Small and Medium Enterprises (SMEs) are in constant need of capital to finance their growth and expansion. Inability to access credit services from financial institutions remains a major bottleneck and businesses are constantly finding ways of navigating this minefield.
Credit service providers have requirements for individuals applying for loans and you need to know them before you apply. Here is a bit of what you need to know to improve your prospects of getting approval on the funds you need.

Understand the loan
Knowing the most suitable credit facility to bridge your business financial needs is the first step at ensuring you are not walking in the dark. Loans can range from personal; trade finance; bridge financing; to business growth loans and the terms differ. Before you get a loan, be clear on what your need is; shop around the best suited loan product; compare the terms with other products; think about your ability to pay back via the terms and choose the right loan for your business needs.

Apply for the right amount
Applying for the right amount for a loan can be the deciding factor between being able to repay your loan and defaulting. Resist the urge to borrow more than you need. Making the right calculations and projections for your business prospects can help you avoid applying for more than you need or less than your need. Either one of these positions is a recipe for disaster.

Credit rating
Before applying for a loan, you need to know your credit history. This information is accessible from the Credit Reference Bureau and provides a snapshot of your reputation in as far as fulfilling financial commitments. Banks will be looking at this to assess your past record as they make a decision on whether you are creditworthy. Having a bad credit history will hinder your chances of successfully applying for a loan.

Collateral
Financial institutions ask for collateral as a guarantee to expend resources in case of default. Collateral is assessed on forced sale value of the asset and not the original cost. When you fully pay back your loan, your collateral is returned to you. A level of discipline is needed to pay back a loan to avoid losing one’s collateral.

Repayment terms
Before accepting a loan, seek clarity on whether your monthly payment is fixed or variable. It is advisable to have fixed monthly payment terms. If you do not pay back your loan as outlined in your agreement with the bank, you risk losing your good credit standing or the collateral you offered to get a secured bank loan.
To find out more about dfcu loans and financing call 0800 222 000.

The Credit Reference Bureau
The Credit Reference Bureau his is provides timely and accurate information on borrowers’ debt profile and repayment history. The CRB screens loan applications by enabling the lender to sort out prospective borrowers who have defaulted with other lenders.

Ronald Kasasa, head of business banking – dfcu Bank.