Owning a small business or SME (small and medium-sized enterprise) is never easy and it is especially difficult in the economic environment today.
Among the most common issues small business owners face is also one of the most serious — cash flow.
If you are a business owner experiencing cash flow problems, it is time for you to consider the advantages of business loans in Singapore.
Business owners can get a business loan online to help with cash flow problems and keep their heads above water when times are tough.
Low-rate business loans may also be used for a capital injection to start a business. Many successful entrepreneurs start with business loans with low interest rates to overcome their initial lack of capital.
This comprehensive guide on SME loans in Singapore will help you to find an SME loan in Singapore that is right for you.
Owning a small business or SME (small and medium-sized enterprise) is never easy and it is especially difficult in the economic environment today.
Among the most common issues small business owners face is also one of the most serious — cash flow.
If you are a business owner experiencing cash flow problems, it is time for you to consider the advantages of business loans in Singapore.
Business owners can get a business loan online to help with cash flow problems and keep their heads above water when times are tough.
Low-rate business loans may also be used for a capital injection to start a business. Many successful entrepreneurs start with business loans with low interest rates to overcome their initial lack of capital.
This comprehensive guide on SME loans in Singapore will help you to find an SME loan in Singapore that is right for you.
SME loan
A type of business loan given to SMEs to start a new business or sustain an existing one.
SME Working Capital Loan
An unsecured loan, but it is meant specifically for short-term SME operational expenses.
In Singapore, you have three main options:
Banks
*some also offer government-backed schemes
Licensed moneylenders
Other financial institutions
Let’s delve into more details.
A business loan or SME loan in Singapore is one of the most versatile loans you can get. How they are used generally falls in two categories:
Launching a business involves a huge investment of time, effort, and, perhaps most crucially, money. The bulk of the expenses that can be met by business loans for SME fall into these categories:
For most businesses, their initial launch is the most expensive stage. However, ongoing expenses can also skyrocket, especially when the economy is doing poorly.
An SME working capital loan can function as a stop-gap measure when there are cash flow issues, for example, when you have to pay suppliers but your customers haven’t paid you. It also solves a variety of issues by covering:
Every entrepreneur wants the best business loan in Singapore with low interest rates, but it can be a challenge to find the right one. Currently, business owners in Singapore have six viable funding options for fast, unsecured business loans.
Our government has always been very supportive of small businesses and that is evident from its range of support for SMEs. There are several financial schemes under the umbrella of the Enterprise Finance Scheme (EFS) currently available to eligible businesses.
These loans are not directly negotiated with any government agency, but are instead available through banks and other financial institutions certified by the government as Participating Financial Institutions (PFIs). However, assistance comes in the form of the government acting as a partial guarantor, shouldering between 50% and 70% of the risk-share. This is an incentive for banks to approve more working capital loans for companies, including those that don’t have the best credit or are fairly new.
EFS loans are available to all businesses based in Singapore that are at least 30% owned by Singaporeans and PRs. There is enhanced support for ‘young businesses’, defined as those operating for five years or less.
Digital financing platforms fill the gap between large financial institutions – such as banks, and licensed money lenders. They have a quicker and more streamlined process than the former and access to greater loan amounts than the latter. However, they are also strictly regulated by the Monetary Authority of Singapore (MAS).
Companies like Validus and Infund have taken the lead in this relatively new niche. They generally take a laid back approach to eligibility if you can show that you are registered with ACRA.
Another advantage of using these platforms is that they also act as a networking node, bringing in investors who want to finance companies that inspire them by becoming their angel investors. The flip side is that business owners, like yourself, may have to give up a stake in your company if you want an angel investor. These platforms offer both secured and unsecured loans.
Interest rates: | varies, up to 20% per annum |
Loan tenure | 3 months to 2 years |
Late interests/ late fees | Varies depending on the platform at the institution’s discretion |
Processing fees | 1% to 5% of loan principal (usually capped at around $200) |
Early redemption fees | up to $1,000 (some have no charges) |
Average loan amount you can take | up to $5 million |
Other loan terms | Minimum revenue ($100,000-$500,000) and operational period (2 – 3 years) |
Can business owners pledge private property to get a higher loan? | Yes |
Banks have always been the stalwarts of business finance. Despite the recent surge in the number of business loan financing alternatives, they remain the most respected and reliable option. With that long history and prestige, though, comes a higher cost. This is evident from the relatively higher interest and fees.
