Starting a Business? Here are the 5 steps in Applying for SME Loans

Written by
Marissa Saini
Last Modified on
December 19, 2023

In starting a new business, an entrepreneur needs more than just a business idea. Funds or capitals are needed to realize a business idea. Therefore, many entrepreneurs usually try to apply for business capital loans to institutions such as banks. Loans can also be in the form of unsecured loans or guarantees. But many entrepreneurs fail to get loans. So, let's go through the 5 tips for smart entrepreneurs when applying for loans.

1. Evaluate your BI Checking history

One of the considerations for banks to give you a loan is your BI (Bank Indonesia) checking history. If you previously borrowed funds from a bank, of course the bank would also examine the history of your debt/ installment payments. The lender usually checks whether your name is inside the BI blacklist. The bank also considers whether you are consistent in paying off your debts in the past. The lender also considers the number of loans you have.

Therefore, many business people actually do not need a loan, but they still apply for loans to banks, so that they have a good history for BI checking. The more often a person borrows and the better the payment history, banks are more likely to give the next loan and even in larger amounts. But, you need to make sure that you have repaid your previous loans because it is difficult for you to apply for a new loan when the previous ones are not fully paid.

If you never applied for a loan before, the bank will be more careful in surveying your financial condition and your business. This is especially true when you apply for a loan without collateral, then maybe the amount you can borrow is small. Therefore, evaluating the BI checking history needs to be done before applying for a business capital loan. If you want to start a business with another business partner, you can consider who has the best track record on BI checking.

2. Prepare your business plan carefully

After evaluating the BI checking, next thing is to prepare your business plan. You need to think about the details of the loan allocation. Think carefully about the main reasons you borrow. If you borrow for business expansion, expanding space, buying new equipments to lower production costs, or adding employees to grow your business, these are all good reasons to apply for a loan. However, if the reason for borrowing capital is only to cover operational costs that do not help to develop your business further, of course this is not ideal.

The capital lender will definitely ask about your need behind the loan. If you can answer by providing a good business plan, the lender is more likely to give you funds. You also need to explain how you plan to repay your debt.

3. Look for the best loan option

After finding out the business plan, you need to choose the best loan option. Make sure that you apply to more than one lenders. You can compare offers that the bank gives you. Some of the things you have to compare are the interest rates and the loan terms. Choose the one that suits your needs.

In addition to large banks, you can also look for options from loan cooperatives or government-owned rural credit banks. In addition, if you are looking for an unsecured loan, online loans are now available in the form of online credit cards that can disburse funds for you at any time. There is this product from Singapore which seeks to helo SMEs in Indonesia to grow rapidly through good financial solutions. This financial startup, called Aspire, offers very little interest even up to 0% if the loan can be returned in 60 days. Registration for these loans is very fast and easy, which can be done online. Maybe this product can be one of the best options for you to get a loan.

4. Meet the application requirements

After comparing loan products and finding the best option, the next step is to fulfill the application requirements. Try to fill the application as detailed as possible. Also, try to fulfill every requirement requested by the lending institution.

Usually, the requirements are divided into two, which are the general requirements and the special requirements. Here are the requirements which are usually requested:

General requirements

- Fill out the application form

- Photocopy of identity card (KTP, SIM, or passport)

- Photocopy of marriage certificate for those who are married

- Copy of family card

Additional special requirements for entrepreneurs

- Photocopy of savings account / checking account at any bank for the last 3-6 months in the last few months

- Other financial data, such as the balance sheet, income statement, daily sales and purchase records, and other accounting data

5. Prepare for the short interview process

After passing the first selection, the next step is the interview process. Prepare yourself and your business plan carefully for this interview. Make sure you are not nervous and answer all the questions truthfully. Here are some of the questions that are usually asked by the lender at such interview:

- Livelihood:

The lender will ask what business you are doing and where you get money from. Make sure you answer according to what you write in the application.

- Income:

Next, you will be asked about the monthly income. From this question, the bank evaluates whether your income is reasonable compared to the amount of the loan you are requesting. In addition, the bank is assessing your ability to pay debt installments.

- Expenditures:

You also have to explain your monthly expenses clearly to the lender, so the lender has a clear picture of your financial condition. It is good if the amount of your expenses can be lower than one third of your income.

- Debts and payables:

Finally, the bank will ask if you have accounts payable in other places, such as car, house or other bank loans. The amount of debt, ownership of a credit card, and how to pay all debts each month are certainly important factors in the assessment.

Those are the five steps to prepare a loan application to the bank or other financial institution. Make sure you have strong reasons before lending. Good luck!

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About the author
Marissa Saini
is a seasoned writer and an avid trendspotter across business finance, personal finance, travel and lifestyle industries. With writing history at SingSaver, INK, and ohmyhome, Marissa leverages her broad range of experiences to simplify finance and make readers financially savvy.
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