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Welcome to the business owners guide to successful funding.

“Dear client, we regret to inform you that your funding application has been declined” – a message that many business owners received last year.

We helped many businesses realize their funding applications in the millions during 2019 and we had a great time helping those clients. We also had several clients that received the infamous notification above despite our efforts, so we conducted research to learn more and see how we can help business owners to avoid being declined unnecessarily. In some cases, we help clients to avoid applying and saving valuable time while we are also able to improve the success rate of clients that do qualify for funding. The burning question on every business owner’s mind is…..what are the lenders looking for to qualify a business for funding?

As a consulting service we help guide our clients towards an approved application and we have a direct line of communication with the lender to give you a voice and an opportunity to cross the tees and dot the I’s before submitting an application.

Here is what is important and what lenders focus on when considering an application:

Credit record
Any credit application is subject to a credit check. The lender uses this to assess risk and have a better understanding of your financial habits. Should a business owner have an adverse listing with the credit bureau, this could negatively impact on the application outcome however it is not solely based on the check.
Credit checks will detail whether the applicant is a good or slow payer, has any judgements or disputes etc. It is best to know your credit score and other information prior to an application as you may be asked for more information.

Business registration
A business has to be registered in order to be considered for the application unless you are operating as a sole proprietor in which case a vat registration is compulsory. This also ensures that the lenders are working with established businesses and it removes risk from the transaction.

Minimum annual turnover
The minimum annual turnover required is at least R1000 000 per annum which is roughly R85 000 per month. This will exclude any income into the business account that is not related for example renting of parts of the business property (unless the business industry is property related) or leasing out vehicles (unless it is a rental or asset managing business).

Affordability
Being able to afford a loan is imperative and it is gauged based on the current cash flow of the business instead of future projections based on funding.
The business must have sufficient cash flow to furnish the loan repayments over the 6 – 12-month repayment period. For example if John has a logistics business and he turns over R600k per annum he would not be able to apply for a R600k loan as he would not be able to fulfill all his financial commitments over and above the loan repayment amount.
As much as we help clients with access to funding, we also protect clients from becoming over indebted with business funding at the core of the problem.

Trade history
Lenders look for businesses with a good track record and therefore require a minimum trade history of 36 months. This ensures that the business is established and has an active cash flow and client base. Any business that takes on a name change would have to provide at least 12 months trade history for the newly registered business.

Up to date VAT
When an application reaches the lender an analyst will commence the processing by analyzing the bank statements requested. Part of the documentation that is requested is a SARS statement of account once the bank statements make the cut. If a Vat account is not up to date, the lender may decline the application at their discretion.

Correctly formatted statements
Funding applications require a 12-month bank statement that will detail the transaction history, and this can be a lot of information, especially if a business transacts in high volumes. Lenders have sophisticated software that will convert the information into their system, but it requires the documents in a certain format in order to perform the task.
The pdf format that is emailed to business owners from the bank on a monthly basis is in the correct format as well as the pdf versions downloadable from internet banking. Scanned copies are not recognized by the software and halt the processing until the correct format has been provided.

Availability
It’s a tough job as a business owner with time being in demand from the get-go up to day-end. An analyst will only require a short period of time on a call to discuss details, gather more information and advice on the next step. Taking a call from an analyst is pivotal to the application proceeding.

Because the type of funding is unsecured, the transaction has a great degree of risk for the lender and this is the reason for the checks and policies. Each application is processed on a case by case basis without the involvement of computer algorithms so you will be working with real people that are really interested in making funding possible for your business to grow!

Thank you for sharing your time with us. We would love to hear your feedback. You can connect with Vernon on the details below:

Email: vernon@jkmsloans.co.za

Contact number: 081 460 3351

Business funding information: https://jkmsloans.co.za/unsecured-business-loans/

Follow us on linkedin: https://www.linkedin.com/company/unsecured-business-loans-south-africa/