Many SME owners who want a low-interest-rate business loan will opt for government-assisted loans (EFS) through banks. However, banks also have their own SME loan packages. If you’re eligible for both EFS and new business loans direct from your bank, choose the direct route if you prefer premium service and are willing to pay for it.
Loan interest rates: | 3.5% to 11% p.a. (effective interest rate of 6.5% to 24%). |
Loan tenure | 1 to 5 years |
Late interests/ late fees | 22% to 26.9% interest on outstanding amount; fees from $60 to $80 |
Processing fees | 1% to 3% of loan principal (usually capped at around $500) |
Early redemption fees | around $150 or 2.5% to 6.88% of the principal amount redeemed early, whichever is higher |
Average loan amount you can take | $50,000 to $500,000 |
Other loan terms | Minimum company revenue of $300,000 – $500,000 and operational period (2 – 3 years); may require guarantors |
Can business owners pledge private property to get a higher loan? | Yes |
Licensed money lenders have become a robust and widely-respected part of the financial services community. That itself is a testament to the hard work and deliberate efforts of licensed lenders who have had to battle the Ah Long stigma that has unfairly been attached to them.
These legal lenders cater to the widest array of applicants living in Singapore because they rarely have restrictions on citizenship and residency status. However, borrowers have to contend with a higher interest rate of 4% to 8% per month. If you can put up with that and need money in a hurry, licensed lenders can often be the best option.
Loan interest rates: | 1% to 4% per month |
Loan tenure | Up to 12 months |
Late interests/ late fees | interest capped at 4% per month; fees capped at $60 per month |
Processing fees | capped at 10% of loan principal |
Early redemption fees | Not allowed |
Average loan amount you can take | $500 for those earning less than $10,000 a year; $3,000 for those earning $10,000 to $20,000 a year; and 6 times monthly income for those earning over $20,000 a year |
Other loan terms | business registered with ACRA, have been in operation for the past 6 months, and have a director who is a Singaporean/ Singapore PR, or a foreigner residing in Singapore. |
Can business owners pledge private property to get a higher loan? | Yes |
Prosper Credit is an established licensed moneylender that offers affordable business loans.
The term ‘crowdfunding’ is self-descriptive – getting funds from random people. P2P (peer-to-peer lending) in crowdfunding gives money to a business in the form of a short-term business loan to be paid back to the investors at a predetermined rate of interest. Payments are usually deferred for several months to allow the injection of capital to have its desired effect.
Loan interest rates: | from 0.8% per month |
Loan tenure | 1 to 12 months |
Late interests/ late fees | some charge 0.1% of the outstanding principal per day |
Processing fees | 3% to 7% of loan principal |
Early redemption fees | depends on loan, no charges for some |
Average loan amount you can take | $5,000 to $5 million |
Other loan terms | Minimum revenue $300,000 onwards and operational period 2 – 3 years |
Can business owners pledge private property to get a higher loan? | Yes, up to 80% of property value |
Any private company may give another company a business loan. In Singapore, private businesses that extend loans to other businesses in the form of B2B loans do not require a separate licence to operate.
Transport stalwart Grab started GrabFinance for this purpose. Other major players in this category are IFS Capital Limited, GB Helios and Capitall. These companies are currently not on the list of top business loan providers, but they provide a range of attractive financing options for both new (at least 6 months old) and existing businesses. Some are open to financing promising business ideas, too.
They may offer repayment flexibility in the form of weekly, bi-weekly, and monthly instalments.
Loan interest rates: | from 0.9% to 7% per month |
Loan tenure | 2 to 12 months |
Late interests/ late fees | Twice the monthly interest rate |
Processing fees | 5-10% of loan principal |
Early redemption fees | Yes, for some |
Average loan amount you can take | $10,000 to $500,000 |
Other loan terms | Revenue $100,000 to $500,000, staff less than 200, and operational period 6 months onwards |
Can business owners pledge private property to get a higher loan? | Depends on the institution |
Our government has always been very supportive of small businesses and that is evident from its range of support for SMEs. There are several financial schemes under the umbrella of the Enterprise Finance Scheme (EFS) currently available to eligible businesses.
These loans are not directly negotiated with any government agency, but are instead available through banks and other financial institutions certified by the government as Participating Financial Institutions (PFIs). However, assistance comes in the form of the government acting as a partial guarantor, shouldering between 50% and 70% of the risk-share. This is an incentive for banks to approve more working capital loans for companies, including those that don’t have the best credit or are fairly new.
