3 factors affecting small business loans

October 11, 2018

Capital is the core of each and every business and there are times when you want more capital to expand your business. Keeping this in mind, a number of finance companies now offer SME loans for business owners who are facing financial crunches. This ensures you get the capital you need to be successful and run a thriving business. However, were you aware that two similar businesses can receive two very different loan offerings?

Both businesses might need the loan to cover the same financial gaps and both businesses might even approach the same lender but still end-up with varying capital deals. Wondering why? Well, certain factors related to your business affect the type of loan you receive. This article will highlight these factors to ensure you have a better idea of what to expect when applying for a business loan.

1. Credit scores.

Credit scores have a major bearing on the SME loan you are provided. Lower credit scores can be attributed to higher rates and lower eligibility. It’s also worth noting that, if your business is relatively new or you are borrowing from a certain lender for the first time or you are the sole proprietor in the business, some lenders might look into your personal credit record to ascertain your loan worthiness. So before you apply for a business loan, remember to check and work on your credit score.

2. Stage of business.

The stage of your business is another very important factor influencing your SME loan. Companies that are just starting up will inspire less confidence in the eyes of a lender as compared to a company that has already established itself. Thus newer company owners should expect lower loan amounts and slightly higher rates.

3. Monthly revenue & small business loans.

Your monthly revenue determines if you will be able to successfully and quickly repay the loan. Companies with higher monthly revenue are more likely to repay the loan than those with a lower monthly income. Therefore, when applying for the loan, it makes sense to show just how successful your current business is and how much more profitable it will be after you get the capital you need.

These were 3 of the most important factors affecting SME loans. In some cases, the current market scenario will also influence the loan offering provided. For a better idea, feel free to approach one of our branches or speak to one of our executives.

We hope this article has been useful.

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Business, Loans, Education, Home

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