A Guide to Navigating SME Business Loans in Singapore (2023)

Navigating the realm of business loans is a vital aspect of the sustenance and growth of small and medium-sized enterprises (SMEs) in Singapore. In the face of mounting financial challenges and a highly competitive business environment, understanding the crucial role of financial aid and loans becomes imperative. 

The Singapore government, recognizing this necessity, has proactively extended enhancements to the Enterprise Financing Scheme (EFS) and introduced the Energy Efficiency Grant (EEG), both of which are instrumental in supporting SMEs. The enhancements to the EFS encompass a variety of financial aids which will remain accessible until March 31, 2024. Specifically, the Working Capital Loan, a component of the EFS, provides substantial financing options to meet operational cash flow needs, with a maximum loan quantum of S$500,000.

By leveraging these financial instruments, SMEs in Singapore are better positioned to navigate the challenging economic terrain, ensuring their survival and prosperity. It is essential for business owners and financial managers to comprehend the intricate details of these loan schemes and grants. Doing so enables them to make informed decisions, optimize their financial strategies, and ultimately contribute to the robustness and vitality of Singapore’s SME sector.

What are the Business Loan Options in Singapore?

When looking for a business loan in Singapore, there are several options available for your SME. To help your business grow and prosper, consider exploring these financing solutions.

Government-Assisted SME Loans:

The Singapore government has been proactive in supporting small and medium-sized enterprises (SMEs) through various loan schemes. These loans are typically easier to qualify for and have lower interest payments compared to commercial loans.

• Enterprise Financing Scheme (EFS): This is a government-backed loan program aimed at helping SMEs secure financing across various stages of their growth. The EFS covers various areas such as trade, project financing, and mergers and acquisitions.
• Micro Loan Programme: Aimed at smaller SMEs, this program offers loans of up to S$100,000 to help businesses manage daily operations and cash flow.
• SME Working Capital Loan: This is part of the EFS, offering loans of up to S$300,000 per borrower to help SMEs with their operational cash flow needs.

Traditional Bank Loans

Banks in Singapore offer a variety of business loans, catering to different needs of SMEs. They usually require a more established business record for loan approval. Here are some of them. 

• Term Loans: These are standard loans where businesses borrow a lump sum amount and pay it back over a fixed term with interest.
• Revolving Credit Facilities: This is a flexible loan option where businesses have a credit limit and can draw down and repay funds as needed.
• Trade Financing: This helps businesses manage their import and export trade transactions, providing the necessary cash flow for such dealings.

Licensed Money Lenders

Licensed moneylenders provide an alternative source of financing, especially for businesses that may not qualify for bank loans.

• Personal Loans: These are usually smaller loan amounts with a short repayment period and can be processed quickly.
• Unsecured Business Loans: These loans do not require collateral but generally come with higher interest rates compared to secured loans.
• Bridging Loans: These are short-term loans used to cover immediate cash flow needs while waiting for longer-term financing to be secured.

While licensed moneylenders can provide quick access to funds, it is crucial for businesses to be aware of the higher interest rates and fees associated with such loans and to ensure they are able to meet the repayment terms.

Understanding the Singaporean Government’s Intervention

The Singaporean government has implemented various loan schemes to support small and medium-sized enterprises (SMEs) in their quest for financial resources. This intervention mainly aims to provide more accessible financing options for SMEs while promoting sustainable business growth.

Introduction to Special Assistance Loan Packages

1. SME Working Capital

The Enterprise Financing Scheme – SME Working Capital Loan (EFS-WCL) supports SMEs in addressing their operational cashflow needs. The loan helps businesses cover short-term expenses and provides an opportunity to boost their working capital.

2. SME Fixed Assets Loan

This loan scheme is designed to help entrepreneurs in acquiring fixed assets such as commercial property or equipment. By offering financial assistance, the government seeks to encourage business expansion and supports SMEs as they set up new facilities or upgrade existing ones.