EFS loans are available to all businesses based in Singapore that are at least 30% owned by Singaporeans and PRs. There is enhanced support for ‘young businesses’, defined as those operating for five years or less.
Digital financing platforms fill the gap between large financial institutions – such as banks, and licensed money lenders. They have a quicker and more streamlined process than the former and access to greater loan amounts than the latter. However, they are also strictly regulated by the Monetary Authority of Singapore (MAS).
Companies like Validus and Infund have taken the lead in this relatively new niche. They generally take a laid back approach to eligibility if you can show that you are registered with ACRA.
Another advantage of using these platforms is that they also act as a networking node, bringing in investors who want to finance companies that inspire them by becoming their angel investors. The flip side is that business owners, like yourself, may have to give up a stake in your company if you want an angel investor. These platforms offer both secured and unsecured loans.
Interest rates: | varies, up to 20% per annum |
Loan tenure | 3 months to 2 years |
Late interests/ late fees | Varies depending on the platform at the institution’s discretion |
Processing fees | 1% to 5% of loan principal (usually capped at around $200) |
Early redemption fees | up to $1,000 (some have no charges) |
Average loan amount you can take | up to $5 million |
Other loan terms | Minimum revenue ($100,000-$500,000) and operational period (2 – 3 years) |
Can business owners pledge private property to get a higher loan? | Yes |
Banks have always been the stalwarts of business finance. Despite the recent surge in the number of business loan financing alternatives, they remain the most respected and reliable option. With that long history and prestige, though, comes a higher cost. This is evident from the relatively higher interest and fees.
Many SME owners who want a low-interest-rate business loan will opt for government-assisted loans (EFS) through banks. However, banks also have their own SME loan packages. If you’re eligible for both EFS and new business loans direct from your bank, choose the direct route if you prefer premium service and are willing to pay for it.
Loan interest rates: | 3.5% to 11% p.a. (effective interest rate of 6.5% to 24%). |
Loan tenure | 1 to 5 years |
Late interests/ late fees | 22% to 26.9% interest on outstanding amount; fees from $60 to $80 |
Processing fees | 1% to 3% of loan principal (usually capped at around $500) |
Early redemption fees | around $150 or 2.5% to 6.88% of the principal amount redeemed early, whichever is higher |
Average loan amount you can take | $50,000 to $500,000 |
Other loan terms | Minimum company revenue of $300,000 – $500,000 and operational period (2 – 3 years); may require guarantors |
Can business owners pledge private property to get a higher loan? | Yes |
Licensed money lenders have become a robust and widely-respected part of the financial services community. That itself is a testament to the hard work and deliberate efforts of licensed lenders who have had to battle the Ah Long stigma that has unfairly been attached to them.
These legal lenders cater to the widest array of applicants living in Singapore because they rarely have restrictions on citizenship and residency status. However, borrowers have to contend with a higher interest rate of 4% to 8% per month. If you can put up with that and need money in a hurry, licensed lenders can often be the best option.
Loan interest rates: | 1% to 4% per month |
Loan tenure | Up to 12 months |
Late interests/ late fees | interest capped at 4% per month; fees capped at $60 per month |
Processing fees | capped at 10% of loan principal |
Early redemption fees | Not allowed |
Average loan amount you can take | $500 for those earning less than $10,000 a year; $3,000 for those earning $10,000 to $20,000 a year; and 6 times monthly income for those earning over $20,000 a year |
Other loan terms | business registered with ACRA, have been in operation for the past 6 months, and have a director who is a Singaporean/ Singapore PR, or a foreigner residing in Singapore. |
Can business owners pledge private property to get a higher loan? | Yes |
Prosper Credit is an established licensed moneylender that offers affordable business loans.
The term ‘crowdfunding’ is self-descriptive – getting funds from random people. P2P (peer-to-peer lending) in crowdfunding gives money to a business in the form of a short-term business loan to be paid back to the investors at a predetermined rate of interest. Payments are usually deferred for several months to allow the injection of capital to have its desired effect.
