How a loan can help you grow your business faster

Stronger Together. Life and Health Benefits for your employees.

Opening a small business is a dream come true, but it is also the start of many more challenges ahead. Beyond day-to-day work, a small business will eventually grow and will naturally have to take on loans and investments to do so.

The idea of a loan can be anxiety-inducing, but when done right, a loan can work to a small business owner’s advantage. Here’s what other small business owners have used their loans for:

To establish good credit

Most people immediately fear the shame that comes with the idea of debt, but an entrepreneurial mindset sees debt as a way to show banks and other similar establishments that one’s business is a trustworthy investment. Loans are always a way to develop good credit that allows one to take on bigger loans, better terms, and more flexibility to grow one’s business. While some risk is needed to take on these small loans, timing is everything to make this risk pay off. Like with personal savings, make sure you have 3-6 months of operating expenses as liquid before taking on a loan.

To give them room to innovate

While a sturdy organizational and operational infrastructure is a feature of excellent business, there has to be room for innovation. While ideally this comes with expansion, sometimes outside circumstances will require a business to change and evolve quickly. Taking on a loan buys owners time to be able to try out new channels for their business. This was prevalent during global lockdown in 2020, when new eateries and restaurants could not offer dine-in services. For some, loans helped them adapt to online channels to keep their businesses afloat until they were allowed to operate normally.

To get through emergency expenses

It isn’t enough to keep the business running. Part of running a business is preparing for the worst-case scenario. An emergency expense loan can help cover property and equipment repairs, operations during a seasonal slowdown, or even losses incurred in the event of an emergency or necessary restructuring.

Tip: You can lessen the fear and uncertainty with taking on a loan with the right insurance. Rescue Finance offers Group Credit Life Insurance with flexible and accommodating payment options. Avail of it today

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Credit not as great as you would like?

August 10, 2023 admin No Comments

What you need to know about credit reports in South Africa

What is a credit report?

A credit report is a detailed overview of your credit history compiled by a credit bureau. For you, it’s a good way to monitor your financial health to ensure you’re on the right track. It’s especially good to check ahead of applying for credit. For a credit lender, it is used to assess your risk profile and credit worthiness.

What is a credit bureau?

A credit bureau is a company that collects data based on your credit history and accounts. In South Africa, there are 4 main credit bureaus:

Experian
TransUnion
XDS (Xpert Decision Systems)
Compuscan (now owned by Experian)

At Meerkat, we give our clients access to a FREE credit report compiled by Experian. Experian is a trusted credit bureau who have been in existence for more than 125 years.

All credit bureaus should be registered with The National Credit Regulator (NCR). Here is a list of all registered credit bureaus. According to the website, there are a total of 53 credit bureaus registered in South Africa.

How do I check all my debts?

You can use a credit report to check all your accounts or debts. A credit report should also give you information concerning:

Your credit score
A record of your payment of those debts (your payment history)
Previous loan enquiries/ applications
Credit limits
Detailed overview of your accounts or debts (for example, credit cards, store/retail accounts, home loans etc)
If you have any accounts that have been handed over for collection and any judgements that are against you

Insight: Credit reports will reveal slightly different information based on the credit bureau you request the report from. The reason for this is that not all credit lenders report the same information to all consumer reporting agencies (CRAs). CRAs here are companies such as Experian and TransUnion.

Credit score explained according to Experian’s scoring system

Individuals with a very high score are seen as a high credit risk for credit lenders or banks. If you have a very high score, this will work against you and your loan application may be rejected.

500 – 594 very high

595 – 610 high

611 – 628 average

629 – 659 low

660 – 750 minimum

Below is an image of an example of what your credit score could look like in your credit report

What’s a good credit score in South Africa?

A good credit score will depend on the credit bureau you are requesting information from. Different lenders and banks usually request credit reports from different and multiple credit bureaus. According to Experian’s credit scoring system, a good credit score would be anything from the average score (611-628) to the minimum (660-750).

It’s definitely in your best interest to regularly check your credit record (credit report). This will help you give you an idea of your risk profile according to banks and credit lenders.