Is your business struggling due to lack of capital, or do you want to expand it? You can apply for a business loan in Singapore to improve your cashflow and bring in more products.

You can get a business loan from a bank or a licensed money lender. The application process is straightforward if you have the relevant documents. However, a lender can grant or deny you the loan depending on its eligibility criteria.

This article will help you understand what is business term loan, different business loan options, the eligibility criteria, the application process, terms, and more.

What Is Business Term Loan?

Many refer to any loan given to a company for business purposes as a business term loan. However, you must know what is business term loan, as there are several types of business loans in Singapore.

Some lenders give loans for specific business needs such as property loans, and others for general business needs such as to expand a business.

Here are some common types of business term loans:

Business Loan

This is a standard loan type that you can source for your business. It is an unsecured loan, meaning you don’t need to provide collateral.

Depending on your financial capability, you choose a loan term of up to five years. You can apply for a business loan from licensed money lenders or banks in Singapore.

Your loan eligibility will depend on how long your business has been operating and its revenue.

Startup Business Loan

This type of loan is offered as a mini version of a regular business loan.

You can qualify for a business startup loan in Singapore easily. This is because lenders don’t require a strong financial history and years of operations – only a few months.

SME Working Capital Loan

It is a government-sponsored loan given to small and medium-sized enterprises (SMEs) that have a maximum of 200 employees.

The government works with banks to provide an SME loan of up to $1 million to each borrower. You should repay the loan within one to five years.

For your business to qualify for this loan type, it needs to be registered under SMEs in Singapore, and have at least 30% Singaporean or permanent resident (PR) ownership.

Business Loans Vs Personal Loans

How do business loans differ from personal loans? Here are some differences between the two which can help you decide which type of loan to borrow:

Loan Amount

You can borrow up to $5 million for a small business loan in Singapore. On the other hand, you can take out up to four times your monthly salary if you want a personal loan.

Loan Tenure

Business loans have a repayment period of up to five years, while a personal loan can take up to seven years.

Business Age Limit

When you approach a lender for a loan to further your business, you must have been in operations for at least six months. Some may even require your business to be operating for a minimum of two years.

For a personal loan, there isn’t a business age limit.

Documents Required

These are documents required to determine your creditworthiness. For small business loans, you need to provide business financial records, ACRA records, and other relevant documents.

Personal loans require salary records such as your annual income proof.

Loan Processing Time

It can take up to two weeks or more for your business loan application to go through. However, personal loans have a shorter approval process of about a few days.

Eligibility Criteria

Banks in Singapore have eligibility criteria that determine if you qualify for a business loan. Also, licensed money lenders like Lending Bee require your business to fulfil certain things before granting you a loan.

Here are some eligibility requirements that lenders use:

Business Operating Period

How long has your business been operating in Singapore? For your business to qualify for an SME loan in Singapore, it should be at least six months old. Other loans may require up to two years.

Business Ownership

The Ministry of Law requires businesses to have a certain percentage of ownership from Singaporeans or permanent residents to get a loan. The same applies to lenders.

Usually, your business must be at least 30% owned by Singapore citizens or permanent residents.

Number Of Employees

This eligibility criterion varies depending on the business loan Singapore you want to borrow. For example, if you take out a loan from Enterprise Singapore, you need to have 200 or fewer employees.

However, some lenders don’t have a minimum or maximum employee size.

Annual Income

Your annual business income requirement can vary from one lender to the other. Licensed money lenders require a lower sales income of at least $500,000 from businesses.

On the other hand, government-sponsored loans have a limit of not more than $100 million in annual income to acquire a business startup loan in Singapore.

How To Apply

Borrowing a business loan in Singapore is a good idea as long as you know what is business term loan.

However, before you approach a lender, it is crucial to understand why you want a business loan. For example, you may need it for emergencies or to expand your business.

Be sure to take out a loan amount you can manage to pay monthly. The right business loan can help grow your business and give you a healthy profit-and-loss statement.

Once you decide how much you need for your business, follow these steps to apply for the loan:

Apply Online

Visit your lender’s official website and find the Apply page. You will need to select the type of loan you want to apply for. You can also send your application through a lender’s mobile app with your Singpass.

Compile The Required Documents

Whether you are sourcing your business loan from a bank or a licensed money lender, you must provide the documents for loan approval.

You will provide your business track record if you want a standard business loan. These include your company’s financial statements, GST declaration, and bank statements. Banks may request for such documents from the last two years.

If you apply for a loan backed by the government, you will need to provide documentation that proves your company’s ownership. For example, for an SME loan, you should give ACRA records.

Lastly, a business startup loan requires fewer documents than any other business loan type.

Choose Your Loan Tenure And Amount

How long do you plan to take to repay your business bank loan, and how much do you intend to borrow? Choose a loan amount you are comfortable paying within your chosen loan tenure.

Loan Approval And Disbursement

Your lender will go through your documents and determine your creditworthiness depending on its eligibility criteria.

If it approves your application, you will be notified. If you borrowed from a licensed money lender, you have to visit its office to collect the money in person.

Fees And Terms

Before applying for a loan to boost your business, it is essential to understand the fees and terms to abide by. These terms and fees vary depending on the loan type and your lender.

For example, if you approach DBS for an SME Working Capital Loan, you can expect an interest rate of up to 7% and a maximum loan amount of up to $300,000.

For licensed money lenders in Singapore, the Ministry of Law does not allow them to charge an interest rate of more than 4% per month on loans.

If a borrower fails to pay back on time, a licensed money lender is not allowed to impose a late interest of more than 4% per month.

Why Your Business Loan Application May Be Rejected

When you apply for a business term loan, a lender has two options – to approve or deny your loan application. Your application can be rejected because of these reasons:

Duration Of Your Business Operation

Getting a business startup loan is tricky if you’re still in the process of setting it up. Your business needs to have been in operation for at least six months. A lender may ask you for the annual revenue proof to grant you a loan.

Poor Credit Score

Small business loan providers cannot grant you a loan if you have a poor credit score. For example, if you approach a bank for a loan with a bad rating, it will doubt your repayment capability. Therefore, your credit score impacts your chances of obtaining a business loan in Singapore.

Business Ownership

Your business should be present and registered in Singapore to get a government-backed loan. It also needs at least 30% ownership by Singapore citizens or permanent residents.

You will not get a loan if it does not meet this criterion.

A Business Loan Can Be A Good Boost

Now that you know what is business term loan, growing your business and maintaining a good cashflow is vital.

You can source different business loan types from a bank or a licensed money lender to take your business to the next level.

The application process is straightforward as you can do it online using your Singpass. You need to submit several documents such as your company’s financial records.

However, even if you provide the relevant documents, a lender can deny you a loan due to a poor credit score or if you don’t meet the 30% business ownership by Singaporeans or PRs.

If you are looking for a business loan in Singapore for your startup or SME, contact Lending Bee.

We are a trusted licensed money lender in Singapore that provides loans at cheaper interest rates and reasonable terms.

Contact us now or apply for your business loan online today.

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.