Many small businesses already faced challenges before the pandemic, and COVID-19 made it worse. With the pandemic response and Circuit Breaker measures, SMEs are experiencing declining growth and rising uncertainty. That said, many are struggling to stay afloat.

Thankfully, the Singapore Government has offered special assistance loan packages – such as Working Capital Loan and Temporary Bridging Loan Program, to help businesses with their finances. Additionally, SMEs can also seek assistance from local banks and financial institutions.

So what are your loan options? Read on to find out the different business loan options and the best SME loan in Singapore.

What are the Business Loan Options in Singapore?

A business loan is a type of loan offered to companies and organizations for business purposes. There are different types of business loans. Some loan packages can be used for whatever your business may need. However, there are also more specific business loan options – such as property loans and start-up loans.

To give you an idea of what business loan options are available in Singapore, here are some of the most common types.

Standard Business Loan

A standard business loan is an unsecured loan. This means it doesn’t need physical collateral, like property or equipment. This type of loan is one of the most popular among SMEs.

Why? Because it’s very flexible. It can be used to fund any of the following:

  • Inventory purchases
  • Payroll
  • Business expansion plans

All major banks including DBS, UOB, and OCBC off standard business loans. However, they have certain requirements which may include:

  • Number of years your business is in operation
  • How much revenue your business makes in a year
  • Some banks may also take into account the guarantors’ personal credit records

Lastly, the loan amount, repayment term, repayment schedule, and charges may vary across different institutions. So it’s important to know your options. Choose one that is affordable to you while solving your business financing needs.

SME Working Capital Loan

This is one of the special types of business loans offered by the Singapore Government under the Solidarity Budget. SME Working Capital Loan aims to help SMEs cope with the effects of COVID-19.

This loan option is offered to local SMEs with a maximum of 200 employees. They can seek financing up to $1 million which will be repaid within 1 to 5 years.

Who can avail of the SME Working Capital Loan?

  • Singapore-registered SME
  • At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore
  • Maximum group revenue of $100 million or 200 employees
  • Maximum borrower group cap of $500 million

Temporary Bridging Loan

The Temporary Bridging Loan is another government-supported business financing scheme. It helps SMEs tide the challenges brought about by COVID-19.

This loan option is available to:

  • Singapore-registered companies
  • The business must be physically present in Singapore
  • Must be at least 30% locally owned

SMEs can loan up to $5 million and the repayment period is within 1 to 5 years. With this small business loan, the interest rates are capped at 5% per annum.

Start Up Business Loan

Also known as “first business loan”. The Startup Business Loan is an unsecured loan for young start-ups. It works similarly to a standard business loan, but it offers a smaller cap. For instance, some banks offer up to $100,000 financing.

So how can you get a startup business loan? You need to be operating in Singapore for 6 months to 2 years. Apart from that, you don’t need to have a strong financial history to qualify.

Best SME Loans in Singapore 2021

Government-Funded Business Loans

Last April 7, 2020, a series of month-long Circuit Break measures were implemented. And to help support local businesses and SMEs, the Singapore Government introduced government-backed financing schemes.

Government-Funded Business Loans Maximum Loan Amount Government Risk-Share Eligibility
SME Working Capital Loan Scheme $1 million 90% Singapore-registered SME

At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore

Temporary Bridging Loan Program $5 million 90% Singapore-registered companies

The business must be physically present in Singapore

Must be at least 30% locally owned

These loans were administered by Enterprise Singapore in collaboration with participating financial institutions. For these loans, the government sets the eligibility requirements. These are very attractive to SMEs for these reasons:

  • The government risk-share of up to 90%. This means less lender risk and increases the chance of approval.
  • The option to defer principal repayment for the first year of the loan. In doing so, it helps businesses manage their cash flow.
  • Additionally, for Temporary Bridging Loan borrowers, the interest rate is capped at 5% per year.

Bank Loans

Bank Maximum Loan Loan Tenure Interest Rate Eligibility

OcbcOCBC Business First

$100,000 Up to 4 years Per bank assessment Business must be registered and physically present in Singapore for 6 months to 2 years

At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore

At least 1 Singaporean or PR guarantor between 21 to 62 years of age with a minimum annual income of $30,000.

Ocbc

OCBC Business Term Loan

$500,000 Up to 5 years N/A Business must be operating for 2 to 3 years.

At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore

standard chartered

Standard Chartered Business Installment Loan

$300,000 Up to 3 years Up to 11% per annum

Default fee of $100

Business must be operating for 36 months.

At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore

Minimum turnover of $750,000 per annum

uob

UOB SME Loan

$100,000 Up to 3 years Per bank assessment Business must be registered and physically present in Singapore for at least 1 year.

At least 30% owned locally, and more than 50% equity owned by individuals.

No more than 200 employees or annual turnover less than S$100 million

Maybank

Maybank Business Term Loan

$500,000 Up to 5 years Per bank assessment Business must be registered and physically present in Singapore for at least 1 year.

