How To Get The Best
SME Loan Singapore (2023)
What is SME Loan Singapore?
An SME loan Singapore is a small business loan for small-medium enterprises (SME).
The economy is driven by small-medium enterprises which make up around 99% of all companies in SG. As such, SME loans are offered by almost every bank and financial institution, and accounts for a major segment of the business financing market, where working capital is disbursed to companies through a variety of business loan products.
While the business loan criteria and requirements are similar between the various banks and financial instituitons, there are still differences that can affect an business loan approval greatly. SME loan interest rates also vary from bank to bank. Therefore, it can be a confusing and time-consuming process to compare and choose the best business loan for you.
But fret not — simply click on the “Get Funded Now” button to use our FREE assessment tool to find the best small business loan for you today!
SME Loan Options
1. Temporary Bridging Loan
To help businesses to tide through the Covid-19 pandemic. Get up to $3M in working capital. Repayment period of up to 5 years. Interest rates as low as 1.5% per annum.
2. SME Working Capital Loan
Get up to $300K in working capital. Repaymment period of up to 5 years. Interest rates as low as 2.5% per annum.
3. SME Micro Loan
For smaller and newer companies. Get up to $100K in working capital. Repayment period of up to 5 years. Interest rates as low as 2.5% per annum.
4. Trade Loan & Loan Insurance Scheme (LIS)
Trade credit insurance scheme for short term trade financing like inventory/stock financing.
Get Funded Today To Grow Your Business!
When Should I Apply for an SME Loan?
An irony of the global banking and financing system is that the banks and financial institutions will only lend money to those who have money. The hard truth is that the banks are in the business of making money and managing the risk on their balance sheets.
As counter-intuitive as it may seem, the best time to apply for an SME loan is when the cash flow of your business is strong. And the worst time to apply for a business loan is when you actually need it. The problem with most business owners is that they will only start to apply for bank loans when they realize that the company does not have sufficient cash flow, which often leads to a rejection.
Therefore, our advise is always to plan ahead. Apply early and get the working capital while cash flows are strong. If you are unable to lay out any concrete plans for the foreseeable future, it is still a good idea to have some additional funds at your disposal, especially if interest rates are low!
How Do I Qualify for SME Loan?
As the banks and financial institutions have developed and progressed with the continual integration of technology over the years, their systems and processes have also become faster and more efficient through automation.
Therefore, to properly qualify for the SME loans, all you have to do is to prepare your application to systematically meet all conditions and requirements.
Here are a few tips to help you qualify:
- Annual Revenue: Ensure that the yearly turnover of your company is at least S$150,000.
- Bank Balance: Maintain at least S$10,000 in your corporate bank account and do not let it fall below that amount.
- Net Profit: Company to turn a net profit. If not, numbers should show improvement over the last 2 years.
- Outstanding Liabilities: Reduce your company’s credit exposure as much as possible by paying off outstanding loans and other liabilities.
- Personal income of Director(s): It is mandatory for company Directors to provide personal guarantee for business loans. In order to qualify as a guarantor, a Director must have a yearly income of at least S$30,000.
- Credit History of Director(s): Maintain a healthy credit score of at least CC. Credit ratings range between AA – HH, with AA being the best score.
What You Get.
How Will Credit Score Affect My Application
Your SME loan application may be harmed if your personal credit rating is poor.
When you apply for an business loan, the appropriate institutions will normally check your personal credit history. As a result, your personal credit history will have an impact on your company’s business loan approval possibilities.
As a business owner, it’s vital to keep your personal credit score in good standing. Any blemishes on your personal credit will have a detrimental impact on your business loan applications, making obtaining any type of business funding very hard.
As a result, always be aware of the importance of protecting your personal credit rating by paying all of your personal credit cards, home loans, vehicle loans, and other loans on time. Pay off any past-due bills as soon as possible, and avoid overextending your personal credit at all costs.
How long is the SME loan application process?
The application process usually takes about 2 – 3 weeks.
However, you may have more back-and-forth discussion with the banker to get the financing application right if you are unfamiliar with the paperwork required and the application procedure.
If your loan application was approved, you’ll have to wait for another week for funds to be disbursed. Expect a turnaround time of 3 to 5 weeks from the moment you submit your application to the time you receive your funds.
Alternative financiers, such as P2P crowdsourcing platforms, are another potential option for people who cannot afford to wait because they often process applications faster, typically within one week. However, as compared to bank options, expect to pay a higher interest rate or costs.
Enterprise SG SME Loan Schemes
In 2016, SPRING launched a suite of SME loan schemes — SME Working Capital Loan and SME Micro Loan. Through these small business loan schemes, SPRING expected to create upwards of $2 billion in business financing over 3 years.
Under the scheme, registered companies could apply for unsecured business loans with participating banks and financial institutions. SPRING acted as part-guarantor to the loans, making the small business loans more accessible and ensuring that the SME loan interest rates were affordable for companies.
