What are Business Loans? How to get?
Looking for a platform for business loans but cannot find a reliable one, right? There are various platforms available for business loans that offer long and short-term programs. First, you need to find the banks that are providing business loans then you have to see the online platforms. Come with me to explore the types of business loans, sources for business loans, and their application procedures.
Types of Business Loans in South Africa
- Unsecured loans
- Bank loans
- Startup loans
- Bridging finance
Unsecured Loans
It is a type of business loan that does not require any type of asset as security. For example, if you are facing a change to run your business due to a lack of cash flow and you do not have assets to show the bank or the loan provider, you can apply for unsecured loans. These loans are based on the creditworthiness of the business. If the financial health of your business is better, you can get an unsecured loan.
Features
- Interest Rate: The interest rate of unsecured loans is higher than the other types of loans.
- Repayment Terms: These loans are for short periods so one has to repay within a few years.
- Approval Speed: Unsecured loans are approved within a few working days.
Bank Loan
The bank loan category is further divided into subtypes in which overdrafts, fixed-term loans, and asset finance are included. There is a list of banks offering loans for business in which ABSA and Nedbank are on the top. If a person is unable to repay the amount of the loan to the bank, the interest rate increases or the bank takes complete custody of his asset.
Features
- Collateral Requirements: If a person applies for a business loan at a bank, he needs to show his assets in order to ensure the bank that he has the ability to repay the loan.
- Repayment Terms: The bank loans have longer repayment terms up to five years.
- Approval Speed: The bank loan approval speed is slow because one has to engage in a long process of paper work as well as the bank checks the authenticity of all the documents of the applicant.
Start-Up Loans
Start-up loan programs are offered by the government of South Africa, banks, and online platforms. These programs are designed for people who are about to initiate a new business but lack sufficient funds. The start-up loan programs allow one to avail up to R50,000.
Features
- Interest Rates: The start-up loan programs have high interest rates.
- Repay Terms: The start-up loan program’s repayment term is a long but fixed date.
- Business Plan: The start-up loan program is offered only to those who have a solid business plan.
Bridging Loans
These loan programs are designed for people who are facing cash flow problems and want to get an immediate loan. These are short-term loan programs in which one can get a sufficient amount of money to maintain the cash flow of his business. However, people who are building a new house, about to initiate a business, or investing in a corporation can get bridging loans.
Features
- Interest Rate: A bridging loan program has a high interest rate.
- Repayment Term: A bridging loan program has a short repayment term.
- Approval Speed: A bridging loan program is approved immediately.
Sources of Business Loans in South Africa
- Traditional Banks
- Online Landers
Traditional Banks
If you are looking for a reliable source then you should see the list of top banks which are offering business loans. These banks have low interest rates as well as their approval speed is faster than the other banks. Here is a list of banks for business loans:
Standard Bank
It provides long and short-term business loans for both small and large businesses. The Standard Bank loan approval speed is 1 to 2 working weeks depending upon the type of loan plan you choose. However, the repayment term is 12 to 60 months based on the creditworthiness of the business and the amount of the loan.
Eligibility Criteria
- An applicant must be at least 18 years old.
- An applicant must have a registered business.
- An applicant must have valid documents of the business.
- An applicant must have a business bank account.
- An applicant must have a clean loan history.
- An applicant must own an asset if applying for secured loans.
The business of the applicant must adhere to compliance and regulatory policies.
Application Process
- Step 1: Go to the official website of the Standard Bank or visit the nearest branch.
- Step 2: Determine which program suits your business and then click on Apply Now.
- Step 3: If you have an account then log in; otherwise, register your account.
- Step 4: Fill out the application form for a business loan.
- Step 5: Provide the documents required to prove the registration of the business.
- Step 6: Verify your details and then submit the application.
- Step 7: The bank loan dealing officer will contact you for further processing.
Nedbank
Another reliable source of loans is the NedBank that is offering various loan programs. People choose Nedbank business loan programs because it is suitable for small or large businesses. Here are the eligibility criteria and application process for the Nedbank business loan.
Eligibility Criteria
- An applicant must have a registered business.
- An applicant must own an asset if applying for a secured loan.
- An applicant must provide the details of his business.
- An applicant must have a business account.
- An applicant must have a valid ID document.
- An applicant must have a clean loan history.
Application Process
- Step 1: Go to the official website of the Nedbank or visit the nearest branch.
- Step 2: Click on the Apply button and then tap on the Online Apply.
- Step 3: After reading the details on the new page tap on the Let’s Get Started.
- Step 4: Fill out the application form and upload all the documents.
- Step 5: Submit a loan application after you enter the required amount of the loan and the repayment scheme.
- Step 6: You will receive a confirmation message that your applicant has been received and you will be informed shortly.
Online Lenders
BlueVine
One must have a registered business, a valid ID document, and a repayment capacity, plus ensure the finance company that how you will repay the amount of the loan. You can apply for the business loan online if you meet the eligibility criteria and get a R250,000 loan.
Application Process
- Go to the official website of the NedBank.
- Click on the Start Application.
- Provide all the details on the form and then continue to the next page.
- Verify your details and choose the business loan plan.
- Determine the repayment term and then submit the application.
Lulalend
Another reliable online source for business loans is the Lulalend which processes applications within a few hours and then you can get a loan of R100,000 to R500,000. However, the amount of the loan is determined after reviewing the business’s financial health and the flow of cash. Here is the application process for a Lulalend business loan:
Application Process
- Go to the official website of Lulalend.
- Tap on the Apply Now button then fill out the application form.
- Provide all the required details and then tap on the Continue button.
- Upload the required documents and then vary your details.
- Choose the business loan program and then determine the repayment term.
- Submit the application form and you will receive a confirmation message that your application has been received.
FAQs
What are the requirements to get a business loan in South Africa?
The requirements for the business loan depend upon the type of plan you are choosing. However, you need a valid ID document, a business plan or registered business, a clean loan history, and an active business plus an asset to assure the bank that you can repay the loan.
How important is a business loan?
A business loan is important for businesses that are facing challenges due to market shifts. A business loan helps the business to grow and stand against these challenges.
What is the interest on a business loan?
Normally, the interest rate on a business loan is 6.14% to 12.47%.
Can a foreigner get a business loan in South Africa?
Yes, a foreigner who is engaged in business activities in South Africa can get a business loan if he meets the eligibility criteria.
Final Thoughts
Business loans can boost your existing business and help you make progress faster compared to your competitors. Whether you are about to initiate a business or facing challenges in business, you can get a business loan from a bank or an online lender. However, you need to understand that the business loan interest rates are higher compared to the traditional loans as well as the term for repayment is fixed. You can apply for a business loan following the guidelines I have provided above.