Small Medium Enterprises are like the backbone of Singapore’s business industry as it contributes around 50% to the GDP of this extravagant sovereign island city-state. Talking about the business and not mentioning its basic infrastructural need will be a great offense, and the fund to set it up is the major one of them.
SME Business loan plays an essential to generate those funds known as the capital of the business. The initial expenses to start all sorts of business needs fund, and people who come up with a flourishing business idea opt for Singapore business loans.
Why Do You Need A Business Loan?
Needless to say how essential and helpful these business loans are for people who would love to set their own business as it provides the freedom to influence the market locally as well as globally and create a personal brand value there. SMEs are one of the growing and influential industries in Singapore. Their financial prospects are attractive as well as competitive.
So you can start an SME according to the market’s demand. And Singapore business loans will help you to initiate it. With a sorted business plan, you can approach the money lending organizations that will lend you money by analyzing the realistic prospectus of your business plan. So, you can turn your dream into reality to become the face of this SME business world.
Apart from the initial investment, you can also approach the organizations for further development of your existing SMEs as they have various suitable plans as per the requirement of the concerns. From purchasing new machinery to the renovation of your old warehouse, from remitting the debtors to the expansion of the business, business loans will help you to run the business errands smoothly and swiftly.
Types Of Business Loans In Singapore
The business loans in Singapore have multiple options to offer you, and you will eventually get one if you know what they are. As there are various loan terms and criteria, it will be easy for you to apply for them if you know the basic loan terms. Here are the overviews of some of the fundamental facts for a business loan in singapore.
1. Unsecured Term Loan For Business
Security matters whenever you are going to apply for business loans. Because it assures the money lenders about the remittance of the loan on time, else the lenders can forfeit the security. However, security is not the basis of unsecured term loans for business as lenders pass these loans for 3 to 5 years, depending on the credit score of the SMEs. These sorts of loans are easily accessible, and the disbursal is also very prompt. But businesses use the unsecured term loans for the smooth flow of their day-to-day operations. You can also refer to them as the unsecured form of working capital loans.
2. SME Working Capital Loan
The business loans in Singapore scheme launched by the government in 2016 and the Solidarity Budget 2020 has empowered every business to get the government’s assistance to avail of the working capital loan up to $1 million. According to the need and eligibility of the cash flow of the business, SMEs can apply for this SME loan for the enhancement of their working capital, and they have to pay the hundred percent of the loan amount within five years.
3. Temporary Bridging Loan
When the government enhanced the SME Working Capital Loan in the Solidarity Budget 2020, the government also launched the Temporary Bridging Loan there. The scheme allows each business entity to get access to the business loan up to a loan amount of $5 million, considering the recent pandemic effects on the economy. The loan amount is still up to offer by different financial institutions and financing facilities.
4. Trade Financing
This particular business loan has different business terms and criteria than other business loans. If we peep into the depth, then we can understand that global trade has got the swift movement of orders and payments because of this loan. Trade financing is quite a simple process as the importer pays the exporter before receiving the consignment of the goods. Trade finance payment instruments like a letter of credit, trust receipt, factoring are the trustworthy instruments that play a vital role in sending the goods or paying the bill on time.
5. Account Receivable Financing
This a form of trade financing widely popular as factoring that helps the businesses to retrieve the amount of their B2B account receivables. Here financial institutions in Singapore or the factors take the pending invoices over and enhance the working capital flow of SMEs by paying an advance amount of the 80% to 90% of the total invoices received by them.
6. Property Financing
If you want to buy or develop any property in Singapore for the business purpose, then property financing entities are ready to lend you money by mortgaging an existing property of yours. You can also refer to it as a secured loan.
7. Equipment Financing
Just like property financing, lenders lend money for the equipment or machinery enhancement or new addition of them. This is also a piece of financial equipment that allows the business owners to get a loan for the business through hire-purchasing or leasing.
8. SME Micro Loan
The young and active minds bring so many small-scale yet fruitful business ideas, but they keep striving for the fund of the start-ups. Well, this SME Loan is another initiation of the government to aid those fresh business plans with a financing fund up to $100K for the smooth operations of the small-scale SMEs.
Which Financial Institution Gives The Lowest Interest Rate?
The basic loan standards are easy to understand, but the toughest part is to find the lowest interest rate to remit the business loan. As there are various money lenders in Singapore like banks, non-banking financial institutions, private money lenders, etc. it is overwhelming to find the best and lowest interest rate providing financial institute. Hence the SMEs should take time to make a clear choice among the most favorable rates of interest. The permitted interest rates differ from the banks to the money lenders.
Banks are the most traditional institutes that provide business loans on the norms that the government has launched over the past years. However, the Solidarity Budget 2020 has induced an enormous influence on the picture of the financial arena with the Temporary Bridging Loan.
