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DURBAN – Taking the time to understand what banks are looking for when they approve a business credit card application or limit increase can help small businesses increase their chances of approval.
Valentine Jingura, Pricing Manager for FNB Business, said credit plays an important role in helping SMEs start, run, grow and sustain their businesses.
There are some common criteria that financial institutions and banks consider before granting a business credit card increase / limit:
Existing Bank Account – Often the first consideration for the applicant is to have an existing business bank account in good standing before a credit card can be offered.
Monthly payments – banks want to determine if the applicant will be able to meet the minimum monthly payments, if they use the entire amount allocated on the credit card.
Financial Documents – Newly started businesses that do not have adequate financial statements may be required to provide additional business information, such as cash flow projections and estimated monthly expenses. This allows the bank to make an informed decision, based on the information available.
Credit Behavior – Although there is no credit bureau for businesses in South Africa, lenders use all the information at their disposal to understand how the business manages its financial affairs and meets its obligations to them. creditors. A good record always works in favor of the company.
Additionally, as a sole proprietor, mismanagement of your personal financial affairs can impact the bank’s final decision. Part of the reason is that a sole proprietorship is not recognized as an independent legal entity and the owner is legally responsible for all debts of the business.
Directors associated with the business must also have good credit records.
Surety – depending on the legal structure of the business and its credit profile, directors of the business may be required to sign a surety for the payment of credit card debt – in case the business fails. would not meet its obligations. This is often part of banks’ risk mitigation processes.
“A business credit card is one of several unsecured credit products offered by banks to help businesses manage day-to-day operations, working capital and cash flow shortages. Before applying, make sure you choose the right form of credit for the business needs, ”Jingura concluded.
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