Capital Borrowing Application – On 18 February, Minister Heng Swee Keat announced an increase in the self-employment SME credit (EFS-WCL) from a maximum of $300,000 to $600,000 and a time limit of $1,000,000. (TBLP) to the tourism industry in the first budget speech.
These two designs were later still improved; The maximum amount of EFS-WCL has been increased to $1 million with a risk control community of 90%, while the maximum amount of TBLP has been increased to $5 million with a risk control community of 90% and is selected for all companies.
Capital Borrowing Application
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Since then, we have come to understand that many applications have been made to participate in financial institutions for these two government business loans, but unfortunately many SMEs are not eligible to apply.
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If the company is small, the company may not have organized itself and is unlikely to have accurate or complete financial statements for analysis.
According to OCBC, 30% of SMEs will go bankrupt within 3 years, and after 5 years this percentage will rise to 50.
However, requirements differ between financial institutions. For example, DBS requires SMEs to be in business for at least one year, while UOB requires SMEs to be in business for at least three years to obtain EFS-WCL and TBLP.
In these challenging times, most SMEs have not been doing well during these months.
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For the loan market (even at this time), businesses are set to be profitable in the last financial year.
This can refer to the financial year ending December 31, 2019 (if the virus has not yet affected the market) or December 31, 2018 (if your computer has not yet prepared the 2019 financial statements).
The founders want to know that the SME can be profitable again when the pandemic passes and the business recovers.
Although the total requirement varies from financial institution to financial institution, SMEs must normally have an annual income of at least S$300,000 in the last financial year before an application for EFS-WCL and TBLP will be considered.
Loan Application Letter
The good news is that at least one local financial institution has removed this minimum requirement to serve a larger number of SME borrowers.
An SME is considered super-leveraged if its existing monthly debt repayment exceeds its ability to pay interest and normal business income.
Although the guarantors or administrators of the company want to continue payments with personal funds, it is not considered prudent to lend to financial institutions (and continue to accumulate debt in the company), because this is not supported.
For SMEs that have previously demonstrated prudent financial management, many financial institutions have imposed a 6-12 month moratorium (interest only) on EFS-WCL or TBLP to handle current business transactions.
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Some industries, such as jewelry companies and entertainment companies, have strict rating guidelines in relation to the economic climate, others, such as construction, marine, oil and gas, can be considered high-risk industries in certain economic conditions.
There is no way to know for sure if your business is in the high risk category because financial institutions do not disclose this information. But this is usually what public relations managers have gotten to do.
This often happens with one or two member SMEs, where the main operator of the company is also the owner/director of the company.
For convenience (and lower costs), such SME owners can simply use their personal accounts to withdraw business deposits and returns.
Online Quick Loan Application
However, most financial institutions cannot accept personal accounts for credit evaluation because they cannot distinguish between personal and business transactions.
Without the company’s own signature, financial institutions are missing a key point of information that hinders credit evaluation.
Ideally, a corporate bond company should not have more than two bonds in a 6-month period.
While mistakes can happen to trigger a reprimand (incorrect address, payee, etc.), often a reprimand means a reputational reprimand, or a problem with com compensation behavior or simply poor cash management.
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In Singapore, most SME loans are secured by a personal guarantee from the company’s managers or owners.
These loan terms are not secured by collateral such as real estate, but still require personal guarantees.
Thus, the creditworthiness of personal guarantees must also be evaluated as part of the business credit evaluation process.
Personal guarantors are another avenue through which financial institutions can recover from defaulters if the company is unable to keep up with loan payments.
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Financial institutions will therefore negatively assess those personal guarantors if their personal income is declared low or negative (through the assessment notice), because the guarantors may not have the financial ability to pay the loan for the company.
Similarly, SMEs with managers with poor personal credit ratings are negatively affected because these managers are required as guarantors of business loans.
Bad credit records include behaviors such as late payments, bankruptcy, delinquencies, inadvertent closing of personal credit and more.
Personal credit data can also be used by financial institutions to provide insight into the capacity and character of the SME operator.
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The balance-to-income (BTI) rule, which states that each state cannot borrow more than 12 times its monthly income, was introduced by the MAS to reduce Singaporean debt.
Although this does not directly affect the application for a business loan, the representatives of the company may be assessed as negative because they must provide a guarantee for the aforementioned reasons.
Controllers will exceed the STI rate if more unsecured debt (ie outstanding personal loans, credit cards, overdrafts) than annual income is declared.
We know that these parameters work best for financial institutions, and if you work to improve in all of these areas, chances are good that you will be eligible for the next business loan.
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It operates a business loan market that allows SMEs to connect with several lenders through just one app, so that SMEs can find out who their potential lenders are and what interest rates they offer in the shortest possible time.
The leading digital lending marketplace connects SMEs with a network of 45 lenders, including relationship managers from Singaporean banks, financial institutions and private and peer lenders. It aims to help SMEs overcome the problem of asymmetric information and overcome the lack of transparency in the SME financing sector by providing SMEs with immersive options such as line business loans, real estate, income-based financing, lines of credit, working capital loans, bridging. loan, goods financing and career.
Eric Koh is passionate about helping SMEs grow and spent years as a business owner at OCBC and IFS Capital. He asks in 70 rock and roll, odd new things and a lot of historical trivia, final FAQ: business loan application, what, how, why, when 1. What are the requirements to apply for a business loan?
Applying for a business loan can be an important step in obtaining the financing you need to start or expand your business. But it is important to know what requirements lenders usually put on loan applications. Below are some basic requirements that companies should be aware of when applying for a loan;
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1. Credit history: Lenders will often review the credit history of the property and its owners. A solid credit history demonstrates the ability to manage debt responsibly. Having a good credit score and a clean credit report is important to increasing the likelihood of loan approval.
: A comprehensive business plan is important when submitting loan applications. This document should describe the purpose of the loan, the company’s financial projections and market analysis
And the author A business plan should demonstrate a clear understanding of the industry and a strategic approach to achieving profitability.
3. Financial statements: creditors require financial statements such as profit and loss, balance sheet and cash flow. These statements provide an overview of the company’s financial position and results. They must be carefully prepared by a competent accountant.
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4. Security: depending on the amount of interest and the need of the donor, security may be required. Collateral can be real estate, fixtures, equipment, or other valuable assets that can be used as collateral for a loan. Lenders evaluate the value and marketability of collateral to determine its suitability.
5. Business Experience: Lenders often prefer to work with businesses that have success. They consider the property owner’s experience and knowledge in the field. Showing a strong understanding of the market, competition and potential risk, can support the loan application.
6. Industry and Market Analysis: Lenders want to see the company have a clear understanding of its market and the competitive market and landscape. A thorough industry and market analysis should identify the company’s target audience, potential growth opportunities and competitive advantages. This analysis should be supported by a solid marketing research.
7. Cash flow projections: Lenders want to see the business’s sustainable cash flow to repay the loan. Cash flow projections show that the company should generate enough income to cover loan payments
Lending And Borrowing
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