Applying for a business loan? Easy steps on how to get started!

If you're considering applying for a business loan in South Africa, these 9 steps will walk you through the process.

From determining how much you need to borrow to make an online loan application, learn from those who have been there and got it right!

9 Steps to business loan approval in South Africa

Step 1 – Identify the reason for your business loan application

Your loan might be required as capital to start up a prospective business, or your current business might just require financing for an upgrade of equipment. There is a multitude of reasons why a business might require a loan, and having a clear understanding of this will assist you throughout the steps that follow!

Step 2 – Be 100% certain of the amount you are applying for

Lenders will size you up based on the figure you’re requesting and if it doesn’t tie in financially with what the business requires, they will be hesitant to approve the amount you’ve indicated on the application, if at all. You don’t want to make a mistake so early on in the process, nor do you want to tread on the flip side by being too conservative. Have a plan and know how much you need to borrow and make sure it’s well thought through. Speaking of plans….

Step 3 – Have a business plan drawn up

If you’re starting up a business – P.S. Congratulations – you’re almost there, either way, starting up a business or applying for a loan for a current business, lenders will want to evaluate your financials. So, get these documents in order and safeguard yourself from any concerns or questions. This should ensure a seamless review process.

This is a vital part of your application, where the lender may have concerns and needs to see security in the affordability or your repayments. Cross your “t’s” and dot your “i’s” – you’ll be thankful you did.

Step 4 – Get your business registered with a CC

This is a pretty influential indicator to the lender that you’re serious and you are following all the correct steps to get your business up and running. Although you can no longer register a CC directly there are many "shelf companies" that you can still purchase. You also have the option of registering a private company, a sole proprietorship or a partnership. 

Step 5 - Research and find the right lending company

Ask around… friends, family, or even Google, when all else fails. Make sure you're comfortable with the rates and terms and conditions that your lender of choice is offering you, and that, as much as you need to meet their requirements, that they too, meet yours. Once you’ve compared loan options and are satisfied, it’s time to check if you qualify for a loan!

Step 6 – Check if you qualify 

Checking your credit score is a necessity for this process and the result of this credit check – i.e. your credit score, is paramount to the decision that will be taken in lending you and your business any money.

There's also a way to establish what your repayment figures will be via online loan repayment calculators. It is absolutely necessary that you calculate, understand and are comfortable with the monthly loan repayments.

A little sum you can work out on your own beforehand, as the theory goes is, your total income should be at least 1.25 times your total expenses, including your new repayment amount. If this checks out mathematically (please use a calculator!), then you know you are safe with the amount you are requesting.

Step 7 – Getting your documents together

Apart from the business plan already discussed, you will need to have the following in order to satisfy the lender’s requirements for a decision: Tax return documents, both personal and business related; financial statements of the business; bank statements, also both personal and business related, and lastly; any legal documents pertaining to the business.

Step 8 – Apply for a loan or meet with a specialist

Finally, you have ticked all the boxes on the “to do” sheet, you’re ready to set up an appointment with a loan officer! It’s the final preparation stage and it’s a good place to be in albeit a rather daunting one…Have your business plan, financials and research put together in a pack that screams “organized”, “serious” and “ready”!

You might think it strange that this would even be considered as a factor in the business loan approval process, but it certainly influences the selection pile when a loan manager goes to look at which loan appointments he’d like to schedule first.

Step 9 – Submit your application and step back and relax

You’ve had the meeting and you did everything you were guided to do from this list of steps. It went well, and now all that’s left to do is to wait! Patiently!

You can, of course, follow up as often as you want (within reason – don’t be desperate!) though. You can expect a response on the outcome of your business loan anytime from a week to a month depending on the lending company you are dealing with. Good luck!