Equipment Financing Singapore
What is Equipment Financing?
Equipment financing Singapore is a business financing product that provides a business with capital to purchase equipment. In Singapore, most banks and financial institutions will provide you with up to 90% of the value of the equipment.
The equipment will serve as collateral for the equipment loan. So if you fail to repay the loan, the bank reserves the right to seize the purchased equipment, where they it will sell it off to repay the balance of the outstanding loan amount plus any additional costs. Essentially, equipment loans are secured business loans.
An equipment loan is usually a fast and convenient way of securing financing for most types of equipment. Equipment loan interest rates also tend to be lower than a business term loan because it is a secured loan.
In many industries like construction, engineering, or lumbering, companies cannot operate without the necessary equipment. Over time, equipment will need to be fixed, maintained or replaced, which can cost a lot of money and put a strain on your company’s cash flow, especially for specialized equipment that serve a niche industry.
However, with equipment financing, you will be able to get the equipment that your business needs and protect your company’s cashflow at the same time.
How to Qualify for Equipment Financing?
Equipment financing Singapore are relatively easy to obtain because they are collateralized.
Generally, banks will assess your company’s credibility for an equipment loan based on the following factors:
- Type of equipment being purchased
- Company revenues
- Outstanding loan commitments
- Director(s) credit rating
If the above factors check out, most banks and financial institutions are usually willing to finance up to 90% of the equipment value because the loan will be secured by the equipment.
If the equipment being purchased is essential to the business, value-retaining and resalable, most bank will be willing to work with you.
Most businesses are able to qualify for equipment financing in Singapore. The real question is HOW MUCH can you qualify for? That will be largely dependent on the type of equipment you want to purchase, cash flow of your business, current financial commitments, your company’s financial history and your personal credit rating.
If your personal credit rating is less than ideal, there is still a good chance of approval as an equipment loan is a secured loan. On top of that, you could also offer to include an additional guarantor to the loan.
The truth is that most lending institutions are mainly concerned with the equipment that is securing the loan and your company’s cash flow. If the equipment that you want to purchase is essential to the business, value-retaining and resalable, most financial institutions will be willing to work with you.
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- Loan Amount: Up to 90% of equipment value
- Repayment Period: Up to 5 years
- Interest Rate: 1.8 – 2.5% per annum
Required Documents for Application
To apply for equipment financing, here are the documents that you will need to prepare:
- NRIC or passport copy of company directors
- Income tax Notice of Assessment of directors for the last 2 years
- Company financial statements for the last 2 years
- Bank statements for the last 6 months
- ACRA Bizfile
- Quotation from vendor
- Fast access capital
- Low interest rate
- High chance of approval as equipment serves as collateral
- A lot of paperwork
- Equipment could become obsolete by the time loan is repaid
- Lending institutions can be stringent about the type of equipment they are willing to finance
How to Apply For Equipment Financing?
Equipment financing Singapore is relatively easy to apply for, depending on the financial institution that you are working with. Most financial institutions will request for the standard documents that will reflect the financial health of your business, existing credit exposure and your personal credit rating.
On on of that, you will also need to provide all the information about the equipment that you want to purchase and a quotation from the equipment vendor that reflects the equipment cost.
How Does Equipment Financing Work?
An equipment loan is extended to a business that needs to purchase equipment such as a crane, computers or any other machinery, but does not have sufficient cash flow to secure the purchase.
In most cases, an institutional lender or bank will extend an SME loan of up to 90% of the equipment value or purchase price (up to 100% in some cases) to front the cost purchasing the equipment. Your company will then repay the equipment loan, with interest, on a monthly basis over a period of up to 5 years.
Largely dependent on the financial health of your company, your personal credit rating, existing financial commitments of your business and cash flow projections, there are many banks and institutional lenders in Singapore that offer a wide variety of financing products for equipment.