Not with a pandemic that shows no signs of abating and an economy displaying a sluggish but uneven recovery; nothing is definite these days!

Change and uncertainty can cause businesses to arrive and go in a flash.

Even before the pandemic, financiers were cautious – they wouldn’t lend money to a company that looked like it may have trouble repaying it.

Banks aren’t the only ones who have criteria and considerations.

Consequently, what can you, as a small business owner, do? Not all is gloom and doom, as you might have guessed by now.

By boosting your credit rating and credit report, you can increase your chances of securing a loan.

A credit rating and a credit report are two different things.

Borrowers and financiers alike use these terms interchangeably, but they refer to two different (but related) phenomena.

Your credit report Your credit history, including any loan requests you have made, is displayed. In addition, it contains information about your credit repayments, including whether or not you made them on schedule.

However, lenders evaluate your credit score to determine your creditworthiness.

As a result of reviewing these data, Credit Bureau Singapore (CBS) calculates your credit score, considering elements such as your job stability, repayment history, and other factors.

This grade determines your risk level. If your credit rating is low, you’ll have a more challenging time getting a loan. Your credit score will be somewhere between 1,000 and 2,000.

A credit grade is assigned based on this rating, with AA being the highest and HH’s lowest possible. Your credit grade is more important to banks than your actual rating or score.

CBS or Experian both offer credit reports.

You may enhance your credit rating and your chances of acquiring a loan by following the following tips:

1. Cancel any credit cards you don’t need

Having multiple credit cards in your wallet increases your risk of missing payments or going into debt.

Credit ratings are affected by late or defaulted payments, making it more challenging to get loans.

If you have any credit cards at all, you only need one or two. Decide on those that have the lowest interest rates and stick with them. You should always make monthly payments in their entirety and on schedule.

2. Don’t ask for too many loans in a short period of time.

From a financier’s perspective, someone who makes five or six loan requests in a month sounds desperate.

When it comes to a financial professional, most frantic people lack finances; however, they require loans right now. Their debts are generally unpayable. As a result, your loan application is likely to be rejected by the financier.

As a result, you must proceed with caution to avoid damaging your credit rating.

Be careful to do all the research you can, but don’t make an official request for a loan until you are confident you’ve found the best interest rate – and that you can pay it back on time.

3. Do not accumulate too much debt.

Your company may have trouble securing a loan if it is already paying off debt.

Your company’s Debt Servicing Ratio (DSR) will be affected by the number of existing liabilities it has. The DSR measures your company’s cash inflow compared to the amount of debt it is paying off.

Generally, if your company’s DSR is more significant than 1.0, it suggests that you have more cash on hand than you’re paying out in loan repayments, which is a good thing.

Overleveraged companies have more debt than they need to operate.

Your company’s chances of obtaining a new loan may be affected as a result. Consider using the SME Business Loan Eligibility Check to determine if you’re eligible for a business loan.

Likewise, on a personal level. As a director of your company, you may be at risk of having your loan application denied due to personal debt. Directors are often required to guarantee loans that are not secured.

Lenders use Balance-to-Income (BTI) ratios to ensure that borrowers do not take on more debt than they can handle.

If you tally up all of your unsecured debt from different lenders and divide it by your monthly income, you’ll get this percentage.

If a person’s BTI ratio has been surpassed 12 times in three consecutive months, they are prohibited from obtaining additional unsecured debt. This is because the individual’s total unsecured interest-bearing debt would have reached the BTI limit.

They all affect your personal and commercial credit ratings as well as your chances of acquiring a second loan in the future.

4. Make loan or credit repayments on time.

Payment on time is the golden rule, whether it’s credit card bills or loan repayments.

Late payments, or worse, defaults, will negatively impact your credit rating.

As personal guarantors of unsecured business loans, company directors with poor or no credit ratings are at a significant disadvantage.

5. Avoid any money-related lawsuits.

The fact that your company is involved in any form of the money-related legal dispute is a red flag to financiers, and, as a result, your company’s finances could be in difficulty as well.

Try to handle any legal issues as quickly as possible not to harm your company’s credit rating.

6. Reduce the occurrence of bounced cheques 

Due to human error, your organization may experience a few bounced checks in a given six-month period.

Your company’s poor repayment behavior, cash flow concerns, or both are all red flags to a lender.

Why not take the next step if you’ve already attempted the SME Business Loan Eligibility Check?

Published On: September 20th, 2021 / Categories: Uncategorized /