Business Loans For Startups

What is a Startup Business Loan Singapore?

Finding it hard to get a startup business loan for your startup venture?

We hear you… and we got you.

Singapore is a tough place for a startup to survive. Financial support for startups is scarce, and the cost of operating a business is high. Having said all that, sometimes you just gotta put on some grit and push through.

A start up business loan is a term loan meant specifically for startups that do not have much of a business history yet. Other than a few institutional lenders that are offering small business financing products, there aren’t many start up funding options in Singapore.

Recognizing this problem in the last few years, the Singapore government has made concerted efforts to launch a number of funding initiatives to support the rise of startup ventures in the country. Some of the start up SME loans and grants in the market include the SME Micro Loan, Start Up Business Loan for Medical Professionals, OCBC Business First Loan, Early-Stage Venture Funding, and the Capability Development Grant.

The table below shows all the start up business loan options that are available to startups in Singapore:

Startup Business Loan Interest Rate Max. Loan Amount Repayment Period
SME Micro Loan
3.2% - 5.5% p.a.
Up to 5 years
Business First Loan
3.2% - 5.5% p.a.
Up to 5 years
Temporary Bridging Loan
1.5% - 2.5% p.a.
$3 million
Up to 5 years
Venture Debt Loan
2.5% - 11% p.a.
$8 million
Up to 5 years
Medical Professionals
2.5% - 4.5% p.a.
Up to 5 years
Peronal Loan
6% - 9% p.a.
12x monthly income
Up to 5 years
12% - 18% p.a.
Up to 24 months
Invoice Factoring
1% - 1.5% per month
Up to 80% of invoice value
30 - 120 days

The Money Problem That Most Startups Face

One of the most commonly faced problems of any startup business is a shortage of capital. Cash flow can make or break a company.

To add to the problem of insufficient funds, these startups often have no way to get access to additional capital. When this happens, company operations are forced to halt, thus ending a dream before it even began. Even startups that were able to successfully raise sufficient seed funding often run into capital shortage issues after a period of time.

For start up ventures to thrive, access to debt financing is critical. As such, Enterprise Singapore was set up to help solve this problem. Tailored to meet the needs of a startup, the start up business loan is especially popular among medical doctors and dental surgeons who want to set up a private practice.

More than helping to kick-start a business, the start up financing solution has also helped many entrepreneurs to:

  • Improve cash flow
  • Enhance financial budgeting
  • Seize expansion opportunities

Check out this startup business loan Singapore infographic:

startup business loan infographic

What Business Loans Are Available For Startups?

Let us dive into more details about the most popular startup business loan Singapore options.

1. SME Micro Loan - Business First Loan

Enterprise Singapore is a government agency that seeks to support enterprise development in Singapore. The agency has initiated a number of start up business loan schemes that can help to fund startups through different stages of growth.

The SME Micro Loan is the most popular SME loan scheme for startups by far. You can get up to S$100,000 to finance the cost of daily operations. In order to obtain the SME Micro Loan, your business will have to pass the eligibility criteria, which might vary between participating financial institutions and banks.

One of the most active banks offering the SME Micro Loan — as Business First Loan — is OCBC, where there is a minimum requirement for a startup business to have been registered and operating for at least 6 months. Most other banks will require for companies to be registered and operating for at least 2 years.

2. Startup Business Loan For Medical Professionals

Offered by only two financial institutions in Singapore, the startup business loan for medical professionals seeks to provide medical doctors and dental surgeons with financing to set up private practice.

In most cases, the startup business loan can also be accompanied by an equipment loan to finance the cost of all medical equipment.

To qualify for the business loan, the medical professional will have to meet the following criteria:

For medical professionals who are permanent residents in Singapore, approval chances are significantly higher if you have ownership of a residential property.

3. Equity Financing

Raising funds through the sale of equity in your startup business is a popular method of raising funds for working capital. You will need to present your business idea and convince prospective investors that your business will make money for them.

To accomplish this, you will need to have an innovative business idea, a solid business plan, justifiable cash flow projections, an effective working team and a really good sales pitch. In most cases, investors earn their returns via dividends on the shares they hold in your company. This means that their returns will be determined by the profitability and success of your business.

4. Venture Capital Funding

A typical venture capital is usually a fund that invests in start up businesses. The general idea for any venture capitalist is that the potential upside from a successful start up business can outweigh the limited downside – which is usually a small initial investment.

With venture capital funding, investors tend to want to be involved in the business, which has both pros and cons. While a venture capital investor can offer much expertise and experience in running a business, this can sometimes lead to a control struggle.

Venture Capital firms usually look to make a profitable exit from their investments within a period of 2 to 5 years. In recent years, there has been a growing trend in venture capital firms to place their focus on high growth tech startups, where returns could potentially be multiples of an initial capital injection.

More About Business Loan For Startup Singapore

While the government has made concerted efforts to encourage lending to startups in Singapore, the truth is that access to start up funding or working capital still remains a constant struggle for most new entrepreneurs in Singapore.

Most banks and financial institutions tend to be apprehensive to the idea of lending to new ventures, and understandably so. The risk that comes with lending to a startup is exponentially higher than with lending to an already established business.

Banks rely heavily on the financial track records of a company to determine credit worthiness. For a new business with almost no financial history, it becomes a challenging task for any lending institution to gauge the credit worthiness of the company.

Therefore, for most new entrepreneurs, it is often easier to raise funds via equity financing or simply borrowing from family and friends.

General FAQ

Can startups get business loans?

Yes, but options are few. Other than the SME Micro Loan, there are other options like crowdfunding.

How do I get a loan to start a business?

Always start by approaching the banks. If that fails, look for alternative lenders like crowdfunding platforms.

What loans are available for startups?

Other than the SME Micro loan and startup business loan for medical professionals, crowdfunding platforms may be a viable option.

Can I get loan without income proof?

No, you cannot. Most banks and financial institutions in Singapore will require for the Director(s) to show income proof.