- December 1, 2023
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How to Get Your Business Loan Approved in Singapore
5 Important Loan Tips For Singapore Business Owners
It may be frustrating to have your business loan application rejected, but when you look at it from the banker’s point of view, you may understand why. Ask any first-time business loan applicant – They’d have a long story about how they struggled with financial statement preparation, compiling a detailed business plan, disclosing detailed information about their business, and still getting pushed by financial institutions for more. Loans are frequently denied, especially for first-time borrowers who are unfamiliar with the process.
Even in Singapore, where financing options are plentiful and government support for SMEs is extensive, obtaining your first loan can be a difficult task. Despite increased financing options, SME owners continue to struggle with accessing capital. Nearly half of applicants have their applications rejected multiple times, and one-quarter of them have no idea why.
In this article, we’ll go over five common tips for getting your business loan approved faster.
The Timeliness of Your Application
Your new business venture has the potential to be fantastic – good team, great product, first-rate service, and phenomenal growth. Now you need money to grow! However, if you are a startup in its early stages (less than 12 months of operation), it is usually too early to approach a banker for a loan. To avail business loans for startup Singapore companies, lenders want to see a track record, stable revenues, strong leadership and a productive team.
In Singapore, banks entertain companies as early as 12-18 months into their operations. If you can’t find bankers, you might have to turn to crowd-funding, government grants, or other sources. Another excellent tip is to speak with your accountant, as they frequently have connections with multiple local banks that can point you in the right direction.
Maintain Your Company’s Cash Flow
Have you ever considered why a mortgage lender would want to see your pay stubs showing a fixed salary? The same question can be applied to commercial lending. Bankers prefer to see consistent cash flow so that they can be reasonably certain you will repay the loan.
When it comes to financing, the importance of maintaining a clean and clear financial record is the key. Maintaining a regular management account not only helps with strategy, budgeting, and operations, but it also comes in handy when you need to access bank loans, investor capital, or sell your business. Your account may frequently alert you to who owes you money and for how long (account receivable schedule), as well as remind you to cut unnecessary expenses to improve your cash flow.
Minimise Other Debts
Unless you’re earning a million dollars a month, getting 100 credit cards would be difficult because banks share credit information and would classify you as a high-risk lender if you took out too many credit lines or loans from different lenders.
The same is true for businesses: Bankers will typically inquire about the amount of short, medium and long-term debt obligations that are due. Request your accountant to prepare a full balance sheet that shows all of your current and long-term debts, as well as strategies for optimising your borrowings. For example, you could selectively renegotiate terms with a lender for a longer term, making it easier to obtain another short-term loan from a new bank.
Keep an eye on your cash flow, keep loan balances low, and pay them off on time to avoid interest penalties. All of these things help.
Think About Pledging Collateral
Lenders usually require some sort of assurance or promise of repayment for the loan they make. This is especially true for bank loans, where credit and loan officers will review your balance sheet and cash flow consistency (knowing your financial strength), and determine whether the collateral you put up is sufficient to cover a portion of the loan’s risk in the event of a default.
In most cases, a collateral document would be useful. This document lists all personal and business assets, real estate, vehicles, receivables, and cash that could be used as collateral.
Create a Convincing Business Plan
Finally, a thorough and up-to-date business plan should not be overlooked. You must demonstrate to the lender how well you understand your industry, customers, costs, and future plans, just as the bank would like to know about your business when evaluating your loan application.
Singapore’s professional financial consultants provide comprehensive guides on how to create a business plan and obtain financing, grants, or credits. Besides information related to your business like financial statements, corporate tax profile, certificate of incorporation, and other corporate secretarial-related matters, be prepared to gather your own details such as resumes, personal tax records, personal lendings, and bank statements for an approved business loan in Singapore.