SME Financing: 7 Things To Consider First

Looking for the right SME financing option for your business? Consider these seven important things first before you submit that application.


For most small and medium-sized businesses (SMEs), seeking a funding model that’s right for the business is crucial. Not doing proper research and consideration will lead to risks such as growth impairment due to wrongly-chosen repayment terms or losing part of your business.  

Whether your business is in good shape or not, there’s always room for more funds. When your business is doing well, there may be growth that demands bigger space or new equipment. Meanwhile, huge sales could cause a shortage of cash flow as you wait for payments of invoice to be made.

On the other hand, if your business isn’t doing so great, receiving a cash injection could prolong the life of your company. This is especially true when you require new and updated equipment or when sales decrease dramatically; for example.

When deciding whether or not you’d like to get more funding, avoid rushing into it. Take your time and consider these seven things first before you submit that application:

1. Why do you need funding?

Figure out the reasons why you require more funding for your business. Is it to finance an expansion to increase your capacity in order fulfillment? Or is it because you need to hire more staff?

Is it for ramping up campaigns for customer acquisition? Maybe you need to redesign your website? Are you looking to purchase a bulk inventory? Is there a gap in your cash flow? Or perhaps you’re saddled with outstanding debt? Your financing needs will determine the right SME financing product for your business.

2. How is your business doing?

The state of your business is one of the major determinants when it comes to your funding qualification. For instance, most lenders would usually review:

  • How long you’ve been in business

You’ll have a better chance of obtaining a loan that’s affordable the longer you’ve been in business.

  • Your business revenue

 Prove to your lenders that your business generates profits and revenue.

  • Your business’ financial documents

  You need to be willing to share your business plan, bank statement, and business tax returns.

3. What is the actual loan amount that you can afford?

When looking to get funding, you must already have or know the actual amount required to reach your business goal or complete a business project. “As much as possible” isn’t considered a financing amount.

An online business loan calculator could help you see the right amount required and whether or not it’s affordable for you; based on the company’s cash flow and other lender requirements. 

4. Does your credit history look good?

To get a better financing term, you will need to have a good credit score. The favourable credit score depends on the lenders but mostly would prefer anything over 600. With a good credit score, you’ll have a better chance of getting longer repayment terms and a lower interest rate.

Your business credit score will also be meticulously reviewed, so utilise your business credit card wisely. Create accounts with legitimate vendors who often make reports to credit bureaus. Pay your bills on time.

5. Equity or debt financing: which is better for your business?

While there are many financing options out there, they all basically fall into one of these two main categories:

  • Debt financing 

This type means borrowing money. You’re not required to surrender the company’s ownership. However, these kinds of financing often come with inflexible timeframes when it comes to loan repayments with interest.

  • Equity financing 

This type requires you to sell part of your business to investors. There won’t be any debt to repay, however, your portion of income and/or control over the business would decrease.

Decide which is the best for your business based on what you are willing to surrender.

6. Do you qualify for the lender of your choice?

Once you’ve identified the right financing option for your business needs, it will be easier for you to choose a lender. 

Do your due diligence: compare reviews by other business owners, financing requirements, services, and other factors before making your final decision.

Also, remember to check your credit score and whether you meet the requirements set by the lender before you submit your application.

7. Have you prepared all the required documents?

Different lenders require different documents. However, they’ll at least require the basics, for example:

  • Legal business documents
  • Sales projection
  • Cash flow statement
  • Bank statement (business and personal)
  • Tax returns (business and personal)

Since handing out loans is a risk for all lenders, make sure you eliminate any cause for concern before you get in touch with any lender. In other words, get your business in order to convince your lender; which increases your chances of getting your loan approved.


It’s never too late to start exploring your financing options to move things forward. With plenty of financing options on the market, SME owners are able to explore their options before proceeding with caution, and eventually reach their business goals.


This article is for informational purposes only and should not be considered as advice, solicitation, offer, or recommendation to buy or sell any financial products or services. We highly encourage you to consult a licensed, trusted financial advisor before making any major money decision and avoid investing any sum of money that you cannot afford to lose. Remember to research every investment and exercise your due diligence beforehand.

SmartFunding is a licensed SME financing platform regulated by the Singapore Central Bank, Monetary Authority of Singapore (MAS) under the Singapore Securities & Futures Act. SmartFunding holds a Capital Markets Services License, which deals in securities (CMS100637-1). For more info, follow this page or visit  SmartFunding.

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