Business Loans Simplified and Requirements Outlined

posted in: Business Finance | 0

Many small businesses face the challenge of gathering capital to start and/or expand their businesses. Loans from the government can be a cost-effective means to get the funds you need, but there are important things to consider on the way – such as being prepared for a lot of paperwork, strict selection criteria, and a very long wait. Most loans for business come through the Department of Trade and Industry (DTI) and its associated organisations like the Small Enterprise Development Agency (SEDA). These loans tend to offer comparably lower interest rates to financial institutions, and have longer or more flexible repayment terms. Business loans are repayable. Businesses that receive a loan from the government are still required to repay the loan in the same way they would if receiving finance from a bank. The difference is that interest rates are much lower and repayment terms longer or more flexible.

Some requirement to qualify for a business loan from the dti are:

  • At least six months in operation
  • In need of start-up, expansion or growth capital
  • Have growth potential on a commercial scale
  • Able to improve social impact in the form of job creation and economic empowerment.
  • Able to provide as much as 10% of the amount they wish to borrow in the form of cash or equipment that can be used in the intended business.

The two types of business loans can be categorized as following:

Short-term Business Loans

Short-term loans are ideal for dealing with the unexpected. Whether that’s a cash flow issue before your busy season, a surprise project that calls for additional supplies or equipment, or an uptick in demand for a product, short-term loans can cover it all. Unlike some other loan products, there usually aren’t restrictions on how you can use the funds. Because the application process typically takes place all online, approval can happen quickly, in as little as one day. The shorter repayment term also means lenders are more willing to take a risk on a borrower who has weak credit, so even if your score is less-than-stellar you may still be eligible for this type of loan.

Long-term Business Loans

These are often used to finance a specific, long-term project or strategic initiative for a company that is in a growth phase. And because these loans rarely have restrictions on how the money is used, they’re ideal for meeting a variety of business needs—whether it’s developing a new product, rolling out a marketing campaign, or opening a second store location. Because of the longer term of the loan, this is a better fit for businesses that have been around for a while and have a strong financial history to point to. Lenders will typically look for borrowers that have been in business for three or more years (although technically you are only required to be in business for one year), with annual revenue in the six-figure range and a credit score of 600+.

At DTC we understand the complexities of the various funding agencies and the unique application criteria for each. We have assisted thousands of entrepreneurs through the application process to access funding for businesses, and we can assist you with the same. DTC has SA’s largest network of funders that includes venture capital companies, government funds, private equity funds, banks, angel investors, BEE grants & initiatives, Silicon Cape investment companies and crowd funders. We assisted businesses since 2006 in accessing over R4,8billion in funding and/or non-repayable grants and we offer national assistance.

Contact us for more information on Business Loans.