At least 30% owned locally, and more than 50% equity owned by individuals.

Minimum turnover of $300,000 per annum

Dbs

DBS Digital Business Loan

$200,000 Up to 5 years Per bank assessment Businesses must be registered and physically present in Singapore.

At least 30% owned by a Singapore Citizen or Permanent Resident of Singapore

Banks are more thorough when checking eligibility criteria and requirements and have longer processing time. That said, it may take some time for your funds to be disbursed.

As you can see from the table above, most banks in Singapore require at least 1 year of operational history. Plus, your business must be 30% owned locally.

They also offer a variety of other loan options so it’s best to do your research and compare your options. That said, taking a traditional banking loan is perfect for businesses that have stable annual sales.

Signing business contract

Loans from Online Moneylenders

Not qualified for the SME loans listed above? Don’t lose hope!

There are other financing schemes you can consider to support your business and keep it afloat. For one, you can consider taking a loan from online moneylenders.

To qualify for the SME loans offered by moneylenders, you must meet the following criteria:

  • The business must be registered in Singapore
  • It must be operational for at least 1 year
  • Minimum turnover of $60,000 per annum

Please refer to the table below:

Type of Loan Loan Amount Interest Rate Repayment Period Processing Fee Late Fee
Business Loan Up to $200,000 5% to 15% Up to 24 months (subject to the terms and conditions of the agreement) No processing fee Varies depending on the agreement

What are the interest rates for SME loans?

According to the regulation set by the Singapore Ministry of Law, interest rates charged by moneylenders are capped at 4% per month for all personal loans. But this cap does not apply to business loans in Singapore.

Moneylenders offer interest rates between 5% and 15%. They are required by law to explain clearly the terms and conditions of the loan. As a borrower, you need to understand the interest rates applied to your loan. Plus, other information including the tenure, repayment period, as well as fees and charges.

What should you consider before applying for a small business loan from a moneylender?

First, you need to make sure that you’re doing business with a licensed moneylender. To avoid loan scams and loan sharks, you must first verify the moneylender’s credibility. All licensed moneylenders are registered with Singapore’s Ministry of Law. You can view the complete list of licensed money lenders in Singapore here.

Next, you need to compare the loan packages offered by different lenders. Choose one that suits your budget as well as your repayment capability. Lastly, check reviews from Google Reviews and other credible review websites. Doing so will give you an idea of how they deal with their customers.

Best Equity Financing

Aside from taking business loans from banks and moneylenders, SMEs can also consider equity financing.

Equity financing refers to selling shares of a business to investors to raise funds. This is a good option if the business doesn’t have sufficient operating history. Or if they don’t qualify for loans from banks.

Here are two crowdfunding platforms you can consider:

FundedHere

FundedHere is a good platform for businesses that are less than a year old. SMEs can use it to fund their growth and raise up to $1,000,000 in as little as 35 days. Some of its key features are:

  • Equity and debt financing
  • Quick cash disbursement – as soon as 35 days
  • Option to upsize or accept 80% of the funding goal.
Feature Equity
Funding Amount $100,000 to $1,000,000
Eligible Companies Companies less than a year old (startups)
Fees 6% platform fee in cash and 2% fee on the total equity raised

With this option, you’ll have to pay a 6% platform fee as well as a 2% fee on the total equity raised.

Fundnel

Fundnel is another crowdfunding platform that is worth looking into. It is great for SMEs who need larger equity financing. Here are some of its key features:

  • $100 million+ total value of completed deals
  • Option to upsize if the campaign receives more than 100% funding
  • 7,000+ investor network
  • Financing within 3-4 months
  • 5% success fee

This platform charges a 5% success fee and allows SMEs to keep more than their initial target. However, Fudnel is very selective and only approves 10% of applicants. Plus, only 3% of applicants receive funding.

That said, this platform is better for larger and more mature startups. Relatively new businesses may have a hard time receiving funds from this platform. Fundnel does not list information regarding their eligibility requirements on their website.

Feature Equity
Pros No fixed tenure to repay the principal

No interest rates

Cons Dilution of shares

Here is a side-by-side quick comparison between FundedHere and Fundnel:

Features FundedHere FundNel
Loan Tenure N/A N/A
Loan Amount $1,000,000 N/A
Success Fee 8% 5%

Conclusion

There are different types of business loans available to SMEs in Singapore. In fact, the government also offers assistance to ensure that funding is available to smaller companies.

Aside from government-funded business loans, you can also take out an SME loan from banks. However, different banks charge different interest rates. Plus, they have strict eligibility criteria and requirements.

That said, you can also consider seeking financial assistance from licensed moneylenders, like Fortune Credit Pte. Ltd. They have less strict eligibility criteria, making the application process hassle-free.

Fortune Credit Pte. Ltd. can approve a small business loan for companies at least a year old. Additionally, they only require a $60,000 annual turnover to be eligible. Best of all, they offer a low interest rate from 5% as well as quick approval.