Get to know the Prequalification Stage in Business Funding

The prequalification stage in business funding plays an important role in the acceptance of loan applications. This process is carried out by banks or equity holders to determine the financial health of a company.

Apart from needing funds to start a business, other business activities, such as developing product or service innovations, expanding the area of business operations also require a lot of money. Getting financial assistance by applying for a loan is one way to answer this challenge. However, not all loan applications can be accepted by banks.

Main criteria for business loan prequalification

There are several main criteria that form the basis of pre-qualification for business funding loans, namely credit scores, company annual income, and how long the business has been in operation. These three criteria are a consideration for banks and decision makers, is it appropriate for a company to be given a loan as business funding assistance?

The first criterion of a business credit score is one of the determining factors for whether or not a business funding loan is accepted. The higher the score, the better chance you have of getting financial support. This is also in line with the second criterion, namely the company's annual income. The more income you have, the greater the chance of passing the prequalification stage. The third criterion is that the length of time the business has been operating is a sign that the company has a sustainable vision.

1. Credit score

One of the main criteria lenders look at when considering is a company's credit score. A high credit score indicates that the business is financially responsible and has a greater chance of being responsible for repaying the loan on time. Conversely, a low credit score indicates that a business may have difficulty paying back loans. This can indicate the presence of financial risk in the company.

2. Company revenue

The more income a business has, the more likely it is to be able to repay the loan. The lender wants to see if the business has a steady stream of income or not. If the business has a history of strong revenue growth, then the chances of being approved for a business funding loan are also greater.

3. Length of business operation

In addition to the two factors above, lenders also consider the length of time the business has been operating when considering a loan. Generally, the longer a business has been in operation, the more likely it is that it will be able to repay the loan.

Why? Businesses that have been in operation for a longer period of time generally have a stronger track record and tend to have a steady income stream. Even so, it is possible for start-up businesses that have only been running for a short time to get a loan. Of course, it needs to be supported by data that shows business potential. Loans can also be obtained by newly started businesses by providing collateral or collateral.

How to increase your chances of passing prequalification

What does prequalification mean for a business funding loan? In short, at this stage the lender has reviewed the business credit history and determined that your company is eligible for a loan. There are several things you can do to increase your chances of passing the business funding prequalification stage.

1. Know your credit score

As already mentioned, the value or credit score is a factor of consideration for lenders in determining the eligibility of a company. This figure gives lenders an idea of how well the company's financial management is.

In Indonesia, credit scores can be found by submitting a data request to the Financial Services Authority (OJK). Apply for credit score data in advance so that if something goes wrong, you still have time to properly prepare all the requirements.

2. Build good business credit

Still related to credit scores, business credit history also needs to be built properly. You can build good business credit by paying bills on time, maintaining an ideal credit utilization ratio, and using a business credit card for operating expenses.

3. Have a strong business plan

When applying for a business funding loan, lenders naturally want to see a solid business plan. The business plan must include a description and detail of business objectives including how the plan will be implemented, and how a funding loan can help you achieve these business goals.

4. Show proof of revenue and profit

Lenders also want to know the financial history of the business, including the amount of revenue and profit the company has generated. Be sure to have financial statements and tax returns from recent years to show to the lender. If the business is still relatively new, you can provide a projection of the company's future revenue growth.

5. Show collateral or collateral

Lenders often require collateral when approving a loan. Collateral is an asset that can be used to secure a loan, such as a building or equipment. If you default on the loan, the lender can seize the collateral to cover the losses according to the loan agreement.

6. Have a solid borrowing and repaying history

You also need to prepare a concrete history of loans and payments. If you have a personal loan or other credit, make sure you make your payments on time.

7. Choose the right lender

Not all lenders have the same requirements. Each lending institution has different products and assistance. When you want to apply for a loan, be sure to compare offers from several potential lenders to find the option that best suits your business needs and goals.

By preparing the seven steps or tips for the business funding prequalification stage described above, the chances of a loan being accepted are certainly greater. Being professional and responsible in the business decisions you make is certainly no less important than preparing for these requirements.