4 Questions You Need to Answer when Applying for a Business Loan

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It doesn't take an MBA in Finance to know that loans are sometimes needed by businesses to maintain their business operations. An efficient loan from a credible funding agent can stimulate immediate growth in a business, as long as it's used wisely. In fact, in our unpredictable economy in South Africa, business loans are one of the viable options for small business owners to obtain cash for furthering their business aspirations.

The desire to ease the loan application process for small business owners in SA is why we established FundingHub, which is a truly independent credit marketplace for SMEs in the country.

We've been in business for more than a year now and loans worth millions have been granted through our platform. We do this by intelligently matching you with a reliable lender based on your answers to some questions.

For the records, the keys to a successful loan application are:

  • Knowing what your lender will ask; and

  • Coming to the negotiation table prepared.

With careful preparation, you'll not only be able to answer the lender's questions effectively, but also give your loan application a better chance of being approved. Here's a useful guide to prepare your application in the right way.

Keep Your Business Records Organised

Keeping your records organised, both digitally and physically, will reduce the time spent on filing and completing applications, when the time comes.

Ensure that you maintain records of things like:

Your business details:

  • Business name

  • Business type

  • Business registration number

  • Business partner(s) (if applicable)

  • Accounting records

  • Previous tax returns

  • Outstanding loan(s) (if applicable)

  • Cash flow

  • Assets & liabilities

Personal details:

  • Name

  • Address

  • Identification documents

  • Tax return

  • Salary information

Depending on the type of loan you are applying for, the lenders will require different information, but in general, the key questions you should prepare to answer during the loan application process are:

1. What's the purpose of the loan?

Your lender will want to know what you want to use the funds for. The lender will probably check if the purpose of the loan could add value to the business. For instance, a loan for purchasing a new commercial vehicle for supplying the large new customer base of your company is likely to add more value to the business than a loan to fund the purchase of a new car for your private use. The former is more likely to be approved than the latter.

Some purposes for which lenders can approve your business loans include:

Lenders will request to see supporting documents (such as, Quotations and Contracts of Sale) to back up your loan application.

2. Tell us about your business

Lenders will want to know more about your business in order to assess risk. Be prepared to provide answers to such questions as:

  • What's your average turnover?

  • For how long has your business been in operation?

  • Have you defaulted on a loan before?

  • In which industry is your business?

  • What amount do you want to borrow?

  • How quickly do you need the finance?

3. Do you need a secured or an unsecured loan?

A lot of business owners don't really know the difference between the two.

For a secured loan, you must provide an asset as collateral / security. It may be a property, debtors book or equipment. Secured loans normally offer longer time frames for repayments and lower interest rates. If you default, however, the lender can take your asset. On the other hand, an unsecured loan doesn't require any collateral. But, the lender can request for a guarantor who will repay the loan if you're unable to do so. Unsecured loans are more ideal for short-term funding, but they attract high interest rates.

Your choice depends on the purpose of the loan.

4. Do you prefer fixed or variable interest rates?

While fixed rates are locked for the specified period of repayment which will allow you to adequately plan ahead, variable rates change with interest rates, and your rates will increase or decrease with increasing or decreasing interest rates.

To prepare for these questions and navigate the loan application process effectively, you'll need the services of FundingHub.

Why FundingHub is Unique:

FundingHub remains the No. 1 marketplace for providing SMEs with reliable funding solutions in SA. Reasons why FundingHub receives so many rave reviews include:

  • Proven track record as an independent business loan marketplace where borrowers are matched with credible lender(s) based on their answers to the key questions.

  • Free to use service.

  • Super-fast loan application process.

  • Transparent process with multiple South Africa lenders bidding to fund your business.

  • You will be in control of the application and choose your preferred lender by yourself.

Contact us today to manage your business loan application. www.fundinghub.co.za

We are ready to help you!