Tips for Fast Liquid Capital Loans and Quick Repayments, MSMEs Must Know!

For business actors, including MSMEs (micro, small and medium enterprises) the opportunity to get a capital loan is now more widely open. The government supports this, by encouraging various financial institutions to cooperate with each other.

Financial institutions such as banks and platforms financial technology or fintech, Many offer capital loans for MSME actors. This opportunity can be an opportunity for MSMEs to accelerate their business growth.

Even so, financial institutions are certainly not arbitrary in distributing their funds. There are certain criteria for MSME actors who want to get a capital loan. Thus, funds can be channeled in a targeted and efficient manner.

So, what are the criteria for MSME actors who can be said to be eligible to get a capital loan? Then, how do MSME actors process capital loans until they are profitable and pay off quickly? Here's the explanation.

Guidelines for MSME Capital Loans to be Approved

Gabriel Frans, CEO and Co-Founder of digital bookkeeping services CrediBook explained, things that need to be considered by MSME actors, in order to increase the opportunity for their capital loans to be approved by lenders.

“Each lending institution has certain criteria. MSME actors need to display a credible business profile through good business financial reports," said Gabriel.

In addition, Gabriel added, there are several other points that MSME actors can make, so that their proposed capital loan is approved and disbursed quickly. Including the following:

• Managing Business Licensing

First of all, MSME actors need to ensure that their business has legality. For example, a micro and small business license (IUMK) or other types of business licenses. Besides being important for applying for a loan, business licensing can also expand business potential.

“(Business licensing) can increase business credibility in collaborating with other parties and obtaining certification. Therefore, MSME actors need to immediately take care of business legality to develop a more competitive business,” said Gabriel.

In other words, business licensing can build public trust, as well as increase business competitiveness. In addition to taking care of licensing, MSME actors also need to complete all other required documents, as requested by the lender.

• Separate Personal and Business Finance

According to Gabriel, separating personal finances from business, shows the professionalism of business actors in managing or cash flow. Moreover, lenders will usually analyze the transaction and credit history of each prospective borrower.

“Having separate business and personal accounts is recommended. This will facilitate the loan application process. Tracing transaction and credit history directly focuses on business activities, without being mixed up with personal matters," he added.

Then, Gabriel also suggested that business income should not be used to buy personal needs. Alternatively, a portion of the business profits can be set aside for personal use.

“Then, separate personal and business financial records. That way, MSME players can monitor their business growth because their financial management is more organized,” explained Gabriel

• Neat Financial Recording

Another factor that makes applying for a fast liquid loan is having a neat business financial report. Financial statements can be used as supporting documents, which is a plus in the eyes of lenders.

“To have neat financial reports, MSME actors need to build the habit of recording their finances every day. To make it more practical, MSME actors can take advantage of digital bookkeeping,” suggested Gabriel.

Gabriel said the management of capital loans needs to be accompanied by a good fund allocation strategy, after the application is received. The goal is to make MSMEs more productive in increasing their business, so that current capital loans are paid off and paid off quickly.

How to Manage Loans for Profit and Pay Off Fast

Capital loans or debt are often considered taboo. However, capital loans actually bring benefits to businesses, if they are used for productive needs such as developing a business.

The advantage of borrowing capital for MSME actors is that they can increase production capacity, to pursue optimal income. In addition, it can encourage SMEs to continue to innovate in their business.

“Among them, such as being able to add product variations, carry out promotions, add human resources, and others. Then the additional capital will increase the potential of MSME actors to earn more profits," said Gabriel.

However, Gabriel suggested, MSME actors need to be wise in managing loans. The trick, can be started carefully in regulating the circulation of money, in order to meet loan repayments.

There is also another way to do this by doing the following:

• The Right Debt Time

SMEs are recommended to apply for loans when consumer demand increases, but capital is very limited. Capital loans can be allocated to meet the stock of merchandise.

In addition, MSME actors can also take advantage of it to have more capacity to continue to meet customer demands, increase turnover, and further improve their business.

• Determine the ideal amount of debt

Gabriel assessed that the ideal portion of capital loans for MSMEs should be no more than 30% of the total capital. The goal is to ensure that the business can continue to operate, even though there are loan installments.

“Therefore, before applying for a loan, MSME actors need to take into account their financial needs and capabilities. These include calculating business needs, daily expenses, and preparing emergency funds for businesses," said Gabriel.

• Debt to the Right Place

Furthermore, MSME actors must make sure to apply for a loan to the right place. The safest, MSME actors can apply for loans to financial institutions that are officially registered and protected by the Financial Services Authority (OJK).

“One of them can take advantage of loan assistance from the government such as the People's Business Credit (KUR). Because the application process is fairly fast and the interest charged is also light,” suggested Gabriel.

• Avoid Potential Bad Credit

In the middle of the installment period, borrowers often encounter problems, one of which is bad credit. Bad credit is a condition where the borrower struggles to the point of not being able to pay the debt. Starting from dismissals, delays and requests for an extension of the installment period.

Gabriel also explained things that can be done to avoid potential bad loans, including the following:

• Make sure the cost of the loan, including interest or profit sharing, is less than the potential additional income from the loan.

For example, an additional loan of 10 million rupiah can provide an additional income of 1 million rupiah, with a loan cost of 300 thousand rupiah (net profit of 700 thousand rupiah). That way, business actors can pay installments through additional income from the loan.

• Pay the loan on time.

The loan amount is usually given based on the lender's level of trust in the borrower. By always paying on time, MSME actors show that they are worthy of being trusted to get another loan in the future.

• Careful in managing cash flow.

Inaccurate money circulation can potentially lead to the inability to pay the loan on time. By regulating cash flow, MSME actors can avoid a lack of funds when they want to pay off maturing loans.

Those are a series of tips from Gabriel Frans, regarding capital loans for MSME actors. According to him, if managed properly, capital loans can be a driving force for the sustainability of MSMEs in the midst of a pandemic, so that they can be a solution for MSME actors.