Securing a business loan is not as easy as falling off a log due to stringent approval criteria and additional terms and conditions, which are never a part of a personal loan approval. Things become more complicated for startups that have to prove their repayment ability by submitting business plans, which highlight the likelihood of propitious growth, due to a lack of trading history. A small business loan in Ireland is aimed at meeting small business expenses.   The minimum amount you can borrow is €5,000, while the maximum amount you can borrow is up to €25,000. However, it is worth noting that no lender is obligated to lend you more than your affordability. How much money you would be able to borrow heavily depends on two factors: your credit score and your income sources. In the case of a startup, a lender would like to evaluate projected profits to decide approval. 


Ways to secure a small business loan in Ireland 

If you are looking to secure a small business loan in Ireland, you should follow the following tips: 


Improve your credit score 

The first thing you need to do is to improve your credit score. If you are a startup, it becomes crucial that you manage to improve your credit score. As you do not have a traditional history, your lender would want you to have a stellar credit report. Subprime borrowers can qualify for these loans, but they will end up with high interest rates.  

Whether you are a startup or an established business, you must ensure that your credit score is up to scratch. In order to ameliorate your credit score, you can do the following: 

  • You should pay off your debts on time. Late payments are not appreciated. They are recorded on your credit file and remain there for two years. 
  • You should never carry a credit card balance. Make sure that you pay off the balance in one fell swoop every month. 
  • Keep an eye on the credit utilization ratio. This should not be more than 30%.  
  • If you do not have a credit history at all, you should build one through a credit builder loan. 
  • If you are a limited liability company, you will need a business credit score, too. It is enjoined that you pay your suppliers on time. 
  • Business credit cards and a line of credit should also be used carefully.

With a good credit score, you will be able to qualify for a small business loan easily at lower interest rates.  


Avoid having an outstanding debt 

At the time of taking out a small business loan, you should try to avoid having outstanding debt, whether it is a business loan or a personal loan. When you have outstanding dues to be paid off, this will influence the decision of a lender.  

Bear in mind that you are to pay interest on top of what you borrow. If you have other debts to pay off, your credibility will be called into question. It means you will be perceived as a risky borrower. Your lender will charge high interest rates and may restrict the borrowing amount.  

Small loans, such as payday loans and other similar loans, including business loans, that are discharged in one fell swoop, must not be reflected openly on your credit file at the time of taking out a business loan.  


Improve your debt-to-income ratio 

A debt-to-income ratio will not affect your credit score, but it speaks volumes about your repayment capacity. The ratio suggests how much debt you owe against your total income. Ideally, it should not be more than 30%. A high ratio suggests that you usually rely on debt and might find it hard to pay it off.  

You should reduce the debt-to-income ratio. Whether you owe business debt or personal debt, make sure that you pay them off in order to improve your overall financial condition.  


Compare interest rates and APRs 

There are various lenders providing small business loans in Ireland. They all might be charging different interest rates because each of them has different criteria to determine the risk involved in lending you money. Those who find you an extremely risky borrower will charge higher interest rates than those who think otherwise.  

It is always recommended that you compare interest rates and APRs. Both interest rates and APRs are different. The latter includes interest rates and associated fees and charges, and therefore, the deal should be chosen based on the APR.  

If APRs are low, you will end up paying less interest on your debt. There is a huge probability of getting a lower APR if your credit score is decent.  


Be cautious about unregistered lenders 

If you have no credit history at all or your credit rating is abysmal, you might tend to take out small business loans in Ireland with no credit checks. 

You should be wary of using these loans because no legitimate lender can approbate a business loan without a perusal of your credit history. Registered lenders could make a lending decision only after knowing your credit score, which is possible only after making hard inquiries.  

If you come across a lender who provides small business loans without any credit checks at all, you should immediately understand that it is a red flag. Such lenders cannot be registered lenders because they are loan sharks. They target subprime borrowers who are turned down elsewhere because of their abysmal credit rating.  

They charge exorbitant interest rates in order to make money. If you fail to repay the debt, you will plunge into an abyss of debt. You cannot refuse to pay your debt even though you have borrowed from a loan shark.  


The final word 

In order to secure a small business loan in Ireland, you should try to improve your credit rating, avoid borrowing money from unregistered lenders, reduce your debt-to-income ratio, and compare interest rates. All these steps will help you qualify for a business loan at lower interest rates.