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Debt Financing FAQs

What you should do before you apply for a loan

On the fun scale, applying for a loan falls somewhere between doing your taxes and having minor surgery. Once you get organized, though, the process takes less time than you think. If you need a loan to start or expand a business, the following steps can help you power through the paperwork. Steps 1 Determine which type of loan you need to apply for: Working capital is used to meet immediate, short-term needs (payroll, rent, vendors) that you will repay ...

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What are the common SME loan appraisal criteria?

Viability of the business and its repayment capacity Surplus operating cash flow projection sufficient to service/repay loan within the agreed tenure Conduct of existing account is satisfactory Acceptable Gearing ratio (i.e. % of loan to networth) Good business/industry outlook Capability of the management/borrower Make a presanction visit and is satisfied with the operation of the business Joint and several guarantee of directors Any form of acceptable collateral Common grounds for declining credit applications include: Low ability of applicant to repay ...

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What are the common reasons for a bank to reject a loan application?

Common grounds for declining credit applications include: Low ability of applicant to repay the facilities applied; Purpose of financing does not align with facilities applied; Poor financial records of the applicant / poor repayment records with other lenders Applicant obtain other substantial borrowings resulting in high gearing Unsatisfactory conduct of bank account by the applicant Applicant has pending legal action High business risk i.e. over dependence on single buyer or supplier Lack of financial commitments from business owners (i.e. not ...

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What is “Collateral” ?

Collateral refers to assets that you are willing to put up to secure credit, such as a small business loan. Your house (if you own it outright), your car, property, or equipment are all examples of tangible assets that you may be able to use as collateral. Loans that use tangible assets as collateral are called secured loans (as opposed to unsecured loans). The advantage of secured loans is that they often have lower interest rates than unsecured loans. One ...

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What are the three “C”s that bankers looking for?

Traditionally bankers look at what are called the 3 “C”s – character, credit and collateral. Character means more than not having a criminal record. It means that the banker feels confident that you are not going to suddenly disappear if the business runs into trouble. Specifically bankers like to see ties to the community such as long residence, family ties, and home ownership. A clean credit history is important. A couple of late credit card payments shouldn’t be a factor, ...

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Can you get a business loan?

The criteria for business loans varies much more widely than for consumer loans and often varies quite a bit from one banker to another. However, here are some rules of thumb to give you an idea of your chances of getting a loan. Getting a loan for a new business is tough. Fixed assets such as machinery or properties can almost always be financed. Current assets such as inventory or good in process increase you loan chances. 2+ years of ...

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Getting an appointment with a Bank

Don’t just show up in person – first make an appointment by phone. Ask the receptionist in the bank or the loan department for the name of the appropriate person who would handle your loan request. Of course it would be better, but not necessary, to get a referral from a friend or advisor such as your lawyer or accountant. When you get the name of the appropriate bank officer simply ask for an appointment. Don’t offer any more details ...

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10 tips on how to get bank loan first time

Whether it’s for a growing company, or to start up a new business, finding the money to get started is one of the most difficult obstacles business owners face. The most likely (and easiest) sources of capital are your family, friends and your own savings. But institutional sources may be a wiser option. That said, without a previous track record, securing a first time bank loan can be tough. Banks often turn down first time loans because of the risk ...

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How to get the Bank’s money, even when the Bank says “No” !

Banks have much more lenient standards for lending to consumers than to businesses. So what you can do is borrow the money from the bank as a consumer and then turn around and personally invest the funds in your business. Just make sure that you never lie about how you are going to use the proceeds on a loan application. For example, you could refinance your home loan to tap any appreciation in your house value. Then take the funds ...

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