Top reasons why strategic borrowing makes sense for your small business
SME owners often begin looking into loans only when they see a need. A strategic approach can help anticipate future financial needs and gain access to loans when needed. Here are some things to think about as you plan how to finance your business.
1. What are your potential capital requirements?
The first thing you should think about is probably why you are seeking a loan. Once you’ve identified the purpose of your loan, you’ll have a better idea of how much you need to borrow, what costs are absolutely necessary, and whether it’s worth taking the plunge. For example, financing inventory to meet a surge in demand might make sense if it means reaping substantial profits in the process.
2. How is your credit profile looking?
If you expect to actively seek financing for your business activities, the importance of a good credit rating cannot be understated. You’ll need to review your credit profiles on a regular basis – monthly, if necessary – so you’ll have a better understanding of where your profile could be improved. If your credit rating isn’t looking so great, it’s even more important to be proactive about improving your position to give you the best shot at a loan.
3. What are your options?
It’s always good to know what your financing options are – business opportunities could come any time, and you might need ready access to financing to seize them. Banks like DBS are often the go‐to for small businesses seeking financing, with options such as microloans, commercial property loans and more – but be sure to assess potential sources such as friends and family, investors and other lending platforms as well.
4. Do you have all your necessary information handy?
Getting familiar with the different kinds of information a potential lender might request will take a significant amount of stress out of the borrowing process. Be sure to have information on your company’s income and expenses at your fingertips, and get up to speed on financial details you don’t have a great handle on. It’s worth taking the time to speak with a financial advisor who can give you a quick primer on financial and accounting terms you aren’t too familiar with.
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