Without doubt, securing SME funding can be challenging.
Regardless if you are still in the process of getting your venture off the ground or if you are looking to expand, lending institutions and banks can be rigorous and meticulous in their lending review practices.
Case in point: if your business only has a few assets to its name, you might find securing a traditional loan relatively difficult.
Likewise, if you won’t be able to provide sufficient proof that you would be able to settle your obligations promptly and in full, lenders won’t think twice about rejecting your SME funding application.
If you are considering getting a business loan but are still finding your way around, below are some basics you need to keep in mind:
Know and understand your options.
Lenders can vary from traditional to non-traditional.
While non-traditional credit providers will likely ask for a higher interest rate, their approval and processing are often speedier compared to traditional alternatives.
Also, some non-traditional loan options provide you with the luxury to repay your loan in small daily increments as opposed to shelling out a significant amount at the end of each month.
Know your numbers.
Prior to applying for a business loan, consider it a must to know your credit score.
Request for a personal credit report and ensure that you set aside time to check it thoroughly.
In some instances, there are errors reflected that can significantly impact your current credit rating.
There are also instances where payments made on time were reported as tardy so you should check on those too.
If you find any errors, get in touch with the credit bureau so any issues are resolved right away.
Know what the loan terms are.
Before signing on the dotted line, make it a point to know what the terms and conditions are so you have a crystal clear idea of what you are getting yourself into.
The loan sector is rapidly growing so the possibility of meeting questionable characters looking to make a quick buck is now highly likely.
If something seems too good to be true, it most likely is.
That being said, ensure you investigate first before you take the plunge.
Know how your prospective lender gauge creditworthiness.
Akin to any other form of loan or credit, not all underwritings have been created equal.
If you are a small business, expect that there will be a lot of requirements you have to meet.
Other lenders will require that you have been in business for two years while others would prefer if you already have a six-figure income.
Determine the amount of funding you need.
Before shopping around for prospective lenders, you have to determine how much funding you need first.
And do not forget to factor in the fees on top of the amount.
Ensure your chosen lender would also be willing to lend you the maximum amount you need.
Otherwise, consider looking someplace else.
Make sure you have a backup plan in place.
In most cases, businesses borrow money to fund projects they believe will help increase profit and revenue.
Understandably, the expected revenue and profit would help pay for the loan.
While a reasonable expectation, keep in mind that creditors would like to know if you have a backup plan in case expectations don’t go according to plan.
Do you have a contingency plan in case the expected revenue and profits don’t come in?
Bottom line, lenders would want to be assured you have a contingency plan in place so you will be able to pay the periodic payments agreed upon right on schedule.