Whether you need to manage cash flow, purchase inventory, or cover unexpected expenses, knowing what you need for the application process is crucial to set you up for success.
Understand what you need finance for
Assess the amount of capital you require, the purpose of the loan, and how long you’ll need to repay it. Short-term financing typically spans from a few months to a year, making it ideal for immediate financial requirements.
Know what financing options are available to you
Common finance types include:
- Overdraft Facilities: Linked to your business bank account, allowing you to withdraw more money than is available.
- Trade Credit: Offered by suppliers, allowing you to buy now and pay later.
- Invoice Financing: Advances against unpaid invoices.
- Merchant Cash Advances: Based on future credit card sales. (Merchant Capital)
- Short-Term Loans: Lump sum loans to be repaid within a short period. (Bridgement or Lulalend)
Assess if you’re eligible to apply
Here are the common criteria that financiers look for when it comes to short-term finance:
- Business Age and Revenue: Most lenders prefer businesses that have been operational/trading for at least 6 months to a year, with a minimum monthly or annual revenue threshold.
- Credit Score: Both the business and owner’s personal credit scores are considered. A good credit score increases your chances of approval and favourable interest and repayment terms.
Required documentation
The documentation needed can vary by lender but typically includes:
- Business Registration Documents: Proof of business registration with the Companies and Intellectual Property Commission (CIPC).
- Financial Statements: Recent balance sheets, profit and loss statements, and cash flow statements.
- Bank Statements: Usually, the last 6 to 12 months of business bank statements.
- Tax Clearance Certificate: Proof that your business is compliant with tax obligations.
- Identification Documents: Copies of IDs or passports of the business owners.
- Proof of Address: Recent utility bills or lease agreements.
Tips for Success
- Maintain Good Financial Records: Accurate and up-to-date financial records can make the application process smoother.
- Improve Your Credit Score: Pay off debts and ensure timely bill payments to improve your credit score.
- Seek Professional Advice: Consulting with a financial advisor or accountant can help you prepare a stronger application.
Most lenders now have online application processes where eligibility criteria is assessed and documentation required can be submitted or viewed. Modern lenders are able to connect their application software to your accounting system (on your consent) and can view financial information without you having to provide financials and bank statements. This still requires your business to keep up to date with the bookkeeping and taxes, so you are ready for finance when the need arises.
Contact us today to get your books and taxes on track. We can also help you with applications as we’ve done for our clients.
Here are some links to financiers we work with
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