Running a home based business can be a profitable and enjoyable way to make a living. Financing such a business can be challenging, however. Before you consider applying for financing for a home based business, it’s important to have an ironclad idea, some form of collateral, investors (in some cases) and a long-term plan for success.
By: Hitesh Khan/
1. Pull a copy of your credit report. A lender will not grant a small business loan to any potential borrower with poor credit. You’ll want your credit to be in top shape before filling out any applications for credit. Red flags that may disqualify you for a business loan include maxed-out credit lines, excessive trade lines (more than four revolving accounts), judgments, bankruptcies and charge-offs. Make sure to clear all of your negative credit before applying for financing.
2. Collect all of your documents and do a self-analysis. Put yourself in the lender’s shoes – decide how strong a credit risk you are. Positive attributes of a successful business loan borrower include strong assets (house, investments), existing investors (either angel investors or venture capitalists), strong cash-flow from an existing business or other career and a unique business idea with a clearly defined customer market.
3. Research lenders on Singapore’s Government-Backed SME Loans website. The government is not a direct lender but instead contracts with private lenders to provide government-approved small business loans to consumers. A prospective lender is required to abide by the government’s predetermined set of guidelines, but, in the end, the lender is looking for a profitable loan and will scrutinise your application quite carefully. Be sure to present personal bank statements, business bank statements and a clear one-page report on the thrust of your home-based business, its prospective customers and your ideas for long-term sustainability and growth.
4. Apply to two or three Singapore’s Government-Backed SME Loans lenders. Before filling out the application, make sure you have copies of all documents, a clear idea as to a loan amount and an inordinate amount of patience – sometimes applications for small business loans can languish for weeks in underwriting. Be prepared to be flexible in your conditions for a loan. For example, while you may not initially want to secure the loan, a lender may require you to collateralize an asset – especially if it is your first business loan.
5. Make sure that all approved loan offers meet your original needs. Obtain copies of all approved small business loans and compare the final terms to your original idea. Make sure the capital is sufficient to fund your start-up home business, make sure you can make the monthly payments and make sure the business idea is still viable. For example, if another business owner has entered the market you had hoped to penetrate with a similar idea, you’d be wise to revisit your business plan before accepting any loan funds. If it seems as though your customer market is still there, proceed with the loan. However, if your plan is in jeopardy due to the new business, it’s best to refuse any loan and go back to the drawing board.
It is perfectly normal for a home based business to borrow money and be in debt. Also, borrowing money to make money is not really a new idea.
It may seem odd for your business to borrow money when you have already got personal savings. But you saved that money for a reason — perhaps to fund children through education or provide for your retirement. Whatever that reason is, if you tie up that cash in your business, it’s not available for the original purpose. Taking out credit for your business offers a number of benefits and can improve your chances of commercial success.
Most financial institutions and non-traditional lenders disclose their minimum requirements for lending. If you meet a lender’s minimum qualifications and want to see estimated rates and terms, you can pre-qualify for financing. But pre-qualification is not the same as putting in an application for personal loans. A home based business may pre-qualify for a loan and yet your loan application may be rejected once you put in a formal application – and the more formal personal loan applications you put out, the more the impact is on your credit score.
This is one good reason why a home based business need to work with trusted loan specialists like those at iCompareLoan. Our Loan specialists are able to not only pre-qualify you with multiple lenders and compare rates and terms, they are also able to get you the best personal loans which has costs and payments that fit into your budget.
How to Secure a Personal Loan Quickly
Are you a foreigner and searching for expat personal loans? Don’t worry because iCompareLoan loan specialists can set you up on a path that can get you the best personal loans in a quick and seamless manner.
We also can arrange the Best Home Loans in Singapore as our brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs.
Whether you are looking for a new home loan or to refinance, our mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the loan. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them.
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