What are the business loan options in Singapore? (2023)

If you own a business in Singapore and need financing for your business, there are various loan options available. From and including 2023, several public bodies will provide loans to small and medium-sized enterprises. These organizations tailor small business loans at competitive rates for companies in various stages: start-up or growth.

Whether you're an established business looking for an infusion of working capital or a new business exploring expansion opportunities, these specialist lenders have you covered! Through their advanced search tools, they help businesses reduce the hassle of paperwork, while ensuring that all parties involved can easily agree on fair terms offered by financial institutions in Singapore.

There are different types of business loans available in Singapore. Here are some of the most common:

1. Credit for working capital for small and medium enterprises (WCL): world championship leagueis a government-sponsored financing scheme in Singapore to help small and medium-sized enterprises (SMEs) obtain financing to meet their day-to-day operations and working capital needs. Risk sharing between participating financial institutions and Singapore companies (ESG) is between 50-70%. The scheme was launched by ESG and the Monetary Authority of Singapore (MAS) in 2016 and is valid until 31 December 2023. Under the scheme, eligible SMEs can apply for an unsecured working capital loan of up to S$500,000 for a loan term of up to five years . Interest and repayment terms are usually in the easy range of 4-8% per annum for 1 to 5 years.

2. Business credit (BTL):A business loan, also known as a business installment loan, is a form of financing in which the borrower receives a lump sum and repays it over a fixed period, usually from one to five years. The loan amount, interest and repayment period are determined in advance, and the borrower must repay the loan in installments, usually monthly. Financial institutions usually provide BTL and do not share risk with ESG. Beneficiaries are therefore generally better off compared to WCL, with interest and repayments on loans similar to WCL, 4-8% simple interest per annum, repayable over 1 to 5 years.

3. Mortgage financing:Mortgage financing is financing provided to individuals or businesses to purchase, refinance, or cash in with property as collateral. Mortgage financing is generally available for both residential and commercial properties, with a maximum loan-to-value (LTV) ratio of 75% for residential properties and up to 90% for commercial properties. Business owners can also use individuals/companies as borrowers to pay off their unencumbered (fully paid) assets to finance their business/personal needs. The term of the loan is from 5 to 30 years, and the interest rate is from 3-12% per year. In addition to the loan amount, borrowers may have to pay other costs associated with mortgage financing, such as legal fees, notarization and appraisal fees. Legal fees and appraisal costs range from S$1,800 to S$4,500 and S$200 to S$800, respectively, depending on the value and size of the property. In addition to typical banks, there are financial institutions that offer flexible loan structures and criteria to take advantage of their financing characteristics. For example, directors in bankruptcy, people with bad credit ratings, etc.

4. Invoice financing/factoring:Invoice financing and factoring is a form of financing where a company can obtain immediate cash flow by selling unpaid invoices at a discount to a lender or factoring company. The process of invoice financing involves companies selling outstanding invoices to a lender or factoring company that will pay them a percentage of the invoice value, usually between 70% and 90%. The lender will then collect payment from the customer on the invoice due date and deduct their fees before transferring the balance to the company. Invoice financing can be useful for businesses that have long payment terms and need immediate cash flow to pay bills or invest in their business. It is also suitable for businesses that are growing rapidly and need to manage cash flow efficiently. Rates and fees for invoice financing/factoring vary from 0.5% per month, depending on the circumstances of the borrower/debtor, the creditworthiness of the company, the currency in which the invoice is paid and the duration of the financing. In general, invoice financing can be an effective way for businesses to generate immediate cash flow from the sale of outstanding invoices. Apart from typical banks, there are financial institutions and factoring companies that provide such services.

5. Revolving kredit:A revolving line of credit is a form of financing that provides a company with permanent access to a pre-approved line of credit. This means that companies can borrow and repay funds as needed, up to the approved credit limit. Revolving credit facilities are useful for companies that need flexibility in cash flow management and short-term financial needs. For example, a company may use a revolving credit facility to purchase inventory, pay operating expenses, or pursue a business opportunity that requires immediate financing. A revolving credit line can be secured or unsecured, depending on the policy of the lender and the creditworthiness of the company. A secured revolving credit facility requires the company to post collateral, such as accounts receivable or inventory, time deposits, or even property, to secure the line of credit. Unsecured revolving loans do not require collateral, but may have higher interest rates and stricter loan-to-value criteria.

6. Rental/financing of equipment:Installment/equipment financing is a form of financing where a company can obtain funds to purchase or rent equipment for work. The equipment financing process involves a business obtaining funds from a lender to purchase the equipment it needs to operate. The equipment itself is often used as collateral for a loan. The loan is then repaid over a period of time, usually through fixed monthly installments. Equipment financing can be useful for companies that need to buy equipment but don't have enough money to do so. It can also be an advantage for companies that need to upgrade equipment to stay competitive or increase efficiency.

Government business loan support scheme

Getting a business loan in Singapore can help your business get off the ground and stabilize your business operations.

Major banks such as DBS, OCBC and UOB finance local companies. However, there are some limitations. These limits include the time frame in which the company operates and the amount of annual revenue.

To help small and medium enterprises (SMEs), the government scheme also provides up to300.000 S$Each lasts 1-5 years, depending on eligibility criteria, including a Singaporean/Permanent Resident (PR) with 30% ownership.

