Are you a small business owner in Singapore looking for some financial breathing room?

You may have heard about small business loans but don’t quite understand exactly how they work or how long is a small business loan term.

That’s alright. With a wide variety of business loan options available, it can be confusing to remember business loan terms and figure out the right one for your small business.

In this blog post, we’ll explain what a small business loan is, how long is a small business loan term in Singapore, and other key aspects of taking out small business loans in Singapore.

Read on to learn more.

What Are The Business Loan Options In Singapore?

Business loans are economic aid designed to support and expand businesses of all shapes and sizes. These convenient options provide companies with the funds necessary for day-to-day operations, growth opportunities, or even long-term investments.

However, the term “business loan” may refer to a variety of financing options in Singapore.

Some of the most popular business loans in Singapore:

Unsecured Business Loan

An unsecured business loan is the standard business loan that doesn’t require any form of security or collateral to secure the loan. Unsecured loans usually have a repayment period of up to 5 years and can be availed from all major Singapore banks, including DBS, UOB, and OCBC.

However, despite being the most popular, unsecured loans require you to first pass a rigid assessment.

Some banks and lenders, for instance, require your business to be at least two or three years old before they approve it. Others might require a certain annual income from the business in order to qualify for it.

Government-Assisted SME Loans

The Singapore government has launched various SME loans to help businesses affected by the pandemic and other economic downturns. These loans are typically provided with preferential terms such as lower interest rates and longer repayment periods.

The best thing about these loans is that 50% of the risk is shared by the government, which makes it somewhat easier for businesses to access them.

The most popular government-assisted SME business loans in Singapore include the Temporary Bridging Loan Programme, Enterprise Financing Scheme, and the SME Working Capital Loan Programme.

But how long is a small business loan term? Let’s find out.

How Long Is A Small Business Loan Term?

The duration of a small business loan term in Singapore depends on the type of loan you’re applying for.

Unsecured business loans typically have loan terms of up to 5 years, while government-assisted SME loans can go up to 15 years in some cases.

It’s important to remember that the loan term also depends on your lender and its terms and conditions, so make sure you read all the fine print and do your own research before signing any loan agreement.

Now that you know how long is a small business loan term in Singapore, let’s go over some SME loans in detail.

What Are Small SME Business Loans?

SME financing options in Singapore are designed to help small and medium-sized businesses in Singapore with their financial needs.

These loans generally have lower interest rates, higher loan amounts, and longer repayment terms than traditional business loans, making them an ideal option for businesses that need quick access to capital but don’t want to take on too much risk.

The most popular SME business loans in Singapore are:

Startup Business Loan

A startup business loan is like the concise edition or mini version of regular business loans, offering amounts up to $100,000.

The loan comes with a repayment period of four years and doesn’t require businesses to fulfil strict eligibility requirements or spending regulations. It allows business owners to use this amount for managing cash flow problems and daily business operations.

In the business or corporate world, it is more commonly known as a First Business Loan or Micro Loan Programme.

SME Working Capital Loan

SME Working Capital Loan – a government-assisted loan – was launched in 2016 to cater to local small and medium business enterprises with 200 employees at max.

Small businesses can get this loan from banks and get as much as $1 million as the principal amount, which is to be paid back within 1 to 5 years.

Just like Temporary Bridging Loans, this loan is offered to locally registered businesses with a 30% stake owned by a Singapore national or permanent resident.

Invoice Financing

Invoice financing is a short-term loan in Singapore that allows businesses to raise funds against unpaid invoices. It’s useful for businesses that have to wait long periods of time to receive payments from customers, which can put a strain on their cash flow.

With invoice financing, businesses are allowed to borrow up to 80% of the value of an invoice and receive the funds as early as within three days. This allows businesses to access quick capital without taking on too much debt.

In Singapore, invoice financing is offered by a range of banks and financial institutions, including DBS, UOB, HL Bank, and OCBC.

Line Of Credit

A line of credit is an ideal SME loan option for businesses that need access to quick capital but prefer not to take on too much debt. It allows businesses to draw on a predetermined amount of funds whenever they need it, up to the limit set by the financial institution.

The repayment terms and interest rates will vary depending on how much you withdraw each time. However, in most cases, it can range from six months to a few years.

HSBC, Maybank, UOB, Citibank, OCBC, and DBS offer some of the best “credit lines” or lines of credit (loans) in Singapore.

Fixed Asset Loan

A fixed asset loan provides businesses with the funds they need to purchase fixed assets, such as equipment and machines, to automate or upgrade their process and operations. Businesses can buy both new or used (resale) assets as they deem fit.

Or they can even construct or purchase government and commercial-built factories and business premises.

Moreover, businesses can get as much as $30 million as a fixed asset loan per borrower or $50 million as a group. This gives them more purchasing power to strengthen their business operations and processes.

Plus, these business loans come with a long repayment period of 15 years, making them very attractive for businesses looking to expand or upgrade.

These are some of the most popular SME business loans in Singapore.

Now, let’s say how you can apply for these loans and the requirements you need to meet.

How And Where To Apply For A SME Business Loan In Singapore

You can get small business loans in Singapore from banks and licensed money lenders. Both of them have certain eligibility criteria for application; however, banks have stricter criteria than licensed money lenders.

Eligibility Criteria

Registration/premises: Banks require your business to be registered and based in Singapore. Licensed money holders only want your business to be operational in Singapore.

Ownership: Almost all banks require 30% of the business to be owned by Singaporean citizens or Permanent Residents, while licensed money lenders can give a loan to a foreigner doing business in Singapore.

Sales/income: Each bank has its own sales or income requirements. Some banks demand an annual revenue of $300,000, while others might ask for $20,000 or $30,000.

Licensed money lenders have flexible sales or income requirements.

Company size: This might also vary, but some bank loans require businesses to have fewer than 200 people.

Once again, licensed money lenders have no maximum or minimum limitations for employee count.

Business age: Banks ask for at least two years of business age to be eligible for a business loan, while licensed money lenders demand only six months of business operations.

Credit score: Banks are very strict with credit scores. They strictly demand a positive credit score and might even reject a loan application because of poor credit history.

Licensed money lenders assess applications based on a business’s ability to repay the loan. You may get a business loan in Singapore from a lender even with a poor credit score.

Application Process

Singapore SME loan applications are quite similar to personal loans. This means you can apply for a business loan in three ways:

  • Online (website)
  • Phone call
  • In person at your lender’s office.

The documents to be submitted will vary based on the type of loan and your lender. However, you’d generally need the following:

  1. NRIC or other identification proof of all partners/shareholders.
  2. ACRA report with business information, including directors’ and shareholders’ names and your company’s paid-up capital.
  3. Latest two years’ financial statements.
  4. Latest six months’ bank statements.
  5. Other miscellaneous documents required by your lender.

Once you’ve submitted all the required documents, the lender will assess your loan application. Banks may take up to 2 or 4 weeks, while licensed money lenders can get your business loan approved on the same day.

Get A SME Business Loan Faster

Whether you want to expand your inventory, purchase new machinery, or get working capital to solve cash flow problems, you can do it quickly with SME business loans in Singapore.

But make sure you take your time to compare different loan options. This way, you can get the best terms and conditions, ensuring you make the right choice for your business’s needs.

Need more information? Loan officers at Credit 21 are available to answer any questions you may have. Get in touch and apply for a loan today.