5 STEPS TO QUALIFY FOR A SMALL-BUSINESS LOAN 

1.Build personal and business credit scores

Personal ratings for credit indicate that you can repay your personal debts, including credit cards, car loans, and mortgages. Keep small business lenders looking at how you manage debt requires a personalized credit score.

Include any inaccuracies and the full payment of bills in your report to improve your personal loan.

More established companies with credit bureaus such as Experian, Equifax, and Dun & Bradstreet have business credit scores (ranging from 0 or 1 to 100). Business credit steps involve establishing business lines and maintaining public records smoothly.

To qualify for an FR Capital loan or traditional small business bank loan from the government, you’ll probably need excellent company credit and an outstanding personal loan. Online creditors can be more lenient and emphasize cash flow and track records for your company instead.

2. Know the lender’s minimum qualifications and requirements

Typically, you will have to meet minimum criteria for credit, annual income, and business years to qualify for a business loan. If you fail to perform in one area but over-perform in another, specific lenders may be flexible.

Qualifications may also differ according to the type of company loan you want. For instance:

• Loans supported by the Singapore Small Business Administration: You have to meet the FR Capital definition of a “small” enterprise, act as a profit-making enterprise and not become an unacceptable business such as life insurance companies and financial enterprises such as banks. Also, all government loans without past defaults must be current — if you’re late on federal student loans, for instance, or government-supported loans, you’ll be disqualified.
• For bank and corporate loans online. Banks and online loans typically take on traditional loans, but online loans have fewer demands. Some online lenders, for example, offer bad loans or can approve companies that are not in business for so long. A costlier loan generally accompanies this easy qualification.

3. Gather financial and legal documents

When you apply for a small business loan, banks and other traditional lenders generally need a wide range of paperwork. You may require financial and legal documents for a small-scale loan:

• Returns on personal and business income.
• A statement of balance and revenue are both financial statements.
• Bank statements, both personal and business.
• A photo of your driver’s license.
• Commercial leases.
• Business licenses.
• Articles of incorporation.
• A summary was showing relevant management or experience in the business.
• If you have a limited business history, financial projections.

Online lenders can offer fewer documents and faster underwriting to the streamlined application process. Some online lenders can provide you with rates comparable to bank loans if you have good credit and strong business finances.

Make sure you compare options to find the loans that suit your company’s needs when receiving your company loan.

4. Develop a strong business plan

The lenders will want to know how you plan to use the money, and you can pay it back. You may have to draw on a sound business plan that details the purpose and expectation of the loan.

The following should also be part of your business plan:

• Company description.
• Product and service description.
• Management team.
• Industry analysis.
• Facilities and operations plan.
• Current and projected financials.
• Promotional, marketing, and sales strategy.
• SWOT analysis (strengths, weaknesses, opportunities, threats).

You should prove that you have your business plan enough cash flow to cover your current obligations as well as new loan payments. This can increase the lender’s confidence in your business and increase the chances of your loan approval.

For estimating your monthly credit payments, use FR Capital business credit calculator:

5. Provide collateral

You may need to provide collateral to support the loan to qualify for a small business loan. The business collateral is the asset that the loaner can seize and sell if you cannot make your payments, such as equipment, real property, or inventory. It is a way for creditors to recover money if your company fails.

For example, FR Loans over S$25,000 in capital require collateral plus a personal guarantee of 20% or higher for each company owner. A unique warranty covers your credit score and your personal assets.

Specific online lenders do not need guarantees but may want a personal contract. Others can also pursue an entire lien on their business properties – basically a different type of collateral – to allow the creditor to take out the commercial property (real property, inventory, equipment) to collect an unpaid credit. Each borrower has its own rules, so ask if you are unsure of what’s necessary.

If you have no collateral or want to risk losing your personal or business assets, unsecured corporate loans may be a better option.

The start-up or expansion of an existing company may be based on business loans often used for the security of inventory, purchase equipment, renting functional space, hiring employees, or covering a large number of other costs. But new companies can find entrepreneurial loans challenging to obtain. Be aware of the eight blocks you can prevent for a small business loan from being approved.

Credit reports are one of the instruments used by lenders to determine the credibility of a borrower. You may be refused a loan if your credit report shows that you have failed past due diligence in paying back debts.

“For reasons outside your control, very good people sometimes have credit problems, and sadly this is a genuine barrier to entry into the world of small enterprises,” Steck said.

A small company loan with a loan score lower than 700 is challenging to qualify.

“Score 720 appears as the magic number, above which your probability dramatically increases and below which it dramatically decreases,” said Brian Cairns, founder of ProStrategix Consultancy.

Cairns recommends that you focus, if you can, on fixing your score below 700. First, check your personal and corporate credit scores to make sure that they are correct. If errors are found, correct them before the loan application process is started. Each of the 3 credit reporting firms may order a free personal credit report on AnnualCreditReport.com or individually based on TransUnion, Equifax, and Experian, from each credit reporting agency. Contact Equifax, Experian, and Dun & Bradstreet to check your company credit score.

