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(*Information Updated for 2020)
Ensuring that you have the right documents on hand before submission may increase your chances of obtaining the right business loan.
To make life easier for you, let us fill you in on the 5 main documents that are needed for a business loan application.
This article will help you understand why these documents are necessary and provide you with information on where you could obtain them.
Firstly, financiers would need your company’s business profile information from the Accounting and Corporate Regulatory Authority (ACRA) – a document that shows your business information, directors and shareholders, as well as your company’s paid-up capital.
With ACRA, financiers are able to identify the company’s directors, understand the type of business you are operating and ascertain who to bring in as a guarantor if needed.
Proceed to ACRA to download your business information.
Secondly, the financier would need the company directors’ Notice of Assessment (NOA) over the last 2 years to find out about their declared incomes.
You should note that the NOA here refers to the personal NOA of the directors, and not the company’s NOA.
When determining a borrower’s eligible business loan amount and tenor, financiers would refer to the director’s income in their personal NOA as one of the factors for consideration.
The NOA, combined with the CBS Report, gives financiers a sense of the total debt-to-income ratio. If the amount of unsecured debts exceed the director’s income, financiers are less inclined to offer a loan because the directors are perceived as being less capable to repay the loan.
Proceed to IRAS to download your personal NOA as shown below:
Thirdly, It is important to submit the Credit Bureau Singapore (CBS) report so that financiers are able to view your company directors’ repayment histories, existing loans and outstanding unsecured loan amounts.
In other words, it shows the borrower’s creditworthiness to the financier when he or she is applying for a loan.
The general credit ratings range from AA-HH (AA being the best, and HH the worst). There are also non-scored risk grades. These ratings are illustrated as below:
There are two ways to obtain your CBS Report. If you have applied for a credit card previously, you can get the CBS Report for free within 30 days of application or pay $6 to get it from CBS.
The image above illustrates the secured and unsecured amounts owed to the lender each calendar month while the image below shows your payment records.
Financiers would also require the latest 2 years of your company’s financial statements, a set of documents that records the financial activities of your company.
To determine your company’s historical performance, all financiers in Singapore would require a copy of the latest 2 years of profit and loss statements and balance sheets.
These documents can be obtained from your company’s auditors or the accounting software that your company uses.
If your company is less than 2 years old, show the financiers your first-year statements and let them know what you have done so far.
Apart from the financial statements, financiers would also need copies of the bank statements to look into your company’s day-to-day bank account activities.
The bank statements display the company’s revenues and expenses, as well as the balance in the account at the end of the month. One of the reasons why financiers require this is to gauge whether the company has sufficient funds in the account to repay the loan at the end of each month.
It is also indicates the cash flow of your company.
You can easily retrieve bank statements from the banks in charge of your corporate accounts.
An additional document that you may submit would be the Accounts Receivables Aging List. It lists down the names of your clients and the amounts that you are expected to receive from them for the products or services you have rendered.
The Accounts Receivables Aging List also shows your overall debts, how long these debts have been overdue, as well as your clients.
This document may be used for determining if you are eligible for invoice financing, another form of business loans.
Applying for business loans may be a feat for you, especially when you’re the pillar of your own business.
Follow the above requirements and save time by submitting the right documents appropriately.
In the event that your company has been in operation for less than 2 years, you can still submit your statements and documents for the past year to show the financiers what your company has achieved so far.
In the meantime, don’t give up! When there’s a will, there’s always a way!
Disclaimer: Lendingpot.sg may receive a small fee for each business account, card or credit facility opened with Aspire through our referral link.
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
Jennifer loves helping SMEs in their business growth journey. She is also an epicurean and has perpetual wanderlust. During the weekend, she weaves poems out of thin air and buries herself in books.