The Factors That a Sme Must Consider Before Requesting a Loan

The Factors That a Sme Must Consider Before Requesting a Loan

Every company, big or small, needs extra money in specific periods in its life cycle. One of the alternatives is to go to the banks to request new funds. There are many good reasons for a small or medium enterprise (SME) to request a business credit or request the extension of their credit line. Click here for payday loans like wonga.

However, before making the request it is good for the owner of the SME to evaluate the status of various aspects of their business since the financial institution will request documentation and proof that the company is working well, such as:

-Accounting and tax status

-Annual results

-Growth projections

-Market situation

-Business flows

Many times, SMEs request loans in situations of financial loss or over-indebtedness, and this reduces their chances of obtaining the loan. Visit this site for payday loans like wonga.

Here we explain the factors that an SME must take into account before asking for a loan:

Credit history

If the owner of the SME has a valid credit and pays it within the stipulated terms, his “financial life history” will play in his favor when he returns to a financial institution to request another loan.

However, if the payment of the debt is normally out of time, with delays, partially, breaching the conditions, etc., this damages the financial history.

Even if the person has been in the bank for years, or has asked for many credits and paid them all, it is the habit that counts.

Therefore, a bad credit history will pass the bill the next time you ask for a loan. Moving to a new financial institution or going to another executive who does not know about this background is a temporary solution that will only prolong the problem.

Current credit

SMEs that already have credit lines or credit cards for business use must evaluate the status of those funds available, the guarantees and associated backups, and the ability to pay before applying for a new loan.

Normally, the companies go to the bank when they have already taken the credit card or their line no longer gives, or they are late with the payments of their current debt.

If this is the case, the first thing the institution will do is evaluate the financial history (point 1) of the company and how many debts it has.

In case the bank evaluates considering the possibility of lending money again, it will request new guarantees that it will be able to pay the new loan. This includes equipment or other assets of the company. This point is very important: if the SME cannot comply with the guarantees of the new loan, it risks an embargo in case of non-payment.

Reparation of debt

It is a factor closely linked to points 1 and 2. Although it is “indebted to the neck”, before applying for the new loan, the SME must know the true balance sheet status of their company, the payment situation of their contracts and your budget

With this financial radiography, it will be possible to evaluate if the consolidation of the debt that is already in force is a feasible alternative.


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