Businesses facing uncertainty due to the Covid-19 outbreak can opt for a temporary bridging loan, not limited to SMEs, with a repayment period of up to 5 years with restrictions1 million Singapore dollars.Startups requiring smaller amounts may prefer a seed loan, which usually caps its value at S$100,000 and requires a minimum of 6 months from establishment, rather than a good financial record. However, it is more feasible than conventional.

The Enterprise Finance Scheme (EFS) is a financing scheme launched by the Singapore government to help small and medium-sized enterprises (SMEs) obtain funding for their business needs. The program is managed by Enterprise Singapore, a government agency that supports the growth of local businesses.

The EFS aims to provide SMEs with easier access to finance in a number of areas, including working capital loans, trade finance, venture debt finance and equipment finance. The scheme aims to help SMEs obtain financing with more favorable terms, such as lower interest rates, longer repayment terms and lower collateral requirements.

Under the ESF, companies can apply for financing from participating financial institutions such as banks and finance companies. The government shares risks with financial institutions and encourages financial institutions to finance SMEs.

There are three types of ESF funding:

1. EFS-SME credit for trade funds:The facility provides SMEs with working capital loans of up to S$500,000 to support their day-to-day operations such as inventory management and cash management.

2. EFS trade loans:This financing provides trade finance to SMEs to support their import and export activities, such as financing pre- and post-shipment activities.

3. EFS loan insurance scheme:The facility provides up to S$50 million in SME loan insurance to help SMEs secure financing on more favorable terms.

Alternatives to banks and non-bank financing solutions for SMEs in Singapore

Most banks and non-bank financial institutions offer competitive interest rates on their business loans. However, it's important to remember that the interest rate you get can vary depending on several factors, such as the amount you borrow, your credit score, and how long you've been in business.

Also remember that some of these lenders may require collateral (such as property) or a guarantee from you/your business partner before disbursing the loan amount if they deem it necessary. In addition to traditional bank/non-bank financing options for SMEs in Singapore, public financing programs are also available, particularly the PACT scheme, which enables co-financing with partner banks. Companies can receive grants of up to S$200,000 from Enterprise Singapore for a period of 1 to 5 years!

To qualify for the program, companies must, among other things, be locally incorporated, at least 30 percent locally owned and have annual revenue not exceeding $100 million annually. Finally, certain welfare organizations offer tailored grants and subsidies for individuals facing hardship, so check that out too if applicable!

Singapore offers a range of business loan options to suit the needs of SMEs. From government-backed loans to private financing solutions, you'll find an option that fits your unique needs. ThinkSME offers exciting loan packages that include low interest rates and flexible repayment plans tailored to the needs of small business owners.

No matter what stage or size your business is, there are loan options available to make your startup and expansion more sustainable than ever! Start exploring the ThinkSME website today, our experienced consultants are ready to answer any questions you may have about getting a loan for your business.

Make sure you understand all the terms attached to your offer before it expires. This way, you get the full benefit of getting money, while knowing what the money is for. Knowing this, entrepreneurs in Singapore can rest easy when running their own business.

Small and medium-sized enterprises (SMEs) in Singapore have a range of financing options beyond traditional bank and non-bank financing solutions. Some of these alternatives include:

1. Peer-to-peer lending/crowdfunding:Peer-to-peer lending, also known as P2P lending, is an alternative form of financing that connects individual investors with borrowers through online platforms. With this type of loan, borrowers apply for loans on the platform, and investors themselves choose which loans they want to finance. The platform acts as an intermediary, facilitating loans and collecting payments from borrowers. Peer-to-peer loans can be an attractive alternative financing option for small and medium-sized enterprises (SMEs) that may not qualify for or seek loans from traditional banks. P2P lending platforms may have less stringent credit score and collateral requirements than traditional banks and may offer more flexible terms and lower interest rates. One of the main advantages of P2P lending is quick access to capital for SMEs. Borrowers can often receive funds within days of approval, compared to the longer processing times of traditional bank loans. P2P lending can also give SMEs more transparency and control over the loan process, as they can communicate directly with potential lenders and negotiate loan terms. However, P2P lending also has risks. Investors may face default risk if borrowers default on their loans, and SMEs may face higher interest and fees compared to traditional bank loans.

2. private lending:Private lending is a form of alternative financing where individuals or businesses borrow money directly from borrowers, bypassing traditional financial institutions such as banks. Private lenders can be individuals, groups of investors or companies that specialize in providing short-term loans or bridging businesses. Private loans can be an attractive option for small and medium-sized businesses (SMEs) that may not qualify for traditional bank loans due to their credit history, lack of collateral or other factors. Private lenders may be willing to lend money at higher interest rates than banks and may require less paperwork and documentation.

In general, SMEs in Singapore have a range of financing options beyond traditional banking and non-banking solutions. It is important for SMEs to explore their options and choose the financing solution that best suits their needs and goals. This way, you get the full benefit of getting money, while knowing what the money is for. Having this knowledge can give entrepreneurs in Singapore wisdom

h Run your own business carefree. Start exploring the ThinkSME website today, our experienced consultants made up of former bankers are ready to answer all your questions before securing financing for your business.