Definitive guide for successful loan application

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The definitive guide to successful loan applications

The definitive guide to successful loan applications

  • 1 January 2022
  • By OCBC Business Banking
  • 5 mins read

Is your business growing at a rate where your current team simply cannot cope with the increased workload?

Are you looking to hire new staff and acquire new equipment to keep up with your business’s rising needs? Ultimately, all of this is going to require funding. One of the best options for getting the funding you need (without losing equity in your business) is to apply for a business loan from a reputable bank. Don’t worry if you are uncertain about the loan process or worried that your application might get rejected. Our guide below has tips to help you ensure that your loan application is successful.

Securing business financing can seem challenging, particularly if you are a startup as banks tend to be more cautious when lending to newer businesses. Analytics show that people who are newer to business have the greatest rate of default. Simply put, the newer you are in business, the more difficult it will be to get financing.

There are three factors that banks look for before making a loan offer to you or any business. These are called the three C’s of lending or borrowing. You must be prepared to demonstrate all three when you approach a bank for a loan.


First, banks will look for Collateral. Collateral is an asset that a lender accepts as security for a loan. If the borrower defaults on the loan payments, the lender can seize the collateral and sell it to recoup the losses. Collateral is something that the bank can sell for cash fairly quickly to repay itself in case you fail to repay the loan. Hence, ask yourself, “What assets can I put up as collateral for the loan?” Some businesses don’t have enough collateral to take out the full loan amount they need, while others may simply be unwilling to risk putting up bigger collateral in fear of losing it if they end up being unable to repay a large loan. Insufficient collateral is one of the major factors why many don’t get their loan applications approved.

Credit Rating

The second thing that banks look for is your current Credit Rating. In a nutshell, they’re looking for reassurance that you have access to enough money to pay your bills even if there are fluctuations to your business. This is why they may want to see 3 to 6 months’ of bank statements, to make sure you’ve got enough income to get through the highs and lows. Borrowers need to show a solid cash flow that is sufficient to repay the loan. Most banks will also prefer you to be in business for a year or more as businesses with a much more solid footing are likelier to produce more revenue than expenses in the long run.

Make sure to ask yourself, “What is my financial track record with regard to loans? What kind of character do I have in terms of honesty and dependability? Who knows me and will vouch for me?” It is vital that you keep your credit standing impeccable. One bad credit experience can put a black mark on your Credit Rating and undermine the quality of your character in the eyes of the bank.

Give some thought to how much money you have borrowed and repaid in the past and how good your credit history is today.


The third C that banks want to know is the amount of Capital you have, or how much of your own money you are willing to invest. This is often called hurting money. How much of your own hurting money are you willing to put into your business? Those who say, “Never invest your own money in your new business and always insist that the bank provides you with the money,” might not be entirely well-informed. Banks typically want to know that you have put your whole heart and every piece of investible income into the business before they will lend you their money. This is their way of measuring the level of dedication you have towards making your business successful and the level of confidence they are willing to place in you. In the final analysis, the individual banker must have confidence that you are the kind of person who’s going to succeed in the business before lending you money as you start to build.

Borrowing money from banks is a progressive series of financial transactions that develops over time. When you first attempt to borrow money, most banks will want five dollars’ worth of collateral, personal investments and other assets for every dollar they will lend you. They will also want personal guarantees from either you, your spouse or your children if your business should unfortunately go bankrupt. But don’t fret, because once a bank has several years of experience in dealing with you and has gotten to know and trust you better, its lending requirements will decline bit by bit.


Borrowing a loan may seem daunting at first, but with the knowledge you have now, backed with the right credentials, you can put your worries to rest. The above guide should give you valuable insight into the aspects and issues that you should consider and be prepared for when it comes to applying for and securing a loan that could advance your business and even change your life.

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The information provided herein is intended for general circulation and/or discussion purposes only. Before making any decision, please seek independent advice from professional advisors. No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake any obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein. Any reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.


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