Business Loans

Tackling Challenges in Securing Business Property Loans

Lina Tay
December 26, 2023

In Singapore where property prices are high, alternative financing is often necessary to acquire property. However, the business loan rejection rates for companies in Singapore are significantly high at about 80%.

Several challenges stand in the way of a successful loan procurement for companies. Learning what these challenges are and how to overcome them can improve your chances of securing business property loans.

In this article, we’ll share some tips on tackling challenges in securing business property loans.

Why Should You Seek a Business Property Loan?

Many companies may not have enough cash in hand to afford a new property. In situations like these, a commercial property loan can be a valuable tool for businesses. It provides the necessary funds to purchase property and offers the flexibility to distribute the financial burden over an extended period.

With a loan, you can manage your cash flow and overhead costs better, rather than having to spend a large sum all at once. Loans offer options, such as different repayment packages, interest rates and loan tenure which you can choose depending on your financial goals and capabilities.

Common Challenges in Securing Business Property Loans

Securing a commercial loan can be a daunting process. To help you better navigate the application process, we are detailing some of the challenges you may face, and potential solutions to overcome them.

Challenge 1: Fulfilling Basic Loan Criteria

Lenders have basic requirements for business property loan applicants. The first step in a successful loan application process is to ensure that you meet these basic requirements. Although they may vary from one lender to another, lenders generally require a company to be:

  • Incorporated for at least 12 - 24 months
  • Have at least 30% of the business held by a Singaporean citizen or permanent resident (PR).

Unfortunately, there is no easy way out of these basic requirements. If your company is newly incorporated, you will need to wait until you reach the minimum operating period. Companies that require business loans within the first 12 to 24 months should consider alternative forms of financing, such as personal loans.

Similarly, your company will need either a PR or Singaporean citizen as a shareholder to begin the loan application process.

Challenge 2: Incomplete Financial Documents

The list of documents required by lenders for a commercial loan application can differ from one institution to another. In general, these documents will include the company’s proof of income (including income tax notice of assessment or NOA and bank statements), financial projections, cash flow reports, taxation documents and so on. You will also need to supply documents to prove that you are in the process of purchasing a commercial property.

Retrieving and providing documentation is an arduous process that requires effort and careful execution. Moreover, these documents may not paint a flattering picture of your operations. Since these documents are a necessity and will spell the difference between success and failure in your application, consulting an expert is usually the best course of action.

Challenge 3: Poor State of Finances

Most lenders will not expressly state the financial requirements you have to meet for a successful commercial property loan application. However, they generally require proof that your business is doing well or has shown signs of growth and recovery.

Ideally, your business to be profitable, or at least maintain a sustainable income over a period of time before your application. Additionally, your business should be free from financial litigation, legal claims or bankruptcy. Apart from your business income, the financial health of the business partners or directors will also play a part. In general, they should also be free from litigation and heavy debts, as well as maintain an ideal credit rating.

The presence of financial challenges, on the part of the business or its owners, will decrease the success rate of your loan application. One way to address this is to ensure that both the business and its owners pay debtors in a timely manner, improve their credit scores and have their financial statements in order before applying for a loan.

Challenge 4: Lack of Planning for the Commercial Property

Along with documents detailing your financial health as a business and the financial conditions of the business partners, lenders will also want details about the commercial property you are purchasing.

Some of the information required will be easy to provide, such as the property location, layout size and physical appearance.

Another aspect that may complicate or lengthen your loan application process is the submission of building plans. This covers any intended renovations, projected leasing values, estimated operating costs and potential returns. As the property will serve as collateral for your loan, lenders need to determine if it will remain viable and valuable.

To streamline the loan application process, consider preparing a comprehensive property plan in advance. This plan should include not only basic details like location and layout but also more complex elements such as estimated operating costs.

The Bottom Line on Securing Business Property Loans

Business property loans offer you a more flexible financial option when you are planning to expand your business assets. The challenges faced by each company when applying for this loan is unique to each corporation.

Lendingpot features as many as 45 lending partners with different loan terms. Reaching to more lenders and having the flexibility to choose the best loan offers will help you obtain financing that best fit your needs.

Another strategy is to seek the help of an experienced expert in the field. Through this, you’ll have your more complex questions answered and seek guidance so that you can make wiser financing decisions. Come and set an appointment with our experts and clarify any qualms you may have today.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.

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