The best time to consider business loan financing is when the company’s business health is at its peak. During this time, the business is not in desperate need of money to survive. Instead, you are using it for a specific plan to grow your business such as entering a new market or developing a new product. This allows you to take on less risk as your small business is already on a good track.
A common mistake made by Singapore SMEs is that they only look for business loan financing when their business is not doing well. As a result, they are only able to use positive leverage – their track record of success – to convince financial institutions to approve their business proposals or their bank business loan applications. This is what puts the business in jeopardy, leaving them with weaker negotiating power and lesser options. Thus, it is better to plan ahead and seek business loan financing when your business is doing well.
The Importance Of Business Financing
Every business needs money to thrive, and that is where business loan financing comes in. It is one of the most crucial aspects of any business. The financing piece of all your business strategies should be thoroughly addressed to achieve your goals. By planning your finances well, you will leave a positive impression and make it easier to secure business funding.
Here’s why planning your business financing is important:
1. Building a good reputation with lenders
A relationship with lenders, such as Poss Capital or Funding Societies, ensures that the doors to business success is open. These institutions will not undermine your authority, unlike in situations where capital is exchanged for equity in the company. They simply provide financial support through small business loans, and do not interfere with any decision-making regarding business development or your business in general.
2. Unlocking growth opportunities
Business loan financing is like your strategic partner. It provides your small business the resources to achieve specific goals such as:
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- Achieving increased profitability
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- Increased headcount
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- Business expansion
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- Upgrading of physical assets
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- Expanding into new markets
The overall benefit to your SME business health is often significant, despite the interest rate.
How Does Business Loan Financing Work For Business Growth?
When strategising for business growth, it is important for Singapore SMEs to evaluate the feasibility of their plans. Financial institutions need to be sure that the business loans, and their potential profits from the interest rate charged, can be repaid before giving them out. This is the reason why companies need to have good credit — so that banks will feel more reassured.
Submitting a business proposal with a sound financial plan and realistic projections is a good way to lower interest rates and enhance your credit score. With this, you can convince the lender that their small business loans are safe, and repayment is not an issue. Do note that your personal credit score may also affect the ability of your business to attain business loans or working capital loans, especially from a bank. For more information on what you need to know about personal credit scores, check out our article here.
Why Do You Need To Have A Financial Plan?
Lenders may require a detailed financial plan before giving an answer on business loan requests, especially for bank business loan applications. This also helps business owners visualise the financial health of their companies, and is the best way to transform complex data into simple observations.
Well thought-out financial planning can help your SME business take precise measures to achieve growth. Such planning details information from the company’s balance sheet, cash flow projections, and income statement. It also shows the company’s financial strength, including potential profits and losses. Specific, attainable goals and potential obstacles are also included, as well as ways to achieve those goals.
Imagine this: It is not ideal to borrow right now. However, disaster strikes and your business needs funds to keep operating and get back on its feet. In this case, financial planning and the proper documentation of financial statements such as balance sheet is necessary. This gives you room to modify your plans and provide safeguards to deal with the situation.
Seize Growth Opportunities With Business Financing
Work with us and understand how to structure an effective financial plan to help your business reach goals that matter. Acquire business loan financing from Poss with simple borrowing requirements and transparent fees and focus on effectively growing your business without any worries. Contact us today if you require additional business loan financing to achieve your business goals.