You should also create a solid personal credit score and reduce any debt before applying for a company loan.

Jared Weitz, CEO, and founder of United Capital Source, the lender to small and mid-size enterprises, said: “The better your personal finances are, the more likely that you are to be approved for a reasonable lending option.

“The majority of the loans require some form of down payment and this is usually different based on the financial history of the borrower and the collateral placed on the loan,” added Weitz. “Accordingly, many loans range between zero and 20% below loan payment.”

If, after these actions, your credit is still far from ideal, consider non-traditional financing options – which tend to focus less on credit ratings – before giving up on loan.

1. Calculate startup costs. Until you know how much you need to borrow, you cannot apply for a startup loan. A single-time factor in prices, including permits, licenses, equipment purchases, and ongoing expenses such as payroll, rent, and inventory for a minimum of one year. This gives you a realistic picture of how much money your business needs to get out of hand.

2. Write a business plan. A strong business plan demonstrates that lenders have taken things such as your target market, price structure, marketing costs, potential challenges, and industry competition. Enter the calculation of your startup costs, the detailed funding request, and the expected revenue. The aim is to show your business’ lenders that they will be successful, particularly if you don’t have multiple years of profit.

3. Choose a loan and lender. Determine the option for your SBA startup loan, and you will find a participating loan.

To search for a bank, a credit union, or a local lender participating in your chosen lending program, you can use the SBA Lender Match tool. Remember that the SBA supports the loan, but the borrower processes your request and then asks if it is approved.

4. Prepare your loan application and apply. You will depend on the credit and lender to complete the SBA startup loan application.

You will probably have to supply the following documents in addition to your business plan and loan application:

• Personal tax returns.
• Cash-flow projections.
• A list of collateral.
• Contracts, quotes, or purchase agreements.

You will also need to show business finances if your business is already operational, including:

• Business tax returns.
• Balance sheet and income statement.
• Business licenses and permits.
• List of current business assets.

The complete loan process can take 30 to 90 days, depending on the type of loan, from applying to your bank account.

Many of the leading financial institutions in Singapore are now offering SME loans to address the financial needs of small and medium-sized enterprises. The lenders have eligibility requirements for these business loans, as are all types of loans.

For business loans, you should know some of the essential requirements for eligibility.

TYPE OF BUSINESS

For independent professionals (SEPs), such as doctors, chartered accountants, architects, and corporate secretaries, a business loan is generally available. This type of loan is eligible even for self-employed non-professionals (SNPs), for example, producers, resellers, dealers, suppliers of service, and owners.

SME loans can also be requested by corporate entities, such as partnerships, private limited companies, and limited liability partnerships.

BUSINESS TURNOVER

The requirements for business turnover vary greatly depending on the type of lender and loan you choose. For example, to meet business credit eligibility, a Line of Credit (LOC) credit requires a company to have a minimum turnover of S$10,000.

Similarly, your annual business turnover exceeds S$40,000, and an unsecured business loan is approved only.

BUSINESS EXPERIENCE

While loans for start-ups are now also available, the bulk of business loans are only approved if the business owner has extensive business management experience.

If you are looking for small business lending, you will need to have at least 5 years of experience and a minimum of 2-3 years of operations in your company. If you have extensive knowledge of running your business, you can also obtain a better business loan rate.

BUSINESS PROFITABILITY

No lender would like to give a loss-making company a loan as this significantly increases the likelihood of loan default.

Therefore, most of the best lenders only accept SME loans if the company has made profits for at least 2-3 years.

AGE AND CREDIT SCORE OF APPLICANT

Only people over the age of 21 years can apply for a corporate bank loan. The applicant’s age should not exceed 65 years at the time of the loan maturity.

The lender will also take into consideration the applicant’s loan authorization credit score. In general, if your credit score is over 650-700, the loan will be approved easier.

A loan for Small and Medium-sized Enterprises (SME) is also known as a loan. It is a loan facility for the long-term, operating capital, growth, or expansion needs of medium- and small enterprises. It can be beneficial for SMEs, especially for women-owned enterprises which would otherwise find it difficult to obtain funding, to realize their full potential with appropriate financing.

At FR Capital, we know it’s essential to build and expand your organization the way you envision it. With our FR Capital Rebate, you are in the driver’s seat. You control when and how to grow your company.

The FR Capital SME Term Loan with Prime Rebate offers competitive rates for small businesses and customized repayment options suitable for your company’s needs. It provides you with a specific amount of funds perfect for fixed asset acquisition, construction, or boosting your permanent working capital. It is also an ideal option for covering your organization’s long-term financing needs while preserving your funds.

The FR Capital SME Term Loan with Prime Rebate comes with a maturity of 1 year up to 7 years. Repayment is through amortization of principal and interest during the loan period. What’s more, it comes with Prime Rebate, which allows you to get a loan interest discount whenever you make advance or excess payments on your monthly due, making your money work for you.

A loan specifically designed for your businesses that, from time to time, requires financing to bridge gaps in your cash flow. You can use this type of loan to fund day-to-day operations, replenish stocks or inventory, or any other short-term requirements.