Here is a list of top banks that provide this loan to the SMEs on the following interest rate:
|Bank Name||Interest Rate|
|Hong Leong||2.5% p.a.|
|Standard Chartered||3-4% p.a.|
Apart from the Temporary Bridging Loan, banks like DBS, OCBC, Standard Chartered, Citibank, etc. provide other loans to the SMEs on the interest rate ranging from 7% to 13% p.a. as per our market analysis. The analysis also shows that the interest rate is higher if you apply for the unsecured loan.
Besides that, licensed moneylenders in Singapore provide business loans that usually can charge a 5% to 15% interest on business loans. However, the government proposed loan criteria are much cheaper, and you can take any of them according to your business’s needs.
Loanable Amount And Repayment Period
Till now, the picture is crystal clear of the business loans Singapore has. The various loan types and the lending authorities are always there to uplift the business of the SMEs. However, there are still some questions unanswered regarding the loanable amount and its repayment period. As you have come to know that banks and money lenders do not charge the same interest rate, so they also differ in terms of loanable amount and tenure.
When it comes to SME Working Capital Loan or the Temporary Bridging Loan, the accessible loan amount ranges up to $1 million or $5 million, respectively. But if you are approaching the Unsecured Term Loan, then the banks have a different scenario to show you. For instance, from the DBS or OCBC Bank, you can get an unsecured loan up to $500K on the interest rate of 10.88% with the maximum tenure of five years. However, by charging the same interest rate with the maximum tenure of 4 years, UOB can offer you an unsecured loan up to $350K.
It is a fact that secured loans are easily accessible, and this factor influences the money lenders immensely. So the loanable amount for an unsecured loan is undoubtedly lower than the banks (up to $250K), and the tenure is also plainly lower ( maximum 18 months) if you take an unsecured loan from the money lenders.
Eligibility And Requirements
The information regarding the SME business loan Singapore will guide you to approach the right finance sector regarding your business nature and requirement. However, your business should be eligible to get a loan. And the supporting documents should reflect the current and preceding financial status, including the cash flow and the credit score of the business.
Here are some elementary criteria to get an SME business loan in Singapore, but there can be some additional criteria also in terms of the loan amount, tenure, security, the loan procuring authority, etc.
- The business should be incorporated and registered in Singapore. The operations must be controlled from Singapore. Supportive documents are essential to provide the identity proof of the owners, partners, and directors of the business.
- 30% or above of the shareholders in the SME must be the Singaporeans.
- The minimum annual turnover of the SME should be $300K.
- It should maintain at least a $10K balance in its bank account. The bank or the loan provider also needs the latest bank statements for at least six months.
- The SME should have an operating history of a minimum of two years. It is so because the SME has to provide the financial statements and NOA of those two years to help the financial institution to analyze the financial strength of the business to remit a loan.
Alternative Financing Options For Businesses
Apart from the traditional banks and money lenders, there are various other options to get a business loan for your SME. Credit lines and personal loans are noteworthy among them. They are like the saviors to the sinking boat in the ocean, and they help the SMEs when other options do not work with their circumstances. Let me elaborate on them for your convenience.
1. Credit Line
The credit line is also known as the Lines of Credit (LOC) with it. Well, it is none other than a finance payment instrument that a borrower can use and encash whenever he or she wants. LOC comes with a credit limit, and an open line of credit allows an SME to borrow again after remitting the previous loan. One can either use a secured LOC or an unsecured LOC, but the second option comes with a higher rate of interest. It is the borrower’s choice and compatibility with the bank that decides whether he or she can use a revolving or a non-revolving LOC. The borrower is allowed to keep borrowing and repaying the money with both revolving and non-revolving LOC. But when the full payment of the loan is given, the non-revolving LOC account will be closed forever.
2. Personal Loan
Apart from the credit line, a personal loan is another option that can save the borrower during a crisis. A sudden cash crunch in the business does not always get a loan approved to handle the situation. However, being the proprietor or the partner of an SME, you can individually apply for a personal loan. For the eligibility of a personal loan, you must have a decent income statement. Because that assures the bank or the financing authority about the timely remittance of the loan.
Finding a business loan that is appropriate for your SME is quite overwhelming, as there are numerous options available with various criteria. So, it is always a wise decision to check and compare the plans online and seek the approval of the financial authority that you and your business can afford.
The whole research regarding the best SME business loan Singapore 2020 has come with a vital result that the start-ups get deprived when it comes to getting a loan from the traditional financial authorities.
However, the licensed moneylenders in the finance market like Fortune Credit Pte. Ltd. is more approachable as its eligibility criteria are simple and hassle-free. Your current financial statement of a steady and decent earning is enough to get you a personal or business loan.
Fortune Credit Pte. Ltd. can approve a loan for the SME that is just one year old and has an annual turnover of $60K. A low-interest rate and quick approval will make your business operations smooth and swift.