INDUSTRY TALK
Business finance application tips to consider Many factors go into whether or not funders approve a loan, and not all of these are within your control. Darlene Menzies of Finfind looks at the key factors.
W
hen reviewing loan
will consider funding an owner with a
projections and the overall economic
applications, one of the
judgement on their credit record.
forecast for the country – you have no
biggest deciding factors is the probability of the loan
being repaid. Funders or credit committees
control over these factors.
Amount and affordability The loan amount needed and whether or
do not know you personally,
not you can afford the repayments
so they have to rely upon historical data to build a risk profile. Only a couple of credit bureaux provide business credit records, and since these reports are not yet standardised, the personal credit check of directors carries
DID YOU KNOW?
Your personal credit record gives funders a good indication of
maximise the return on the money they
process. The amount you
lend. One of the ways they do this is to
need will be weighed
demand collateral against the loan.
against the financial history
Should you default on the repayments, the
of the business, its asset
lender has the right to use the collateral to
base, and profitability, and whether the lender considers you can afford the cost of the finance. This is where management accounts
play an important role. They show the lender how you manage your
whether or not you’re financially responsible.
business, whether its sustainable, how much
They will examine the accounts listed on
you have invested in the business and how
your record and your ability to manage
you manage the profits.
regular payments. Judgements and
Funders always look to minimise risk and
are also crucial in the approval
If you have a need to raise business funding, visit www.finfind.co.za and complete the questionnaire. Finfind will match your needs with the most appropriate products and will provide you with a summary of the fund and how to apply.
more weight.
Security or collateral
Your balance sheet shows the assets
Interest rates are closely linked to your risk profile, so improving your risk profile can result in a better interest rate recover the cost of the loan. The amount of collateral required against a loan
blacklisting are showstoppers and reveal a
owned by the company. It’s
depends on the type of loan and your risk
breach of credit contracts.
sometimes possible for
profile. Beware – if you are also asked to
assets to be used as
sign personal surety for the business loan,
Risk and payment reputation
security for a loan.
the funder can choose to recover the
If the credit record holds inaccurate
The type of asset, its
outstanding monies from you in your
information, contact the credit bureaux and
current book value
personal capacity.
provide updated information. Know your
and whether the
credit score and problem areas and put
funder believes it has
plans in place to address these to increase
a high resale value will
are less stringent in their demands for
the score. The credit record provides this
determine whether it can be
collateral than private lenders. Get to know
information, so it’s easy to fix.
used as surety.
the different types of finance products
You are entitled to one free credit report
Interest rates are closely linked to your
Research funders carefully as some government financing agencies
available for small businesses and see
per year, so make sure you access this
risk profile, so improving your risk profile can
which ones would work for your business
and check the information is correct. If you
result in a better interest rate. There is also
and risk profile. •
don’t have any accounts, funders cannot
a difference between fixed and variable
assess your risk profile. You may need to
interest rates. Many lenders will consider
ABOUT THE AUTHOR
apply for a credit card, but use it sparingly
a fixed repayment amount, which will not
and pay the minimum repayment on the
adjust should the prime rate change.
Darlene Menzies is the CEO and founder of the innovative fintech businesses, Finfind. In 2017, she was named by the World Economic Forum as one of the six Top Female Tech Breakthrough Entrepreneurs in Africa.
due date. This starts to build a history of responsible credit use. Judgements remain on your credit record
The cost of business loans varies considerably as it’s dependent on the type of finance required, as well as a
for a fixed period of time – determined by
number of economic variables, such as
the laws of a country – and few funders
the current prime interest rate, inflation
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| FEBRUARY 2020 | P C Review
