Many successful businesses have one thing in common: a stable capital reserve. But establishing a stable financial foundation is easier said than done – these capital reserves require tonnes of money that a layman does not have at their disposal. In this situation, licensed moneylenders can offer you the much-needed capital to start and maintain your business venture.
In the money lending industry, there are secured and unsecured moneylenders. Some of these companies require their borrowers to provide certain forms of security, while others do not. Upon borrowing, borrowers will then have to pay interest on top of the borrowed amount.
Whatever the case, you’ll want to ensure that you take the necessary precautionary measures if you wish to secure your business’s financial health. Here are some of them:
Top 4 Things To Note Before Getting A Business Loan
1. Select a trustworthy moneylender
You should always ensure you’re borrowing from a renowned and established moneylender who has a proper license. Always verify their details against the Ministry of Law’s Registry of Moneylenders.
Do thorough research by cross-checking with reviews from previous borrowers so that you won’t fall victim to fraud, and be sure to shun any secretive or shady moneylenders.
2. Have a good credit score
The better your credit score is, the higher the chances of you attaining a more favourable rate on your loan. Note that lenders often look at both your business and personal credit scores and history. As most small businesses don’t have business credit, moneylenders will refer to your personal credit.
The Credit Bureau Singapore (CBS) will issue out a four-digit score that reflects what your credit score should be. This score ranges from 1000 to 2000.
If you scored closer to 1000 on your credit score, it’ll put you in the HH category where it’ll hint that you have a high likelihood of defaulting on your loan payments.
On the other hand, if you manage to score 2000, you’ll land on the AA Risk Grade, assuring your moneylenders that you’ll be able to pay back your loans on time.
3. Understand the interest rate, repayment terms, and loan terms
These can vary significantly, so it’s crucial to compare your options carefully. Interest rates, in particular, can differ considerably, so be sure to find a moneylender with a competitive rate to bring down your cost of borrowing.
It’s worth noting that while there is no upper limit to the late interest and late fees that licensed moneylenders can charge for business loans, they can’t charge early redemption penalties, unlike banks.
To avoid unexpected charges that could impact your business’s financial health, make sure to read and understand the loan terms and conditions thoroughly before signing any loan contracts.
4. Documents needed
To apply for a business loan, you’d have to also furnish essential documents such as:
- Company’s business profile (BizFile)
- Latest six months’ bank statements
- Latest financial statements and business contracts
- Tenancy agreement of physical office or shop
- NRICs of major shareholders and directors
- Latest income tax assessment of the company’s major shareholders and directors
- Latest credit report of major shareholders and directors
These documents are required to evaluate the creditworthiness of the business and its stakeholders, and determine your business’s eligibility for the loan and the loan quota. Make sure that these documents are complete and up-to-date to speed up the application process.
Benefits Of A Business Loan
There’s a myriad of benefits when taking up a business loan from a licensed moneylender.
Easy Funding for Start-Ups
Starting a business from scratch undoubtedly requires a large sum of money, and with the high loan quantum licensed moneylenders can offer, it’s possible for small businesses to secure start-up capital by taking up a single loan.
Growth Opportunities for Small Businesses
If you have a small business that has just started, you can apply for a business loan to enhance and boost the growth of your company, exposing it to numerous opportunities. With adequate financing techniques, you may witness significant development in your brand activities.
Risk Reduction for Business Operations
For smooth-running business operations, a business loan can also reduce the risk of a fold-up when there is a dire need for money. Some licensed moneylenders are also open to partnership deals with businesses with high credit scores that benefit both parties.
Extended Repayment Period
Business loans benefit all types of businesses with an extended repayment period, which can go up to a decade as compared to those in the market. This lengthy payback time gives businesses ample time to generate adequate Return on Investment (ROI) to pay their debts.
Low-Interest Rates for Long-Term Financial Boost
Furthermore, licensed moneylenders offer competitive rates when it comes to such loans, giving you a financial boost in the long run.
With the above points in mind, obtaining a business loan is much clearer, and this will pave the way for the success of your business.
At Goldstar Credit, we understand that financial stability is crucial to the success of any business. We offer business loans with extended repayment periods and competitive interest rates to support your business needs. Visit our branches in Toa Payoh or Hougang to learn more.