If you’re applying for a business loan, you may be surprised to hear that it can be difficult to get approved. Despite the availability of financing options and the extensive government support for Small and medium-sized businesses (SMEs) in Singapore, many business owners still have difficulty accessing capital.
However, from the lender’s perspective, this is often because new businesses are unprepared for the business loan application process. So if you’re a first-time applicant with no previous experience, you may be met with some resistance.
But worry not, as preparation is key to getting that loan that will fuel your growth. Let’s dive in on what you can do to get your business loan approved in Singapore.
Why should SMEs consider business loans?
To expand your business, you need more resources to reach your goals. That’s where access to working capital can help you. By taking advantage of this option, you’ll be able to speed up your growth and improve your bottom line.
Taking on a SME business loan can seem like a daunting task, but there are some reasons why business owners should consider doing so.
Solve large working cash flow gaps
SMEs experience cash flow gaps from time to time. When this happens, business owners have to confront the choice of taking out a business loan. This infusion of fresh capital is typically used to improve cash flow, hire more talent, expand inventory, invest in innovation, or open new locations.
Maximize business opportunities
When your business is flourishing, you’d want to take advantage of all the available opportunities. This means staying on track and reacting quickly to opportunities. Often, this also involves investing in new equipment, property, or employees. This can be a significant upfront investment, so it’s important to make the most of your growth opportunities.
Improve business creditworthiness
The best time to take a business loan is when you’re in a good financial position and know you can repay it on time every month. This builds good creditworthiness, which can be useful in the future as it opens up more financing opportunities for your business.
Factors To Consider When Choosing A Business Loan
Before applying for a business loan, you should always ensure that it is the right fit for your business. Here are some of the most important factors to consider.
Understand The Annual Percentage Rate
An Annual Percentage Rate (APR) is a number that reflects the true cost of borrowing over a period of time, as well as the return on an investment. This number can help borrowers and lenders make more informed decisions about their finances.
The APR covers any fees or expenses related to the loan, but does not include additional charges like interest. This allows customers to compare different lenders and credit cards easily, without having to worry about extra fees. Important to make sure to your lender what additional costs are in their APR calculation.
The APR of your loan may include these additional costs:
- Origination fee
- Underwriting fee
- Loan processing fee
- Private mortgage insurance fee (if applicable)
- Document preparation fee
- Loan application fee
Know The Loan Terms
When choosing a small business loan, the terms will vary depending on the lender. Some lenders offer short-term loans of no more than 6 months, while others will let you repay loans for many years. Consider why you are borrowing the money and how far in the future the repayment is.
Fazz Business helps SMEs to receive capital loans with peace of mind. Loans offered are up to SGD 300,000 with a loan tenure of up to 12 months. Business owners are also given the flexibility to change it to a revolving credit line.
Pay Attention to Loan Structure
Example of a typical small business loan:
- Loan amount
- Loan tenure
- Interest rate
- Repayment terms
- Collateral
When you sign up for a small business loan, be sure to read the terms and conditions carefully. These could include covenants that could force the business to default if they are violated. The loan should also be structured in a way that is feasible to the current financial state of the business. Missed loan repayments is an outcome that should be avoided wherever possible. This is where paying attention to the structure of a business loan is key.
Required Documents for a Business Loan in Singapore
Having the right documents ready before submitting your application is crucial to getting the loan you need. To give you a better idea, we’ve got you covered below.
Required documents for a business loan:
- NRIC (National Registration Identity Card) or other identification details of sole proprietors, partners, principals, and directors
- Goods and Services Tax statements for the past 12 months
- Company’s bank account statements for the past 6 month
- Specific business banking facility forms issued by the bank
- Enterprise Singapore Enterprise Financing Scheme (EFS) application form
- Copy of sole Income Tax Notice of Assessment
- Company’s board of directors’ resolution
- Company’s constitutional documents e.g. memorandum, articles of association
- Professional certificate documents related to the establishment of entity, identity and proof of business address documents.
Alternatively, with Fazz Business, SME owners can simplify it to just 3 documents to get approval, and what’s more, no collateral is required! The process is also seamless and easy. It only requires you to submit documents for credit assessment, after which you can check your approved limit. You may access the loan disbursement by opening a Fazz Business Account, and voila, see your business grow with the funds!
Tips to Get Your Business Loan Approved in Singapore
Now that you’re up to speed on the different requirements needed for the loan application process, it’s time to explore the tips that could potentially boost your business loan approval chances. Here’s how.
#1 Find The Right Time
Your new business venture has great potential and is already well on its way to success. However, in order to continue growing, you’ll need capital. However, because you are an SME in its early stages, banks are usually not willing to provide loans to you just yet. To be eligible for loans, you’ll need to have a track record of stable revenue, strong leadership and a productive team.
In Singapore, banks are happy to work with companies that are already operational, as early as 12-18 months into their business. If you can’t find bankers, you might want to turn to crowd-funding, government grants, or other sources.
#2 Maintain Your Cash Flow
Maintaining a clean financial record is essential for securing funding. It helps with budgeting and operations, and also makes it easier to access loans from banks or investors. Many lenders prefer to see consistent cash flow from a borrower in order to have confidence that the business will be able to repay the loan.
#3 Maintain Your Debts
It is common that banks share credit information and would classify you as a high-risk borrower if you took out too many credit lines or loans from different lenders.
Banks and lenders are interested in knowing the amount of long-term debt obligations that you have. Having an accurate balance sheet will help you optimize your borrowing options. By keeping your loan balances low and paying them off on time, you’ll avoid interest penalties and improve your cash flow.
#4 Prepare A Promising And Convincing Business Plan
A well-crafted business plan is essential if you hope to secure a loan from a lender. Showing the bank how well you understand your industry, customers, costs, and future plans is just as important as demonstrating your financial capabilities.
Final Takeaway
Whether it’s from a traditional financial institution or a fintech alternative lender, getting approved for a loan looks closely at the financial health of your business. Ultimately what’s best for your business needs will depend on the financial health of your business. After all, you do not want to find yourself in a position where you could no longer afford the repayments.
Before taking the leap, be sure you have considered the different business financing options out there.
Grow your business with a Fazz Business Loan
Accelerate your growth with ready access to working capital. Our daily interest rate starts as low as 0.05% with approval within 48 hours. Apply for a Fazz Business Loan here to build, run and grow your business with peace of mind today!