Loan interest rates: | from 0.8% per month |
Loan tenure | 1 to 12 months |
Late interests/ late fees | some charge 0.1% of the outstanding principal per day |
Processing fees | 3% to 7% of loan principal |
Early redemption fees | depends on loan, no charges for some |
Average loan amount you can take | $5,000 to $5 million |
Other loan terms | Minimum revenue $300,000 onwards and operational period 2 – 3 years |
Can business owners pledge private property to get a higher loan? | Yes, up to 80% of property value |
Any private company may give another company a business loan. In Singapore, private businesses that extend loans to other businesses in the form of B2B loans do not require a separate licence to operate.
Transport stalwart Grab started GrabFinance for this purpose. Other major players in this category are IFS Capital Limited, GB Helios and Capitall. These companies are currently not on the list of top business loan providers, but they provide a range of attractive financing options for both new (at least 6 months old) and existing businesses. Some are open to financing promising business ideas, too.
They may offer repayment flexibility in the form of weekly, bi-weekly, and monthly instalments.
Loan interest rates: | from 0.9% to 7% per month |
Loan tenure | 2 to 12 months |
Late interests/ late fees | Twice the monthly interest rate |
Processing fees | 5-10% of loan principal |
Early redemption fees | Yes, for some |
Average loan amount you can take | $10,000 to $500,000 |
Other loan terms | Revenue $100,000 to $500,000, staff less than 200, and operational period 6 months onwards |
Can business owners pledge private property to get a higher loan? | Depends on the institution |
Here’s a summary of the eligibility criteria for different types of lending platforms. Note that different lenders may have differing eligibility criteria. Check with each one before deciding on what works best for your small business.
Business registered with ACRAMin 30% Singaporean/PR ownership
Group revenue of up to S$100 million or maximum employment of 200 employees
Business registered with ACRA,
Operating for at least 2-3 yearsMin 30%-50% Singaporean/PR ownership
May require guarantors or collateral
How can you get a business loan in Singapore for budding or new businesses? Here’s a summary of general application procedures. The exact procedures may differ between companies and loan providers.
For the average small business loan amount, you will generally need these six documents:
1
Accounting and Corporate Regulatory Authority (ACRA) issues a document that shows your business information, a list of directors and shareholders, and the company’s paid-up capital.
2
Company directors’ Notice of Assessment (NOA) for the last two years is usually needed to ascertain their income. This gives financiers an idea of the debt-to-income ratio of the directors.
1
Find out more
Accounting and Corporate Regulatory Authority (ACRA) issues a document that shows your business information, a list of directors and shareholders, and the company’s paid-up capital.
2
Find out more
Company directors’ Notice of Assessment (NOA) for the last two years is usually needed to ascertain their income. This gives financiers an idea of the debt-to-income ratio of the directors.
3
A Credit Bureau Singapore (CBS) report to show company directors’ repayment histories, outstanding debts, and outstanding unsecured loan amounts. This gives an idea of the borrower’s creditworthiness.
4
Financiers use the company’s financial statements such as profit and loss statements and balance sheets to determine its historical performance. Most lenders require the latest two years of information.
3
Find out more
A Credit Bureau Singapore (CBS) report to show company directors’ repayment histories, outstanding debts, and outstanding unsecured loan amounts. This gives an idea of the borrower’s creditworthiness.
4
Find out more
Financiers use the company’s financial statements such as profit and loss statements and balance sheets to determine its historical performance. Most lenders require the latest two years of information.
5
Bank statements reveal the company’s day-to-day bank activities and the balance at the end of the month. These figures indicate cash flow and whether the company has sufficient funds to repay a loan.
6
The Accounts Receivables Aging List is an optional extra. It lists the business’s clients and outstanding payments receivable. It also lists debts and how long they have been overdue.
5
Find out more
Bank statements reveal the company’s day-to-day bank activities and the balance at the end of the month. These figures indicate cash flow and whether the company has sufficient funds to repay a loan.
6
Find out more
The Accounts Receivables Aging List is an optional extra. It lists the business’s clients and outstanding payments receivable. It also lists debts and how long they have been overdue.
Some of you might ask – what if you (and/or your other directors) have a bad credit history?
It is possible to get a business loan with bad credit, but the process may be longer and the terms of the loan less favourable.
Bigger lenders such as banks have especially stringent eligibility criteria. The main reason for this is that they are listed companies with obligations to their investors. If they expose themselves to greater financial risk in the form of bad debts, it may harm their share prices. As such, banks will summarily reject loan applications from anyone with bad credit.
In contrast, licensed lenders are much more receptive to loan applications from applicants with bad credit and even offer them fast cash loans. Each application is judged on a case-by-case basis, which gives them more room to adapt to individual cases.
