Business loan approval is contingent upon understanding the pivotal factors that lenders evaluate. Before embarking on securing funds for cash flow management, equipment investment, or business expansion, it’s essential to familiarize yourself with the prerequisites for loan approval.

Directors Personal Credit

One of the first things that lenders will look at when evaluating your loan application is your personal credit history. This includes any significant arrears on key accounts such as home loans, vehicle finance, and credit cards. Lenders will also check for any adverse listings, judgements, or debt review flags. If your personal credit history shows a high level of risk, it will impact your ability to secure a loan.

Healthy Bank Balance

Another key requirement for loan approval is a healthy bank balance. Lenders will evaluate your bank balance to assess your cash flow management skills. A consistent, healthy bank balance over a period is a good indicator that you are able to manage your finances effectively. On the other hand, if your bank balance is consistently low, it could be a red flag for lenders.

No Stacking

Lenders will also look at whether you have any additional funding facilities held with other short-term lenders. This is known as “stacking.” If you already have multiple loans or credit facilities, it could indicate that you are taking on too much debt and may struggle to make repayments. This could impact your ability to secure a loan.

Multiple Revenue Streams

Finally, lenders will consider the revenue streams of your business. A business with multiple revenue streams and a consistent turnover of over R85000 per month is more likely to be approved for a loan. This is because multiple revenue streams indicate that your business is diversified and less likely to be impacted by a single event or market trend.

In conclusion, if you’re considering a short-term business loan, it’s important to understand the requirements for approval. Lenders will evaluate your personal credit history, bank balance, stacking, and revenue streams to assess your level of risk. By understanding these requirements and preparing your application accordingly, you can increase your chances of securing the funding you need to grow your business.