1. What exactly is a term loan?
When you take on a term loan with a bank, you'll have the opportunity to borrow funds at a business loan interest rate, which may be floating depending on the terms. The loan must be repaid in regular repayments within a fixed period. A DBS Business Term Loan, for example, allows SMEs to borrow up to $500,000 over a five-year period. What’s more – it is an unsecured loan, which does not require applicants to pledge any assets as collateral.
2. How do I qualify for a term loan?
Banks look at certain criteria when assessing if a company qualifies for a term loan. In general, your SME should be fairly established, having been in operation for a couple years at least. This is to ensure that borrowers are credible and stable. Banks will also consider if your business has a good credit rating and payment history. It is sometimes helpful if you, the business owner, have sound personal credit and if your company has adequate paid-up capital.
3. Is it difficult to secure a term loan?
As banks consider numerous factors when reviewing a loan application, it is essential for SME owners to be up to speed with the relevant financial knowledge or even consider speaking with a financial consultant to address their doubts about applying for a loan.
4. How do I improve my SME’s chances of securing a term loan?
The first thing you should do is to review your company’s credit report, better with the help of professional Financio accounting. It’s important to know your company’s credit score and the factors that adversely affect it. For example, the number of credit searches on your company could lower your score – so opt to
use eligibility calculators before you actually
apply for a loan. It’s also important to know the different types of documentation needed when submitting your loan application. Make it a habit to keep a file handy with all the necessary documents you will need, such as bank statements, income statements, monthly bills and so on. If you’ve been banking with a particular bank since you started your business, it might be worth thinking about applying for a loan with that bank as they would have most of your relevant financial information handy. If you’ve recently expanded your business, for example, it’s worth looking at other loan types as well, such as a
commercial property loan here.
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