection. This way, you can address and rectify whatever was wrong with your application before going to the next bank or institutional lender.
6. If all else fails, use receivables (invoices) as collateral.
Most business owners have a tendency to gun for the big and juicy unsecured business loans. However, when an application does not go through successfully, they lose all hope, forgetting that there are other ways of raising finances.
An example would be the alternative lenders, such as the crowdfunding platforms, who will charge significantly higher interest rates, but tend to be more relaxed in their requirements and credit assessments.
7. Weathering a Storm
Business owners can make 5 to 10 year business plans, with visions of a booming business and strategies of how to make this happen. However, we all know that no one gets to decide what life may throw our way.
A sudden downturn of the global economy could easily cause a business to plunge, and there would be nothing that you could do to control such external situations. Therefore, it is good for a business to always be prepared for any unexpected circumstances, which ensuring that there is enough cash flow to continue business operations.
However, if your business is already facing cash flow problems, and you are not confident of making enough profits to cover the monthly installments on time, plunging into additional debt may not be the best of ideas. In such a situation, a business loan could turn out to be a bad thing.
8. Always consider working with Business Loan Brokerages
Always consider seeking help from the people who know the business financing industry best.
Being a part of the intricate financing industry, a loan broker will know the ins-and-outs of the business.
While many businesses inaccurately assume that they will not be eligible for business loans, a loan broker could help to re-structure and optimize an application, which will enhance the chances of obtaining the SME business loan.
9. Know your facts
That means finding out the effective and simple interest rates of the business loan. Understand the requirements to qualify, the repayment conditions, prepayment penalties and what the fees will be. It is always better to be informed.