Are you looking for a short-term business loan to finance a new project or explore a new business opportunity in Singapore?
Lenders provide different loan packages for small businesses for you to choose from. Therefore, you need to know how to find the best short term business loan.
There are several factors that you should consider when borrowing. Also, it would help if you understood the various types of small business loans available.
From there, you can compare them and select the best loan for your company.
Keep reading this article to know what to consider when sourcing a short-term business loan, the options available, what you can use a business loan for, and where to find such a loan.
What To Consider
What should you consider when getting a loan for your business?
Size Of Your Company
The size of your company matters when applying for a business loan in Singapore. It shows how much your business is likely to make over a period.
Therefore, you can estimate how much you can borrow and repay without bogging down your business finances.
Some lenders may check the number of employees you have to determine how much they will lend you.
How long will it take to repay the loan? Try to pay off your business loan within the shortest time possible.
This will help you to reduce the interest, and in turn, the total amount you will pay. However, choose a loan term that will allow you to pay the monthly installments without straining your business finances.
Why do you want to borrow a business loan in Singapore? Do you want to buy new equipment or inventory to serve your customers better? Have a goal you want to achieve with the money you will receive.
Finally, consider the amount you want to borrow. Ensure you do not take out more than you need to achieve your business goal.
A loan should take your company to the next level, not the next five levels.
Types of SME Loans
As you search for the best loan for your business, it is essential to understand that several options are available in the financial market.
You can borrow the following small business loans:
Line Of Credit
This is a perfect option for young small and medium-sized enterprises (SMEs) that often make recurring payments or have small unanticipated costs to settle.
You can apply for this loan type online and have it approved within two days. Besides, your business doesn’t need years of operations – six months is enough.
Working Capital Loan
A working capital loan is a good option for SMEs that require a larger amount of capital over a short time. You can get an unsecured loan of up to $300,000 and repay within five years.
Fixed Asset Loan
This is an SME loan where a company can borrow up to $30 million to purchase equipment and machines for upgrading and automation.
You can borrow this loan to construct or purchase government and commercial-built factories or business premises. The equipment or the property can be new or old.
It is a type of SME loan where a company sells its shares of its ownership to investors to meet its financial needs. A business can go for equity financing if it doesn’t have a sufficient history or doesn’t qualify for a business loan from a bank.
Loans For Short Term
As the name suggests, these are loans with short repayment terms.
Usually, you will need to repay the interest within three to 18 months. As a result, your payment plan can be on a daily or weekly basis.
Short-term business loans have a higher interest rate because their repayment period is shorter than those of long-term loans. Besides, the loan amount you can get is smaller.
It is easier to qualify for this loan type than a long-term loan. However, be sure your business can cope with the daily or weekly payment before you borrow.
What They Can Be Used For
Why do borrowers take out start-up loans in Singapore? You can get a loan for your business to achieve the following:
To Meet Start-Up Costs
Whether your business is already existing or you are a new business owner, you can qualify for a short-term business loan.
You can take advantage of such loans if you don’t have the finances to cover the start-up cost of your business.
The approval process is usually fast, as you can get a loan within a day. But what if you have a bad credit rating?
The good news is a lender can overlook your poor credit score if you repay the loan daily or weekly.
For An Emergency
Like life, businesses may also run into emergencies. You can borrow a business loan in Singapore during such times to rescue your company.
However, before you approach a lender, be sure that you can repay the loan.
Short-term business loans are a perfect choice to maintain cashflow in your business.
So if your business is bringing in money within a short time, you can source for a small business loan to improve your cashflow.
However, is your business fit for such a loan? If your business cannot cope with daily loan payment pressure, taking a short-term loan could be risky.
Besides, if it has many daily expenses, few clients, and inconsistent revenue, such a loan may not be viable.
To Purchase Inventory
Another huge plus for small business loans in Singapore is that they help retail businesses purchase inventory.
For example, if you need inventory during the holiday season and don’t have money, you can get a loan and buy them. Lenders can give you time to repay after the holiday season.
Therefore, you can take advantage of these loans and buy fast-selling inventory at a discounted price to make profits.
To Start A New Project
Have you discovered a new opportunity in your business? If you are short of funds, you can borrow a short-term loan to cover the cost.
For example, if you manage a hotel, you can take out a loan to employ temporary workers to make more sales during the peak season.
Comparing SME Loans
As you learn how to find the best short-term business loan, comparing the loans available is key. The comparison will help you pick the best deal in the market.
But how do you compare SME loans?
Firstly, you need to choose a loan that matches your business needs.
You may want a short-term loan for a one-time purchase or more financing to buy an expensive machine or a business unit. This will help you know the type of loan you need to borrow.
Secondly, compare the business loan interest rate in Singapore, the fees you will incur, and the tenure.
Lenders in Singapore provide business loans under different terms and conditions. Shop around and take note of what each lender is offering and compare them. It will help you choose a loan with the lowest total cost.
In summary, comparing start-up loans in Singapore allows you to find a loan with the lowest interest rates and fees, plus a realistic repayment period. This in turn saves your business money.
Where To Get A SME Loan
So where can you borrow a business loan in Singapore?
You can take out such a loan from:
Singapore banks provide various business loan packages, including a revolving loan. However, the approval process takes longer than that of licensed money lenders.
Besides, banks may require your business to have at least two to three years of operational history and 30% ownership by Singaporeans or permanent residents.
If your business meets these criteria, you can get a loan for up to five years. The OCBC SME loan is a perfect example of such a business loan.
Here is a table with the interest rates* offered by various banks for business loans:
|Bank||Loan Type||Interest Rate|
|OCBC Bank||Business revolving short term loan||8.88-13.88%|
|DBS Bank||Business term loan||7-11%|
|Standard Chartered Bank||Installment business loan||11%|
|Citibank||Unsecured business loan||6.25-15%|
*Information correct at time of publication
Licensed Money Lenders
Banks have stringent terms and conditions that your business may be unable to meet.
If you need a business loan urgently, you can approach a licensed money lender like Credit 21 for a business loan in Singapore.
The good news is that borrowing from licensed money lenders is safe because they are regulated by the Ministry of Law.
Therefore, they will provide you with the loan under the provided guidelines.
For example, a licensed money lender should have a physical address where you will meet to sign the loan contract.
Find The Best Short-Term Business Loan
When you have a business, needs will arise from time to time, and sometimes you may not have the finances to settle them.
In such times, you can borrow a business loan in Singapore to expand your business or maintain its cashflow. That is why you need to know how to find the best short term business loan.
You can take out SME loans from a bank or a licensed money lender. However, shopping around and comparing the available packages is important before you borrow.
Compare the interest rates, the fees, and the loan tenure to get a loan with the lowest cost for your business.
If you are looking for small business loans in Singapore, check out Credit 21.
We provide business loans at some of the cheapest interest rates in the market, and you choose a loan tenure depending on your financial capability.