Since the start of the COVID-19 pandemic, Singapore has seen more job retrenchments and an increase in new enterprises throughout the recent years. The rapid rise in inflation has also contributed to projects and plans put temporarily on hold – particularly in the case for new business owners.
This phenomenon might pose more challenges for new business owners as they will need to think of ways to bring in more capital funds to start up their businesses.
To overcome this challenge, it would likely take additional time, persuasion, and social networking efforts to find a potential investor who might be willing to take a leap of faith.
Then again, new business owners will also need to take into account ‘unforeseen circumstances’ and the ‘rainy days’ including the additional costs that may be incurred, and continue to come up with suitable ways to sustain their businesses during such periods.
Business Loan in Singapore
There are many various channels or even public organisations that provide SME loans or start-up funding for potential business owners. However, getting a business loan from these banks or organisations usually come with more stringent criteria.
The likelihood of them funding a business have to be based on several facts that can help to support the financial stability of the business and its owners.
Introduction to Credit Bureau Singapore (CBS)
Established in 2002, Credit Bureau Singapore (CBS) is Singapore’s most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions.
The setting up of a consumer credit bureau in Singapore is a significant addition to enhance the Republic´s risk management capability.
Since 2002, the Banking Act has allowed CBS members to disclose and obtain credit-related information to mitigate consumer credit risk through information pooling from CBS.
The Monetary Authority of Singapore (MAS) provides the regulatory guidance and support to CBS to bolster the integrity and transparency of Singapore’s financial sector.
Credit Reputation for Business Owners
Before a loan is granted, banks or financial institutions will need to check on the financial stability of the original owner, or in this context, known as the borrower. These institutions – also known as lenders – will then be able to request for a credit report of the original borrower so that they can make the correct financial assessment before disbursing a loan.
Every individual who has applied for a credit facility in Singapore will have a credit report. The credit report is a summary of an individual’s personal credit facilities and his repayment behaviours across all retail banks and major financial institutions. It is a record of an individual’s credit history, personal details, information on credit accounts and even public records.
This credit report allows lenders to assess your credit health and creditworthiness through banking data contributed by Credit Bureau Singapore members. The report is inclusive of all credit facilities contributed by banks and major financial institutions such as Credit Cards, Personal Loan, Mortgage Loan and Car Loan.
The lenders will then be able to analyse the borrower’s credit health and assess his overall financial standing through his credit report. A borrower with a good credit score can help lenders to make more decisive and quicker lending decisions.
On the other hand, borrowers with poor credit score will be more unlikely to have their loan application approved as their credit report might suggest a higher probability of defaulting future payments. Some lenders might even conduct a credit check on the loan guarantor too.
Essentially, a loan guarantor will hold the same liability as the original borrower therefore doing a credit check on the loan guarantor can help lenders to further mitigate risk of potential default payments especially in cases whereby the original borrower is financially incapable to make future repayments.
Some lenders can be dependent on the credit report as one of the decision making tool before they grant a loan application. Hence, it is important for borrowers know their current financial standing and the early measures they can take to improve their credit score.
Key Things Lenders Look Out for in Your Credit Report
Non-Scored or Public records. Examples of a non-scored risk grade like HX are public records that can suggest that the individual has an ongoing record of bankruptcy proceedings or any law litigation cases, hence suggesting that this could be a potentially high risk borrower. This information will be retained in the credit report for 5 years from the date of discharge from bankruptcy.
Bureau Score. The Bureau Score is calculated from an algorithm based on information in your current available credit data and is a fluid number which may change from time to time in tandem with changes in your credit information. Lenders will assess the Risk Grade and Probability of Default to determine if you are a high-risk borrower.
Account Status History. Lenders will be able to use this information to assess your repayment behaviour for the past 12 months. This information is displayed on a rolling 12 months basis (with the most current cycle on the left) while closed accounts will have the last 12 months payment status history as at the date of closure displayed for 3 years.
In reference to sample credit report and explanation: https://www.creditbureau.com.sg/enhanced-consumer-credit-report.html
Start Building Your Credit Reputation Now
Be vigilant in managing all your credit facilities and understand the ripple effect that might come if your loan application is rejected by the lenders. This is exceptionally important for business owners who need the capital to start their funding.
Different lenders will have different risk appetites and they may not necessarily look out for the same indicators in the borrower’s credit report. Therefore, the best preventive measure is to always exercise good money management and make repayments on time.
Follow and like CBS Facebook page @creditbureausingapore for more useful content and tips to maintain a good credit score or visit the Credit Bureau Website at https://www.creditbureau.com.sg/ to purchase a copy of your credit report. Contact [email protected] for partnerships and collaborations.