5 Business Loan Myths You Shouldn’t Believe in
More and more people are taking the risk to start their own businesses in Singapore. Starting and running a business in Singapore is not an easy task. Other than having to deal with global economic uncertainty, getting the right credit to fund your business can be challenging as well.
Taking up a business loan is quite a different thing from a personal loan. What’s more, it’s likely to be something quite unfamiliar to you, which can easily cause certain misunderstanding. So before you go ahead to look up a business loan, here are 5 myths that we are debunking to ensure that you are on the right path.
Myth #1: It’s hard to get funding for a small business
All lending institutions come with their own set of credit checks before they disburse any loans. This applies to every type of business, big and small. In fact, they may think twice about lending to a large company since the risk can be higher. Many lenders, including legal moneylenders, are more than happy to lend money to small businesses if they can prove their credit-worthiness.
Myth #2: You can only get a business loan from a bank
Similar to personal loans, you have other choices for getting a loan and are not limited to just banks. Legal moneylenders are also a source of credit for businesses. In fact, borrowing from them can offer some advantages over a bank, including shorter loan tenures and more flexible payment systems.
Myth#3: The best loan is the one with the lowest interest rate
It may be tempting to simply take up the loan with the lowest interest rate, but there are a number of factors that you should look out for as well. These include processing/origination fees, early repayment penalty, account maintenance fee and banking fees. With all these added in, the amount you are paying for the lowest interest loan may not be the cheapest anymore! Other factors that you should consider include the minimum/maximum tenure, payment terms and customer service.
Myth #4: Loan approvals for business loans are long
The amount of paperwork and documents you’d need to provide can become a nightmare during the loan application process. After you’ve provided all the necessary documents, there is the additional wait-time needed for the bank to go through the documents and carry out the credit checks. One way to get through this with a shorter timeframe is to consider a private lender. A legal moneylender can provide you with a business loan with a less rigorous approval process. To shorten the time needed for the business loan disbursal, you should get ready these documents:
- NRIC copies of the business directors
- Tenancy agreement for the business premises
- Current ACRA printout
- Bank statements for the last 6 months
- Proof of assets
- Income tax statements
- P&L statement
Myth #5: Business loans require security/collateral
There are both secured and unsecured business loans provided by lenders here in Singapore. Usually, a secured loan requires the pledging of certain business assets, but will give you a higher chance of getting a loan and may even be offered at a cheaper rate. Unsecured business loans are also available, but you may face a more stringent requirement. Find out from your lender which one you qualify for and compare the pros and cons before taking it up.