Due to the relatively small size of operations, small and medium enterprises (SMEs) often face difficulty in obtaining SME loans in SG. Even if they are able to, the approved amounts are often insufficient. SPRING aimed to mitigate the problem by co-sharing a significant portion of default-risk with the banks. In this way, the credit risk was floored for the participating banks, which enabled them to issue business loans at lower interest rates.
SPRING hoped that the various enterprise financing schemes would relieve short-term financial pressure, allowing businesses to grow and take advantage of new opportunities. The loan programs were especially important in light of the 2014 economic slump. Easier access to business financing would provide much needed support for SMEs.
Fast-forward to 1st of April 2018, International Enterprise SG and SPRING merged to form a single entity called Enterprise Singapore (ESG).
ESG was formed to carry on the combined work of both SPRING and International Enterprise SG — to be the one agency to champion enterprise growth and development.
As an embodiment of the government’s efforts to help enterprises stay nimble and competitive in an era of rapid change and technological advancements, ESG is always committed to helping companies build new capabilities, enhance innovations and internationalise to cover new markets.
Along with that, ESG has also partnered with many participating banks and financial institutions to launch a wide range of SME loan products at very affordable interest rates, where they co-share 50% of loan default risks in the event of company insolvency. This was done in an effort to create a more robust SME lending culture, and to make business loans more accessible to small-medium enterprises.
Here the SME financing schemes that you can explore with us:
Other SME Financing Options
It is often said that cash flow is the lifeblood of a company. If asked, most accomplished business owners will tell you that while revenue and profit margins are important, it is cash flow that can make or break a business. This is why the need for small business financing remains as an evergreen concern for most business owners.
While the need for small business funding has not changed over the years, the access and options that are now available to business owners are vastly different. Besides the banks and financial institutions that still provide the majority of business loans, the rise of financial technology (Fintech) is fast making its presence known as an alternative source of business financing.
Within the ranks of fintech start ups are the peer-to-peer lending and crowdfunding platforms that share a common goal of disrupting the lending space. Through the use of advanced technology that make the financing process seamless and much faster, these fintech companies are starting to make waves among the small and medium enterprises.
Other than the SME financing schemes launched by Enterprise SG, there are also many other corporate financing facilities that you can go for. Choosing the right financing product for your business is essential.
For instance, you do not want to be getting a short-term loan for a long-term project, or a trade facility when what you need is working capital for daily operations. Getting the wrong type of funding can be disastrous.
Here is a list of other business financing solutions that you can consider:
- Invoice Financing
- Trade Financing
- Business Overdraft Facility
Also known as Receivables Financing, Invoice Financing is a facility that allows you to sell your unpaid invoices at a discounted rate to a financier for cash upfront. There are 2 types of invoice factoring – disclosed and undisclosed.
Disclosed factoring involves the financier notifying your customer that they have taken ownership of your invoice, where your customer will be make payment directly to the financier. This is the preferred method of invoice factoring for most financiers as the process is straight forward and carries less risk.
Undisclosed factoring entails the debtor being unaware of the involvement of a third party financier, where the debtor will make payment to a joint account between you and the financier. In order for the lender to remain in the shadows, the joint account will bear your company’s name, but will be under the control of the financier. Interest rates for undisclosed factoring is usually higher than disclosed factoring as the lender bears more risk. As you would have guessed, the process for undisclosed factoring is also a lot slower.
With invoice financing, the financier buys over your invoice for up to 90% of its value. Your customer will make payment directly to the lender, where the lender charges an interest and returns the remainder to you. If your business involves extending credit terms to your customers, invoice financing could be an ideal financing facility for you, especially if your customers are big and reputable companies. During credit assessments, lenders will place a heavier emphasis on the quality of your debtor’s credit profile as it is your debtor that will be the one to be making payment ultimately.
Trade financing is the financing of international and domestic trade cycles through the use of various credit instruments. In SG, banks and financial institutions usually only offer import financing products. This is because the risk of export financing can be potentially higher than import financing.
Trade finance, in terms of import financing, is essentially a revolving credit line that your company can use to purchase goods for inventory and raw materials for your business. With a trade credit facility, the financier grants you with a credit line that you can draw down on and utilize to make purchases of raw material and inventory for your business. When a purchase order is issued by your supplier, the bank or financial institution will make a direct payment to your supplier on your behalf, where you will then have a term of 120 days to repay the bank.
A business overdraft facility (OD) is an unsecured line of credit that you can draw down on to utilize for expanding cash flow. Unlike the trade import financing facility, the business overdraft facility does not restrict how you can to use the additional funds. As a matter of fact, you can withdraw cash anytime you want and use it in anyway that you want.
A great feature of the overdraft facility is that you only need to pay for what you use. The pay-per-use feature provides you with flexibility to utilize the credit line only when you need to, without the need to pay a retainer fee. You will only have to pay an interest on the amount that you have drawn down. Similar to the trade financing facility, you will also have a period of 120 days to repay the amount that you have drawn down plus interest.
The overdraft facility for business can be a great solution for short-term cash flow utility, but should never be used as a long-term business financing solution. Interest accrued on an OD line will roll over and compound, which can be very costly over time.