In a nutshell, getting credit is much easier for businesses that don’t need it. Why? Because those businesses would be those that are already successful. For SMEs in business-focused countries like Singapore, sme loan is essential to either keep the business moving or invest in improvements. In any case, there are ways to build your business credit to avoid being rejected by sme loan Singapore banks offer. Let’s get started.
Assess your personal credit rating. One of the biggest factors in a bank’s decision for lending to businesses is the actual owner’s credit ratings and generally look for a personal credit score of at least the mid-600s. You can boost your credit score by paying personal bills on time, keeping a low ratio of debt to available credit on credit lines and personal credit cards, and ensure that any balances remain under 30% of your credit card’s limit. Lenders also typically check the personal credit of an investor or business partner with a 20% stake in the business.
Start applying for credit before it’s required. To build a credit history for your business, start applying for credit soon after starting up. SMEs often need to establish themselves for two years before the bank feels comfortable offering you a big credit line. You can consider a business credit card or apply for a small bank loan to get around this.
If you’re having issues acquiring a small loan, consider a working capital business loan Singapore banks offer. This allows you to get a small secured credit card with a low limit. Many banks that supply to small businesses offer collateral-free funding of up to S$500,000.
Improve your credit and use it. Many businesses with good credit histories applied early and used them as early as possible. After establishing a payment history, you can request an increased credit limit even if you’re not using it straight away.
Start making relationships with multiple lenders. Banks are known to alter lending policies regularly and cut credit limits overnight. The best advice here is to have all your financial eggs in different baskets instead of choosing to have a credit card via a major bank and your credit line with a local bank or credit union. You can usually speak to the one person who will put your loan package together for smaller banks. SME loan Singapore banks generally offer more products and locations.
Evaluate your alternatives. Traditional banks are not your only shot at credit. There are multiple options, as you know. Other resources include asset-based lenders that focus on collateral rather than creditworthiness, peer-to-peer lending, and crowdfunding sites, such as Kickstarter.com and GoFundMe. These alternate channels can indirectly improve your chances of getting credit in the future.
End Note
Get started on separating your business finances from your personal finances through a business bank account. Using this type of account will help you get a business credit card and start building a relationship with a banking partner that offers SME loans in Singapore.
If your business is new and doesn’t have a credit history, you can use the tips above to start building your business credit score. To keep a good credit score, you need to continue building healthy financial habits Best of luck!