SG Small Businesses: Things To Know Before Borrowing Capital
Running a small business has many ups and downs. Happiness, excitement, and stress sometimes mix.
But it can be stressful to decide whether to borrow money. You may want to grow your business, buy cool new tools, or cover unexpected expenses. Many people get excited when they hear “loan!”
Getting a loan is a great option for any business owner, new or experienced. Avoid discussing interest rates and payment plans for now. Let’s start with important issues.
1. Why do you need more money?
It may seem obvious, but having a clear goal is crucial. Want to make more money by moving into a larger space? Will you buy expensive tools to improve production? Or did you get an unexpected bill?
Know where your money is going before deciding how much and what kind of loans from authorised money lender to get — it depends on your needs!
2. Can you afford it?
Reality check before fantasizing about all the cool stuff loans can buy! Give a brutally honest assessment of your repayment capacity. Remember that you must repay this money with interest.
Check your cash flow, do some math, and make sure a loan won’t make it hard to buy Friday coffee for your staff. Think about how much you can spend on a slightly more expensive apartment in a great area. You should only do it if you can pay your bills.
3. You should shop around
Avoid the first loan offer! Like shopping for a new smartphone, compare loans from banks, credit unions, and online lenders. But there are some precautions:
Interest rates
Lowering interest rates is clearly beneficial. If the percentage changes slightly, your loan can change a lot.
Fees
Just warning that some loans have hidden fees. Beware of processing fees, early loan repayment fees, and other costly fees.
Payment terms
You have how long to repay? Do you have enough for monthly payments?
4. What are your eligibility chances?
We’re sorry, but not everyone can get a loan. Not good, right? Lenders don’t want to give money to companies that might fail the next year.
Usually, they want to see:
Time in business
Most lenders consider your company’s age. Most want to see a year or two of business experience. No worries if you’re a new business—you may have options.
<h3>Healthy financials</h3>
Taking care of money well! A steady flow of cash, a profit, and a clean credit history all show that you can pay back lenders.
Local ownership
In Singapore, some government-assisted loans require a certain amount of local business ownership.
5. Not Just About the Loan…
Loans affect more than your monthly budget, so better consider:
Potential impact on credit score
You might have trouble getting another loan in the future if you don’t make your payments on time because of your affected credit score.
Personal guarantees
Sometimes you must pledge personal assets as security. Before signing, make sure you understand the risks!
Conclusion
If you do it right, a loan can boost your small business. Consider, plan, compare, and then achieve your business goals! I hope this helps!
