5 Steps to Getting a Bank Loan for Entrepreneurs

Asian businesswoman getting a bank loan for entrepreneurs on her computer

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Are you an entrepreneur looking out for business loans or working capital loans? Whether you are planning to start a company, innovate new products at your firm, create work processes, or expand your business overseas, having access to substantial financing is crucial. In this article, we’ll show you how you can secure a bank loan for entrepreneurs.

How proper preparation before applying for a loan makes a huge difference

Capital is one of the core things that all businesses must have to run smoothly. Many of us have great ideas and when those are actually implemented, they can lead to the creation of business empires. However, the only obstacle that usually stands between our ideas and turning them into an actual business is the lack of capital.

Before we list out the steps to secure a bank loan for entrepreneurs, you need to first take a look at government grants for working capital loans or business loans that are available.

In Singapore, there are government assistance schemes such as the Enterprise Financing Scheme (EFS). These cover six key areas that will enable Singaporean enterprises to access financing more easily, no matter which stage of growth they’re at:

SME Working Capital Loan Used to finance daily operational cash flow needs. Maximum repayment period of five years.
SME Fixed Assets Loan Used to finance the investment of domestic and overseas fixed assets, including equipment and business premises. Maximum repayment period of 15 years.
Venture Debt Loan Used to finance the growth of innovative and high-growth enterprises using Venture Debt and Warrants. Maximum repayment period of five years.
Trade Loan Used to finance trade needs, including bank guarantees and billing of invoices. Maximum repayment period of one year.
Project Loan Used to finance the fulfillment of secured overseas projects, including land and machinery. Maximum repayment period of 15 years.
Mergers & Acquisitions Loan Used to finance the acquisition of target enterprises with the intent of internationalisation. Maximum repayment period of five years.

What steps do you need to take to secure the best loan for your business?

1. Have a proper business plan

A succinct and robust business plan is crucial to secure a bank loan for entrepreneurs such as yourself. You have to ensure that you consider all elements of running a business when crafting a business plan. These elements include resources for manpower and how much value you are bringing to the table in terms of potential revenue per year. Approval for your business loan hinges on these factors.

2. Calculate your monthly cash flow carefully

You need to include all the amounts needed in your business plan and full details on how you would spend the funds once your loan is approved. Do keep in mind that your loan’s interest rate will affect your monthly cash flow. Additionally, this will have an impact on your company’s operations.

Each loan’s effective interest rate (EIR) varies, but you can calculate it using this handy formula:
1 + (simple interest rate/number of compounding periods) ^ (number of compounding periods) – 1

You should also learn how to calculate your potential monthly instalment with this formula:
[P x R x (1+R)^N]/[(1+R)^N-1]

In the formula above, P refers to the principal amount, R is the monthly interest rate, and N would be the number of instalments.

You can also calculate the total interest that you need to pay across the entire duration of the loan using this formula:
(Monthly instalment x Number of monthly instalments) – loan amount

3. Work on cleaning up your credit report and credit score

Your credit score is a crucial factor that banks and–in some cases–licensed moneylenders look out for before approving your business loan application. You should first know your credit score and obtain a credit report to gauge your creditworthiness. Your credit score is used by financial institutions to determine the likelihood of you repaying your debt. The higher your credit score, the higher the loan amount that you may be eligible for. Additionally, you may enjoy loan terms that are more favourable as well.

4. Assess all your lending options

It’s best to keep your options open when it comes to enquiring about business loans and grants. Have a list of licensed moneylenders and banks that is constantly updated. Don’t be afraid to ask as many questions as you need to. After all, it’s a large sum of money that you’ll be borrowing for your business so the loan must fit your company’s needs.

5. Keep proper financial records of your company

You should store all your company’s financial records securely. What’s more, you might want to play it extra safe and create multiple backups. Creditworthiness is very important as this ensures that you can commit to paying back the loan in full and on time.

Also, it’s generally a good business practice to keep your company’s archives intact. Establish this while your firm is still growing and it’ll become a habit among everyone sooner rather than later.

Alternative options to obtain a business loan

If you’ve completed all of the steps above but are unable to obtain approval for your loan application from a bank, consider relying on licensed moneylenders instead as they have less stringent criteria to approve a loan. However, never seek out unlicensed moneylenders, no matter how tight your company’s cash flow might be at the moment.

Dio Credit is a reputable licensed moneylender that has been operating ever since 2013 and we offer a wide range of loans. Applying for a business loan from us takes just seconds, especially when you have the necessary supporting documents on hand. To submit your application, simply visit this page or head down to the company’s office at Ang Mo Kio.


About the Author
Hamizah Salikimen

A well-rounded media specialist, Hamizah is a storyteller, content strategist, and data enthusiast with a demonstrated history of working in various industries; including media, publishing, fintech, tech, and real estate.

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