Move over world, the entrepreneurial wave has swept over Cambodia and it is making moves. Over the last decade, Cambodia saw the mushrooming of micro-businesses and startups thanks to an increasing support from the entrepreneur community — startups like Soyo, Joonak Delivery, and Khmer 24 has made Cambodia a thriving entrepreneurial force to be reckoned with.

No matter where you are in your entrepreneurial journey — a budding entrepreneur just starting out, or an established entrepreneur looking for more capital to expand, a business loan may be that financial push you need to scale up and move your business forward.

The Nature of Business Loans in Cambodia

The Nature of Business Loans in Cambodia Before we share some good reasons to take a business loan, here are some general criterias of business loans available in Cambodia.

• Loan Amount: From $2,000 – >$2,000,000
• Loan Term: From 1 year – 8 years
• Interest Rate: From 1% per month and above, negotiable for higher loan amounts
• Payment Schedule: Repayment is usually flexible, unless stated otherwise
• Grace Period: Up to 12 months, negotiable for higher loan amounts
• Collateral Requirement: Required, requirement varies according to institution

What is a Business Loan?

Business loan is borrowed capital applicable for managing or growing businesses such as business expansion, renovation, inventory management, buying new equipment, managing cash flow or repaying due invoices.The amount of loan needs to be repaid with added interest. There are different types of business loans in Cambodia, including:

Overdraft

Short-term credit option with no fixed repayment schedule. Funds can be drawn on a need basis and interest is only charged on the drawn amount.

Term Loan

Short to medium-term financing solution for a specific reason like the purchase of capital goods or premises for business operations.

Microloan / Simple Loan

Small loans issued by financing institutions and starts as low as $2,000. Efficient credit solution for micro business owners with little to no collateral to get access to capital. It may sometimes be an unsecured loan, which means borrowers are only assessed based on their credit worthiness.

Growth Loan / Small Loan

Medium loan amount from $10,000 offered to small business who are looking to grow their business to the next level.

SME Loan / Medium to Large Loan

A funding tool for medium to large-scale businesses who are looking to expand and diversifying their current business. Higher capital amount from $50,000 onwards.

Business Loan Refinancing

A credit resource to manage expensive debt to lower monthly loan repayment or maybe receiving a term extension by seeking for financing from another credit institution.

Good Reasons to Take a Business Loan

Expanding your Business

One of the main reasons to consider taking a business loan is to invest in an expansion opportunity. If your business is growing steadily and you are getting more demand from your customers, then it is the right time to think about business expansion. Afterall, you should be thinking of ways to further monetise your business and start to improve profitability. Business expansion can be very costly and to meet the financial needs, the owner can avail a loan from banks or microfinance institutions.

Manage Inventory

Another good reason to take out a business loan is for a business to buy inventory. Inventory-dependent businesses need to keep an optimum inventory level to deliver the goods or services to the customers. To keep a business running smoothly, you will need to replenish your inventory continually. Some businesses earn their profit based on seasonality. For example, if you own a jewellery business — you are more likely to gain your highest profit during Valentine’s Day, mid-year sale, Christmas, etc. You can opt to apply for a short-term loan to stock up your inventory in advance and repay the loan after stronger profits during the peak seasons.

Buying Of Equipment

Most businesses require equipment to operate, especially if your business is heavily dependent on machinery. As a business owner, you should also consider the fact that all these equipments will have a depreciation expense attached to it, eventually becoming ineffective or outdated. New equipment is then necessary to keep the business running. In such a case, you may want to consider a business loan to fund the purchase of new equipment.

As an entrepreneur, going for a business loan can help you get the financing you need for an expansion, inventory management or to purchase equipment. Before you take the risk, be sure to assess the financial health of your business, thoroughly research on the financing options in the market and see if your returns will outweigh the sum of the repayment. Afterall, a loan should be beneficial to your business instead of adding more financial burden.