3. Enhanced Enterprise Financing Scheme Trade Loans (EFS-TL)

The EFS-TL is another government-backed initiative aimed at assisting SMEs in their trade financing needs. It supports businesses involved in import, export, and other trade activities by providing affordable working capital finance solutions.

Key Features and Benefits of Government-Assisted Loans

Government-assisted loans offer several benefits over traditional financing options:

• Lower interest rates due to government support
• Flexibility in repayment terms
• Longer loan tenures for certain schemes
• Access to a wider range of financing products
• The risk share of up to 70% by Enterprise Singapore. This increases your chances of approval because of less lender risk.

These features make government-assisted loans an attractive financing option for SMEs looking for accessible and affordable funding options.

Business Loan Application and Eligibility Criteria

To apply for government-assisted loans, your business must meet specific criteria, which may vary per loan product. Typically, the eligibility requirements include:

• The business must be registered and operating in Singapore
• At least 30% local shareholding (i.e., Singaporean or Permanent Resident)
• Maximum annual revenue or number of employees may apply, depending on the specific scheme. For SME Working Capital Loans, the annual sales must not exceed S$500 million.

Best SME Business Loans (2023)

SME Working Capital

The SME Working Capital Loan is a financing option designed to help Singapore-based enterprises access funds for operational cash flow needs. Offered in partnership between the Singapore government and various banks, it aims to provide financial support to small and medium-sized enterprises (SMEs) in order to promote economic growth and business expansion.

Key Features:

• Participating Financial Institutions: A total of 19 financial institutions are participating in the SME Working Capital Loan scheme.
• Loan Amount: Each of the participating financial institutions can offer loans up to S$500,000 to a single borrower.
• Duration of the Scheme: The scheme is active from 1 October 2022 to 31 March 2023.
• Loan Tenure: The duration for which the loan can be borrowed varies between 1 year and 5 years, giving businesses flexibility in repayment.
• Varying Criteria and Rates: Prospective borrowers should be aware that credit criteria, as well as interest rates, will differ among the various financial institutions participating in this scheme.
• Risk Share:
  • Standard Risk Share: The risk associated with this loan is shared at 50%, meaning both the lender and borrower bear equal risk in case of any default.
  • Young Enterprises: If the borrowing entity is a young enterprise, it may receive a more favorable risk share of 70%. This is to encourage and support budding businesses and reduce their borrowing risk.

OCBC Business First Loan

The OCBC Business First Loan is designed specifically to meet the needs of start-ups and young businesses in Singapore. This startup business loan offers a quick and hassle-free way for SMEs to obtain financing of up to SGD 100,000, helping you to grow and expand your ventures.

Interest rates on this loan are competitive (between 7.75% and 9.75% p.a.) and tailored to suit your specific business needs. Furthermore, the repayment tenure can be flexible, thus offering you the ability to tailor the repayment plan according to your business’ cash flow.

UOB SME Business Loan

UOB SME Loan offers a working capital loan for small and medium enterprises, providing an easy way to increase your company’s cash flow. This loan scheme can help business owners like you to cater to short-term or long-term growth projects.

• UOB SME Loan: Available for businesses in need of up to S$500,000 financing, with a default risk share of 50%. For younger companies incorporated within the last 5 years, a higher risk share of 70% is offered, allowing you to enjoy more benefits from the loan. The loan does not require any collateral, affording more flexibility for your business.
• UOB BizMoney: Unsecured loan of up to S$350,000

The current indicative interest rate for this business loan is 10.88% per annum. You must also pay a 2% processing fee and an annual fee of S$500.

DBS Business Term Loan

This loan is designed for Small and Medium Enterprises (SMEs) with key characteristics that make it one of the best choices in Singapore. With DBS Digital Business Loan, you can get up to SGD 500,000 of financial support, payable within five years. This allows you to have a smaller loan amount, thus providing a more manageable option for your business.

Moreover, DBS offers preferential interest rates for their long-term clients, helping you save on loan repayment costs. Indicative interest rates range between 7% and 11% p.a.

