Singapore, our little red dot, punches way above its weight when it comes to business. It is a hotbed for entrepreneurship, with a thriving startup scene. Still, money does not grow on trees here, and businesses often need a little financial boost at some point.
Those who have taken out a business loan before knows that securing one is tricky. After all, moneylenders understandably want to minimize risks, so they’re wary of potential red flags.
Understanding a lender’s perspective is essential
It may not seem like it, but money lenders Singapore are essentially betting on your business. Put yourself in the lender’s shoes – it can be the best way to understand why some loans may not get approval right away or at all.
Lenders shell out money for you even if there’s no guarantee that your business will profit and be able to pay them back. In short, they are taking risks.
That’s why they want to see that your business is stable, profitable, and with a solid plan on how your business loan will be used. They are also looking at your personal financial health as a guarantee.
Common signs that turn moneylenders off
Lenders may be hesitant if your business is bleeding money. This is essentially true, and you, as a business owner, will probably feel the same about a customer who seems to have no means of paying you. They want to see consistent revenue and profit. Irregular income, high debt or a history of late payments can raise eyebrows.
If you do not have a business plan, or if it is vague and unrealistic, lenders might be skeptical about your ability to repay the loan. After all, someone without a plan on how to manage their business may end up with financial woes.
What does your credit score look like? This is obvious, but your personal credit score matters. A low score indicates financial mismanagement, which can make lenders wary. Better credit report means better opportunities. Moreover, many loans require collateral, like property or equipment. Having nothing to offer to secure the loan could be a deal-breaker.
Borrowing an amount beyond your business size or revenue also raises red flags. Lenders want to see that you have done your homework and are asking for a reasonable amount. Lenders also need accurate and consistent information. If your application is full of inconsistencies or missing details, it can create doubts.
Read also: Why Every Food Business Needs an FSSAI License
Avoiding these red flags can help
Now, is it possible to actually prevent these red flags from raising doubts on your application? The answer is yes!
First, of course, focus on increasing your revenue, reducing costs and improving your profit margins – all stuff that helps you build a strong financial foundation. Your request may get an extra boost if you create a well-crafted business plan. Lenders appreciate it when applicants show a solid, well-thought business strategy.
To improve your credit score, pay bills on time and avoid taking on more debt. And, if possible, identify assets that can be used as collateral for the loan – money lenders will definitely appreciate them. Be realistic about your loan needs as well. What are your actual requirements? Only take what you need; you can always come back later as long as you are a good payor.
Lastly, it never hurts to double-check (even triple-check) your application. Are there errors? Are you consistent with all information? This way, you can increase the chance of getting the funding you need. Good luck!