However, the loan terms may be more severe — a higher rate of interest, shorter repayment period, increased payment frequency, and higher penalties for missed or late payments may apply. The loan principal itself may be smaller to shield the lender from excessive potential bad debts.
Bad credit is the biggest barrier that many aspiring entrepreneurs face. It can stall or completely derail otherwise profitable business ideas. Try to always avoid bad credit because it will burden you with these disadvantages:
All lenders, big and small, are less likely to lend money to someone with bad credit. Licensed lenders are generally more lenient but most banks automatically reject applications from anyone with a poor credit history.
Getting a good business loan interest rate depends on your credit score. If you have bad credit, lenders will attach a higher rate of interest to the loan even if your loan application is approved. This means that those with bad credit pay more in every instalment, costing them money that could have been channelled into their business.
Lenders are more cautious about extending large sums of money to a borrower with a history of not repaying their loans. You could miss out on the capital you need if you have bad credit.
Bad credit affects loan tenure (shorter time to repay) and opens the borrower up to severe late payment penalties such as potentially higher interest rate on late payment amount and higher late payment penalty charges.
Although it is more difficult to get a SME loan in Singapore with bad credit, it is certainly not impossible. Here are some strategies you can employ to offset the disadvantages of your bad credit history.
If a single borrower has bad credit but his or her business partners have good credit, a lender is more likely to consider and approve their loan application.
A co-signer acts as a guarantor, ensuring that the lender will get paid even if the borrower with bad credit is unable to pay.
In a secured loan, the borrower puts an asset such as a vehicle or home up as collateral. Lenders are keen to offer secured loans because they have the right to seize the pledged collateral and liquidate it to recoup their losses if the borrower fails to pay them directly.
Reach out to us.
Licensed lenders are a noteworthy provider of business loans for SMEs . They may not be able to extend the largest loans but they certainly cater to the widest range of applicants.
Are you planning to apply for an SME loan in Singapore? At Prosper Credit, we offer attractive startup business loans that cater to your needs.
Hello! I’m Nikki and I nitpick through all the boring financial data and jargon so you don’t have to!
Government-assisted loans | Digital financing platforms | Banks | Licensed moneylenders | Crowdfunding platforms | Private financial institutions | |
---|---|---|---|---|---|---|
Interest rates | <5% per annum | Up to 20% per annum | 3.5% to 11% per annum | 4% to 10% per month | from 0.8% per month | 0.9% - 7% per month |
Loan tenure | Up to 5 years | 3 months to 2 years | 3 to 5 years | Up to 12 months | 1 to 12 months | 2 to 12 months |
Late interests/ late fees | 22% to 26.9% interest on outstanding amount; fees from $60 to $80 | Varies depending on platform at institution’s discretion | 22% to 26.9% interest on outstanding amount; fees from $60 to $80 | 4% - 10% interest per month on outstanding amount; late fees from $60 per month | Some charge 0.1% of the outstanding principal per day | Twice the monthly interest rate |
Processing fees | 1% to 3% of loan principal (usually capped around $200-$500) | 1% to 5% of loan principal (usually capped around $200) | 1% to 3% of loan principal (usually capped around $500) | No processing fee | 3% to 7% of loan principal | 5-10% of loan principal |
Early redemption fees | ~ S$150 or 3% of the outstanding principal | Up to $1,000 (some have no charges) | ~ $150 or 2.5% to 6.88% of principal redeemed early | Not allowed | Depends on loan, no charges for some | Yes, for some lenders |
Maximum loan amount you can take | $300,000 per borrower | $5 million | $50,000 - $500,000 | $500 to 6 times monthly income (depending on income) | $5,000 to $5 million | $10,000 to $500,000 |
Other loan terms | Max company revenue of $100M & staff of 200 | Minimum revenue ($100,000-$500,000) and operational period (2 – 3 years) | Minimum company revenue of $300,000 - $500,000 and operational period (2 – 3 years); may require guarantors | Businesses registered with ACRA, have been in operation for the past 6 months, and have a director who is a Singaporean/ Singapore PR, or a foreigner residing in Singapore | Minimum revenue $300,000 onwards, and operational period 2 – 3 years | Revenue ($100,000 to $500M), staff (less than 200) and operational period (6 months onwards) |
Can business owners pledge | No, EFS loans are unsecured | Yes | Yes | Yes | Yes, up to 80% of property value | Depends on institution |