Standard Chartered Business Installment Loan

As a business owner looking to expand or support your operations, you may consider the Standard Chartered Business Instalment Loan. This loan offers up to S$500,000 without requiring any collateral. The approval process is straightforward and comes with a repayment period of up to 5 years. With this loan option, you don’t need to pledge any collateral. Only personal guarantee(s) is required.

In addition to the main loan offering, Standard Chartered provides other specialized SME loan products, such as the SME Working Capital Loan in partnership with Enterprise Singapore. This program offers risk-sharing of 70% by Enterprise Singapore, supporting businesses with working capital needs and promoting growth in the Singaporean market.

Maybank Business Term Loan

With the Maybank Business Term Loan, you can secure up to a S$500,000 loan, collateral-free. This can be a significant advantage for your business, especially if you’re in the early stages and don’t have substantial assets to offer as collateral. This loan offers a repayment period of up to 5 years, which provides adequate time to settle the loan while you focus on growing your business.

The eligibility requirements for this term loan include that your business should be established for at least 3 years to qualify. Additionally, while interest rates can vary, make sure to compare them with other options in the market to ensure you’re making a well-informed decision.

In-depth Analysis of Selected Loans

A. Low-Range Loans: Up to S$200,000

1. UOB BizMoney Loan

A part of UOB’s suite of SME financing options, BizMoney offers an unsecured loan of up to S$350,000. It provides substantial financial support for SMEs looking to navigate their growth or operational challenges, all without the need for collateral.

2. OCBC Business First Loan

Tailored specifically for start-ups and younger businesses, the OCBC Business First Loan offers a quick solution for those in need of up to S$100,000. With competitive interest rates ranging from 7.75% to 9.75% p.a., and a flexible repayment tenure, this loan caters to the unique cash flow needs of newer enterprises, facilitating their growth and expansion efforts.

3. DBS Digital Business Loan

DBS Digital Business Loan stands out for its capacity to offer up to S$500,000, though smaller businesses can access amounts tailored to their needs, within a repayment period of up to five years. With indicative interest rates ranging between 7% and 11% p.a., and preferential rates for long-term clients, DBS provides a cost-effective and manageable financing option for SMEs.

B. Mid-Range Loans: Up to S$500,000

1. Standard Chartered Business Installment Loan

This collateral-free loan option from Standard Chartered allows businesses to access up to S$500,000 with a repayment period of up to 5 years. The straightforward approval process and the requirement of only personal guarantee(s) make it a hassle-free solution for businesses looking to expand or stabilize their operations.

2. UOB SME Loan

UOB’s SME Loan is a versatile option for small and medium businesses in need of financial support of up to S$500,000. Additionally, the loan has a risk share of 50%, though young enterprises incorporated within the last 5 years can enjoy a heightened risk share of 70%. However, businesses should note the 2% processing fee and annual fee of S$500 when considering this loan.

3. Maybank Business Term Loan

Maybank’s Business Term Loan is a collateral-free option that caters to established businesses, requiring at least 3 years of operations for eligibility. Offering up to S$500,000 with a repayment period of up to 5 years, this loan provides SMEs with the financial flexibility they need, albeit with a closer look at the market’s interest rates to ensure a cost-effective choice.

Final Word

In your search for the best business loan in Singapore, consider options like the DBS Digital Business Loan and the SME Working Capital Loan by Standard Chartered. These loans offer competitive interest rates and loan amounts to help your business grow. Licensed moneylenders also provide alternative financing options for businesses.

Key Takeaways

• Different loans cater to different business needs, so choose based on your business size and loan requirements.
• Interest rates, loan amounts, and repayment periods vary among different banks and lenders.
• Licensed moneylenders can offer alternative financing options if your business doesn’t qualify for government-assisted loans or standard loans.

Need to inject capital into your business? Find the best business loan for your SME with Loan Advisor. A one-stop loan comparison tool, quickly and easily compare multiple loans with a tap of a button. Request up to three loan quotes today!