5 key steps to taking an SME business loan
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October 11, 2018
It takes money to make money, which is why capital is like the backbone of any business. However, it’s not a given that you will have the required funds when a financial gap presents itself. In such a scenario, you can turn to an SME business loan to bridge your capital shortcomings. And though acquiring such a loan has become extremely easy in the last few years, there are still a few steps you should be aware of to ensure a hassle-free borrowing experience. This article will highlight some of these steps to ensure you get the capital you need, minus any unexpected hiccups in the process.
1. Have a plan in place.
Step one is to plan how you’re going to use the capital - lenders like to see applicants that have vision. If possible, try and prepare a short presentation detailing your business, its objectives and how the capital you are borrowing will help in achieving these objectives. Showing how the funds procured will help your business turn a profit is also very important.
2. Decide the loan amount for your SME loan.
Do your research and arrive at an accurate loan amount. Overestimating or underestimating the loan amount could lead to problems later on. If you’re setting up a business, consider all the heads of expenses that need to be covered, if you’re going to buy equipment, keep in mind peripheral costs such as transportation & installation. Knowing what you need the funds for and exactly how much you need can help your lender provide better financial solutions.
3. Check your credit score.
Credit scores are important when applying for an SME business loan. Though your personal credit score shouldn’t have any bearing on your eligibility for an SME loan, there are certain instances wherein lenders will assess your personal credit record before approving your loan. For instance, if you own a small business or are just starting up, lenders might gauge your personal credit score when you apply. The same might apply if you’re borrowing from a certain lender for the first time or if the financial records of your business are not enough. This is also the case if you have a sole proprietorship in the business.
4. Compare your options.
After you’ve drawn out a detailed plan, figured how much you need, how you are going to utilize it and checked your credit score, the only thing that’s left to do is find the right lender and apply for your loan. Different lenders might also offer different types of financial solutions. You need to thoroughly compare your options and see which one best fits your needs. Compare interest rates, tenures, processing fees, reviews & charges before choosing a certain lender.
5. Apply for the SME loan.
Once you’ve found your preferred lender, all you have to do is fill out the paperwork and submit the required documents. Most lenders will offer approval soon (provided everything is in order).
We hope these 5 steps make the SME loan process simple and convenient. If you have any doubts, feel free to contact us; we will be more than happy to answer any of your doubts. Good luck and all the best!