Expanding Your Business Venture: How to Get an SME Business Loan in Singapore
As a business owner, managing an SME (Small Medium Enterprise) is definitely a challenging task and can sometimes require extra financial help. If you’re looking to expand your business, funds are needed to keep your company afloat and in times like these, applying for an SME business loan in Singapore can be helpful for your enterprise. Some of the business loans in Singapore are government-aided specifically for SMEs to help finance their corporations. One of the most popular business loans for SMEs is a short-term working capital loan which is an unsecured business term loan in Singapore. This working capital loan in Singapore does not require any collateral and is offered by 17 financial institutions including established local banks such as DBS and OCBC Bank. Applying for a small business loan in Singapore can be daunting if you are a new start-up so it is important to know the details, eligibility and rates of the loan before applying for a working capital loan in Singapore. Here is an easy guide to SME business loans in Singapore for a comprehensive breakdown of the loan aid.
What You Can Get From an SME Working Capital Loan
If you own an SME and are looking for a small business loan in Singapore, this scheme can get you maximum funding of $300,000. Depending on the financial institution of your choice, there is a maximum repayment period of up to 5 years with most banks offering no penalty fee for early redemption. As this is a government-aided loan, there is a government risk sharing of 50% or 70% for young companies. These young companies are recognised as enterprises founded within the last 5 years with a minimum of one employee and at least 50% of shares owned by individuals. With this business loan, companies will be able to take on high capital projects and hire more employees to further expand the success of their organisations.
Average Charges of an SME Business Loan
Like every other loan, it is always important to compare business loan interest rates with the different financial institutions to get the best bang for your buck. Even though the charges, rates and requirements differ from each bank and are also dependent on your risk assessment, it is good to know the average range of what a business loan in Singapore can cost you so you don’t pay more than you should. The usual interest rate charges for an SME business loan can range from 6-7.5% per annum with the loan repayment varying from three years to a maximum of 5 years. As mentioned, most banks do not have an early redemption penalty but do look out for financial institutions that do as this fee could go up to 6.88%. Be wary of extra charges such as processing fees as this usually ranges from 1-5% of the loan amount. With these varying charges that different institutions offer, always enquire as much as you can before settling on the lender of choice.
Eligibility for an SME Business Loan
While the loans and funding aids are attractive to small business owners, unfortunately, not all SME enterprises may be eligible for them. SMEs that are eligible for this loan must be local businesses that are certified and located in Singapore with a minimum operating duration of 2 years. The enterprise must also have a minimum of 30% in shareholdings by a local Singaporean or Permanent Resident. These small businesses cannot have annual revenue of more than $100 million and their employee capacity cannot exceed 200.
While this SME business loan requires a list of documentation before being processed, a great upside is that it is considered an unsecured business term loan in Singapore. Unsecured loans do not require any collateral to collect the loan amount and usually have a quick transaction turnaround time. However, some of the documents required would be the company’s bank and financial statements as well as the credit bureau statement and notice of assessment of the guarantor.
An SME business loan in Singapore is a great source of help for small enterprises to gain substantial profits in the long run but like all loans, enterprises should review their finances, shop around to compare business loan interest rates, and only choose to take up a loan if their monetary capabilities allow it.