01 Aug Micro Loan 101: Introduction To The Basics
Regardless if they’re a seasoned tycoon or a cautious newbie, many entrepreneurs would agree few can rival the kind of competition seen in the very volatile world of business.
This is especially true in countries that are highly progressive like Singapore and the United States.
Since competition can be unbelievably stiff, getting ahead of the pack is no walk in the park.
For starters, you need to have funding to fuel your growth and to ensure you are a step ahead of everyone else.
Fortunately, a micro loan in Singapore can come in very handy.
What can you use micro loans for?
Furniture or fixtures
If you are engaged in the restaurant or retail business, you can utilize your micro loan fund to purchase fixtures, décor, and other furniture your retail space can use. The funds can also be used to buy furniture and fixtures needed in the office.
Bottom line, use the funds on improvements that will increase revenues and provide a more favourable customer experience and not just enhance aesthetics.
Inventories or supplies
A micro loan in Singapore can also be used to buy supplies and additional items if you are in the retail business. Micro loans are considered beneficial especially for small businesses as it gives them the opportunity to increase their profitability.
Machinery or equipment
Bakeries, restaurants, and manufacturing companies can use micro loan funds to buy equipment or machinery needed by the business. Businesses engaged in other things can utilize the funds to purchase computers or IT equipment.
If you need money to hire new employees or cover day-to-day expenses, a micro loan would be ideal. Regardless if it’s for working capital needs or basic expenses, funding from micro loans can definitely go a long way.
What are the enticing benefits of micro loans?
- As the name implies, micro loans often only involve a small amount so you don’t end up borrowing more than you actually need. More importantly, the setup can get you in the habit of making payments on time.
- In some cases, even if you have a less-than-ideal credit score, you can still be granted a micro loan. However, expect that your credit history will still be looked into.
- Since micro loans are structured as instalment loans (equal monthly payments), so it is a lot easier to pay. Repayment of the loan is from 1 to 4 years.
How can you increase your chances of getting approval?
Compared to other loan types, standards needed to qualify for a micro loan are generally more lenient.
However, you can further increase your chances of getting the nod by keeping the following pointers in mind:
Make sure your credit report is accurate. Before submitting your credit report, make it a point to double check if the figures and information reflected are correct.
Check for accounts that might be linked to your name by mistake or reflected delinquent balances that you have already settled.
In essence, ensure there are no errors in the report that might bring your credit score down or figures that will mislead potential creditors as to your true “creditworthiness.”
Prepare the necessary financial documents. Understandably, before any lender agrees to grant a loan, they have to make sure you would be able to pay your obligation.
In line with this, you will most likely be asked to present financial documents (income statements, balance sheets, a reconciliation of net worth, etc.) to prove your capability to pay.
Ensure that the financial statements you present should not be more than 90 days old. If you just started the business, you will most likely need to provide your balance sheet and income statement so make sure you have them prepared in advance.
Regardless if you use the money for improvement, expansion; or to get your venture off to a superb start; micro loans are a huge step in the right direction.