5 Worst Mistakes to Avoid When Applying for an SME Loan

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There is never an easy road to a successful business. At some point, you may encounter hurdles and issues. Now that we are still experiencing a significant blow from the Covid-19 pandemic, The world economy is still recovering after being in a slump for almost two years. The good thing is that we are seeing a bright light for businesses in 2022.

However, if you are one of the business owners with financial problems, you might want to seek a business loan. It would be a great help to have something that covers your costs. Someone who will rescue you while you’re trying to keep your business running until the market gets back to its stable flow.

The solution for your problem is an SME Loan!

What is an SME Loan?

Small and medium enterprises business loan is a secured credit facility that will provide you with a short-term loan. The SME Loan can cover costs such as business equipment, office spaces, and finances for your day-to-day operations. With the help of the SME Loan, you can still stay on the market while you are growing your business and preparing it for the year 2022.

Getting an SME Loan from banks and licensed lenders like Cash Mart Singapore is not as hard as you think. However, your application can still get denied. To avoid rejection from your Loan application, take note of the five (5) big mistakes.

1. Lack of a Proper Business Plan

A good business owner never runs out of a proper business plan. Even when you have been in the industry for a long time, having a business plan is necessary for your business to prosper further. It will serve as your business’ map that leads you to growth. Aside from having a concrete business plan, you should also strictly stick to it.

Not only does business plans help your business, but it is also one of the things that moneylenders like the Lucky Plaza money lender look for before approving your loan. So, if you have a business plan that appeals to them, you will surely get loan approval. Make sure that your business plan is attainable and realistic.

A proper business plan that attracts loan lenders should have a summary of your company. It should include how long your business has been running in the industry. You can also include information that will showcase your business’ reputation. Aside from that, you should also include your business market, products, and financial standing.

2. Failing to Get Your Business Registered

The next one on the list is one of the most important aspects that loan lenders look out for. That is, registering your business. Formally register your business to make it look legit to loan lenders. Doing so gives a higher chance of having it approved. Most banks and private lending facilities require proof of business.

Failing to get your business registered may get your loan application on the least of their options for approval. The same goes when you fail to provide them with other required documents. Also, make sure that the information on the required documents is accurate. Do not try to falsify any information because the banks and moneylenders have a way to check your eligibility.

If you are caught in fraud, you will get rejected. The worst that could happen is getting banned from getting loans from other banks and money lending institutions. You could even get caught in legal consequences. So, as much as possible, provide legal documents upon your loan application, and make sure that your business is registered.

3. Poor Credit History and Limited Cash Flow

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Your credit records will also measure your credibility. If you have a poor credit history, banks and lenders may see that negatively. They may think that you are not a good payor, thus bound your application for rejection. If you have a poor credit history before you apply for a loan, make sure that you work on it first to ensure your approval. Your business and personal credits accounts must have a good history.

After clearing your credit history, ensure that you have a better cash flow. Banks and loan lenders will check if your financial management is in good health. Before getting a business loan, make sure that you can afford it. Put in mind that applying for a loan will add up to your expenses. So, make sure that you will be able to pay them back.

4. Making Multiple Loan Applications

Some borrowers think that applying to multiple loan lenders can give them more chances for approval. However, that is a myth that borrows should avoid. Banks and moneylenders can detect it if you have applied to other loaning institutions. And if proven, your application can get rejected.

When you have several loan inquiries and applications, banks and lenders may pick that as a red flag. Every time you inquire about a loan from a lender, it leaves a record. And if the right lender detects that, they will assume that you are a high credit risk. Therefore, they will take each of your inquiries as a desperate action which could mean that you are in big financial trouble. Unfortunately, this can reject your SME Loan application.

5. Not Applying to an Appropriate Loan Product

Before you apply for a business loan, ensure that you have in-depth knowledge about your lender and the loan product you want to avail yourself of. For small business owners like you, seek advice from accountants. Ask them about a particular loan product that will suit your needs. It is better always to ask them first than to regret in the end because of a wrong choice of loan product.

Aside from knowing the specific loan product, you should also research your loan provider. Make sure that they are credible and legit. Check their eligibility before trusting them with your business finances. Not doing so might put your business at risk of dealing with loan sharks.

Knowing if your chosen lender is legit will be transparent with you. They will take time to explain all the necessary details that you need to know. Of course, there could be some hidden charges such as the processing fee, prepayment penalty, and many more. But they will let you know about them. They would even suggest other payment methods when you can’t pay them on time.

Many businesses went bankrupt in the past two years because of the pandemic. Thankfully, you can avoid it from happening. But only if you can get an SME loan.

Consider all the five aspects above, and you are ready for a more prosperous business in the year 2022.