Are you searching for a short-term business loan in Singapore to finance a new venture or explore a new market opportunity?
Using business loans is a great option for Singaporean business owners looking to turn their ideas into profitable ventures. Small and medium-sized enterprises (SMEs) are the backbone of the Singaporean economy, accounting for 99% of all businesses in the country.
As such, SMEs need access to the funding they need to grow and thrive. One way for SMEs to secure funding is through business loans.
This article will discuss the different types of business loans available in Singapore, specifically focusing on small business loans and their terms.
What Are Small SME Business Loans?
Small business loans, or SME business loans, are financial products designed for small and medium-sized enterprises.
Banks, financial institutions, and government agencies offer SME business loans in Singapore. Small local businesses and start-ups are intended to benefit from easy access to capital through SME loans in Singapore.
They can be employed to pay for fixed assets like machinery or commercial equipment or to fund working capital.
Singaporean business owners can also take advantage of the government’s assistance program, which provides a range of financing options to support the growth of small companies in a cutthroat industry.
How Long Is A Small Business Loan Term?
The term of a small business loan can vary depending on the lender and the loan product. This answers the query, how long is a small business loan term.
A short-term loan in Singapore has a repayment period of less than 12 months. This loan is typically used to cover short-term expenses, such as inventory and payroll.
On the other hand, the repayment period for medium-term business loans ranges from one to five years.
These loans are typically used for equipment purchases and expansion projects. Long-term business loans, also known as term loans, have a repayment period of more than five years. These loans are typically used for real estate purchases and long-term expansion projects.
What Are The Business Loan Options In Singapore?
All types of loans made available to a company for commercial purposes fall under the general category of “business loans”.
There are several business loan options available in Singapore for SMEs. Knowing the different loan types available will help you choose the ones that are best for you. These include:
Working Capital Loan For SMEs
This SME financing in Singapore, supported by the government, enables small and medium-sized businesses (SMEs) from all sectors to obtain working capital for their operations.
The program is a component of the Enterprise Financing Scheme, and the government bears at least half of the loan’s risk. This loan now has a $500,000 borrowing cap in effect through March 2023.
The company must be a Singapore-registered SME, and Singaporeans or Permanent Residents must own at least 30% of the company to qualify for this loan. This loan is intended for SMEs with no more than 200 employees.
If your business has already repaid the full amount of this loan, you might want to consider getting a loan such as OCBC Business Term Loan, which has a maximum loan amount of $400,000 and a five-year repayment period.
This loan can be used to finance ongoing operations or company growth, assisting businesses in managing cost increases.
Machine And Equipment Loan
SMEs in Singapore are eligible to apply for these loans to help with the cost of buying new or used assets for upgrading and automating.
The EFS SME Fixed Assets arrangement, in which the government assumes 50% of the risk, makes these loans available.
Businesses that invest in environmentally friendly assets like trucks, electric forklifts, and buses may qualify for lower financing rates. However, to qualify for the loan, businesses must meet Enterprise Singapore’s requirements.
Along with loans to purchase energy-efficient equipment, SMEs in the food manufacturing, food services, and retail sectors can benefit from the Energy Efficiency Grant. It offers up to 70 per cent of funding support with a $30,000 cap per business.
Invoice Financing
By using their unpaid invoices as collateral, businesses can access cash flow. With this kind of loan, businesses can get up to 80% of the value of their unpaid invoices, giving them access to funds right away to pay bills and expand their operations.
Because it’s a short-term loan, businesses only have to pay interest on the amount they borrow, not the invoice amount. This enables businesses to optimise their financial resources and conserve cash flow.
Alternative Lending
In addition to traditional lending options, various other forms of financing are available for businesses in Singapore. These alternative lending options include utilising online platforms and Peer-to-peer (P2P) lending services.
The options provide businesses with an alternative funding source and are becoming increasingly popular among SMEs in Singapore.
These alternative lending options are known for their flexibility and convenience, often requiring less paperwork and having a faster approval process than traditional bank loans.
Comparing SME Loan
Selecting a loan that fits your company’s needs is the initial step in comparing SME loans. For instance, many SMEs need microloans to cover urgent expenses or make one-time purchases. Others need substantial funding or loans for working capital to grow their businesses or buy expensive assets like real estate or equipment.
To compare interest rates, fees, and loan terms, you must first determine the type of loan you require based on the intended use of the funding.
Therefore you need to factor in how long is a small business loan term. In the end, selecting the loan that will cost your company the least overall is crucial. To do this, pick a loan with low-interest rates, a reasonable tenor, and minimal fees.
Personal Loan Vs Business Loan
It is important to note that personal loans and business loans are two different products. Personal loans are intended for individuals and are typically used for personal expenses, such as home renovations or travel.
On the other hand, business loans are intended for businesses and are typically used for business costs, such as equipment purchases or expansion projects. It is important for SMEs to understand the difference between the two and to choose the loan product that best meets their needs.
How And Where To Apply
Once you’ve determined which loan program best meets your company’s needs, the next step is to gather the necessary documentation. These documents include:
- Financial and bank statements for the business
- Evidence of the personal income of the director
- IC copy for the director and the Notice of Assessment
- Ageing list of debtors
- Creditors GST Form 5
SMEs in Singapore can apply for business loans through online platforms, financial institutions, and government agencies.
Banks
A revolving loan is one of the business loan options offered by Singaporean banks. However, compared to authorised money lenders, the approval procedure takes longer.
Additionally, banks might demand that your company have a minimum of two to three years of operational history and 30% Singaporean or permanent resident ownership. You may be eligible for a loan for up to five years if your company satisfies these requirements.
Certified Money Lenders
Banks have strict requirements that your company might not be able to meet.
If you require a business loan quickly, you can go to a registered money lender in Singapore.
The good news is that because licensed money lenders are subject to Ministry of Law regulation, borrowing from them is risk-free.
As a result, they will give you the loan in accordance with the instructions provided. For instance, a licensed money lender should have a physical location where you can visit to sign the loan agreement.
SMEs need to compare the different loan products and business loan terms offered by different lenders to find the one that best meets their needs. SMEs should also be prepared to provide financial information and business plans when applying for a loan.
Choose The Best Business Loan For A Short Term
When you run a business, necessities will occasionally arise, and you might not always have the money to take care of them.
Business loans are a valuable tool for SMEs in Singapore looking to secure funding for growth and expansion.
SMEs have various options when applying for a business loan, including bank loans, government-assisted financing, and alternative lending options.
It is important for SMEs to choose the loan that best meets their needs and to be prepared with financial information and business plans when applying for a loan.
The best option if you’re looking for small business loans in Singapore is Lending Bee.
We offer business loans that have the lowest market interest rates, and you can choose the length of the loan based on your financial capacity.
Apply now to expand your business with a loan from us.
Frequently Asked Questions
What Is The Maximum Loan Amount I Can Apply For?
The maximum loan amount will vary depending on the lender and the loan product. SMEs should check with lenders for specific loan limits.
What Are The Eligibility Criteria For SME Loans In Singapore?
Eligibility criteria will vary depending on the lender. Still, generally, SMEs will need to have been in business for a certain period, have a good credit history, and have a solid business plan.
What Is The Loan Application Process Like?
The loan application process will vary depending on the lender, but SMEs generally need to provide financial information and a business plan. The lender will review the application and decide whether to approve the loan.
Is Collateral Required For SME Loans In Singapore?
Collateral may be required for certain loan products, such as term loans. SMEs should check with lender for specific collateral requirements.
How Long Does It Take To Get A Loan Approved?
Depending on the lender and the loan product, the loan approval process can take a few days to weeks.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.
