Starting a business can be a fast lane from rags to riches, however, it is not without risks. Anyone who plans to start a business who considers challenges such as competition within the industry, lack of workflow or infrastructure, incomplete team or resource. The most common challenge for business starters is none other than financial cash flow difficulties. It is not however without a solution for financial aid, which is taking a business loan. Here are a few key considerations for small businesses before applying for a business loan. Continue reading more down below!
Running a business is important, yet securing financial funds to start a business is an even more crucial step. For new business starters, understanding the importance of business loans and what to know about business loans will be beneficial when applying for a loan. Below are some important guides to business loans in Cambodia:
Understand the Business Loan Options Available
A business loan is a type of loan specially created to cater to financing businesses. This loan is not limited to just existing businesses but extends to new businesses as well. In Cambodia, SME loans are on the rise with more and more entrepreneurs needing financial aid to jumpstart their businesses. Nonetheless, there are also different types of business loans to consider. It is highly suggested that new business owners should take their time to research the type of business loans available and which type would benefit their business and financial needs most. Besides that, SME owners should be well aware of the interest rates for each type of loan from the banking institutions. In addition, it is important to have sufficient knowledge about the procedure to apply for the loan as well.
Assess Your Financial Position
The next step after understanding business loans is to also have an assessment financially. It is recommended for anyone with plans to start a business to have a financial assessment on personal finance and also business finance. With a good assessment of the financial flows, personally and for the business, not only will you be able to determine the amount to ask for a loan, but it will also be helpful for the bank to make a decision as well. For SMEs who are looking to take out business loans, it is suggested to have proper financial documentation as well as analysis. With a clear understanding of your financial needs and capabilities, taking out a business loan will be less risky.
Prepare a solid business plan
SMEs should be well prepared to provide a solid business plan explaining the potential of the business to convince for an approved loan. A solid, well-written plan increases a good chance of getting a loan approved by banking institutions. To help SMEs prepare a convincing, business plan highly likely to get approved for the applied business loan, here are a few SMEs should include in the business plan:
- Provide A Detailed Summary: offers a detailed summary of the information to be included in the business plan such as achievements, values, goals growth plans, etc
- Description of The Company Overview: make sure to include a reader-friendly company overview to allow a straightforward understanding of the creation of the company, challenges, and solutions the company looks to tackle. It is also recommended to provide statistics and key advantages the company holds.
- Overview Of the Prospect of The Company: a well-written business plan should have information on the products and services the companies offer. Moreover, the business plan should also include information for the marketing plan, sales plan, expected goal for the year onward, marketing analysis, and data on the current or expected sales.
Choose The Right Business Loan Provider
With many banking institutions providing business loans, SMEs need to choose the right financial provider or banking institution. In Cambodia, there are many credible banking providers that SMEs may consider. To help with how to choose the right loan provider, here is a checklist of what new business starters and SMEs should do:
- Have a background check on the banking institution
- Keep in mind to consider several loan providers
- Take note of the business loan types available from the banking institution
- Compare the interest rates and requirements needed to apply for the loan
- Review the minimum amount to request and the collateral needed to get the loan approved
- Inquire from other people's experience as well as from professionals
Be Prepared To Provide Documentation and Collateral
The most important step to applying for a loan is having proper and valid documents. Therefore, SMEs planning to take out the loan need to prepare this general documentation including:
- Maintain a good and healthy credit score
- Provide documents on healthy business cashflow to show eligibility for the loan
- Have verification documents ready such as identification proof, documents to show proof of business, and business and personal tax information,..
It is also important to check with the banking institutions you are interested in so you are well prepared with the other requirements needed to apply for the loan.
Business owners who are not afraid to take risks and have a well-thought-out plan usually are rewarded with great returns from their business endeavors. SMEs, looking for business loans, are recommended to consider all aspects of their financial needs as well as capabilities. In addition, SMEs should also consider having a safety net when taking out a business loan. To provide a guarantee for your business loan, reach out to CGCC for more information on the SME guarantee scheme most appropriate for you!
Check here to understand more about: Business Recovery Guarantee Scheme
