We would like to start with a case study of a business finance application to demonstrate why a business annual turnover affects the finance outcome.
Johns’ cashflow is low and he has projects lined up that need working capital to be completed. He decides his business needs a finance partner to fund the projects and he starts his online application with Premier Finance. On John’s application he applies for one million rand with a business turnover of two-to-five-million-rand (R2 000 000- R5 000 000).
However, after submitting his bank statements, he received a call from an analyst with an offer of only one hundred thousand rand (R100 000).
At first this may disappoint John but there are valid reasons on why his business did not qualify that we would like to discuss:
1. Unsecured business loans are short term loan facilities with a maximum repayment period of 12 months. If a business owner applies for finance up to 3 million rand for projects, this is the solution available. The business would need to be able to afford the repayment terms over 12 months to qualify for their finance needs.
2. The amount the business will qualify for is based on the business discretionary income. This is monthly income less expenses. Some businesses have high turnover but high expenses with not much left over to afford the loan repayments. Our financiers may not place a business in a worse financial position with a loan. They thus only grant loans to businesses that have discretionary income left every month to afford the loan repayments.
3. Creditworthiness of directors. The financiers will run credit checks on all active directors for unsecured finance. In most cases the finance application will be rejected if there are adverse listings. However, some businesses may be given an initial small loan for the minimum amount to start the relationship.
The successful outcome of your application depends on these factors:
1. If your business has the required turn over to repay the loan within 12 months
2. Your business has enough discretionary income to pay the monthly loan repayments
3. All tax payments are up to date
4. Directors have clear credit records with no adverse listings
Business finance solutions available for your business turnover
Now that you have a better understanding of how the offer is calculated. We would like to share a guideline for what funding you can apply for based on your annual turnover.
R0- R1 000 000
Due to high operational costs, it is difficult for businesses that turn over under one million rand to access funding. Majority of applications in this bracket are declined. This is due to no discretionary income available after all expenses are covered.
For businesses in this bracket, we recommend that your focus should be networking to grow your bottom line. You need a business growth strategy to increase your turnover.
R1000 000- R5 000 000
Businesses that turn over more than two million will be able to look at asset finance solutions as well.
R5 000 000+
Companies turning over from 5 million rand can apply for all the above solutions. You also have access to bespoke corporate finance solutions with our strong BEE network.
Our unsecured business loan partners offer a revolving credit facility to clients in good standing. Even if the initial offer you receive is not what you requested, it is still worthwhile to take the loan to start the relationship. If you settle your loan early or repay on time every month, they will consider granting you with further credit.
We are available to answer any questions that you may have regarding your finance needs. You can either email firstname.lastname@example.org or give us a call on 021 780 1046