Due to rising production costs and high inflation, many small and medium enterprise owners are looking to improve cash flow. This is where business loans come in.
A business loan can provide the much-needed funds that a business can use for its business operations. The proceeds from a business loan can be used for managing cash flow, grabbing growth opportunities, boosting inventory, and other business-related expenses.
Thankfully, SME owners have plenty of options for financial assistance in Singapore.
Here, we will take a closer look at your options as well as determine the interest rate and total cost of taking out a business loan.
What Is the Interest Rate for Business Loans in Singapore?
The average interest rate on a business loan in Singapore is between 7% and 11% p.a. for banks and 5 to 15% p.m. for licensed moneylenders.
However, business loan interest rates will vary per bank and financial institution.
How Much Would a 250k Business Loan Be?
Most banks offer a maximum small business loan amount of between S$300,000 and S$500,000. With licensed money lenders in Singapore, you can borrow up to S$200,000.
Let’s say you need a S$250,000 business loan. Most banks, legal lenders, and financial institutions offer SME loans in this amount.
Note: Of course, the total approved loan amount will depend on several factors, such as your business:
- Total operational years
- Business minimum turnover
- Credit history and credit score
The total cost of the business loan will also depend on several factors, such as the
- Additional fees and charges
- Loan tenure
Consider this scenario:
Mr. Kim took out a S$250,000 SME business loan with a 6% annual percentage rate and a 3-year term. His business needs to pay approximately S$7,606 each month and a total of almost S$23,798 in interest. The total costs of the loan will be around S$273,798.
The Best SME Business Loans in Singapore
Name of Loan
Interest and fees
SME Working Capital
S$500,000 (From 1 Oct 2022 to 31 March 2023)
Up to 5 years
Per bank or FI assessment
OCBC Business First Loan
Up to 4 years
Per bank assessment
DBS Business Loan
Up to 5 years
Per bank assessment
Standard Chartered Business Installment Loan
Up to 3 years
UOB BizMoney Loan
Up to 5 years
Maybank Business Term Loan
Up to 5 years
Per bank assessment
With the advent of COVID-19, Singapore Government launched measures to address the financing needs of SMEs in response. These measures come in the form of relief packages, namely the SME Working Capital.
Why choose government financing?
- You can defer principal repayment for the first 12 months of the loan, helping you manage cash flow better
- SME Working Capital Loan (WCL) offers loan amounts of up to S$500,000 up to 31 March 2023
- The risk share of 70% by Enterprise Singapore. This increases your chances of approval because of less lender risk
- Government-funded small SME loans are significantly more trustworthy
1. SME Working Capital Loan
Among the many SME loans available in Singapore is SME Working Capital Loan (WCL). It is a government-assisted financial loan under the Enterprise Financial Scheme (EFS-WCL). This loan is made available to SMEs or businesses with a maximum of 200 employees. Plus, the SME must be registered in the country and is at least 30% owned by Singaporeans/PRs.
There are around 19 financial institutions (FI) participating in this scheme. Each participating FI can provide up to S$500,000 per borrower from 1 October 2022 to 31 March 2023. The loan tenure will range between 1 year and 5 years.
Note that credit criteria and interest rates will vary across different financial institutions. With this loan, the risk share is at 50%. Young enterprises may receive a risk share of 70%.
Banks are also a good source of business financing for SME loans. Different banks have different financing options that small business owners can make use of when they find themselves in need of equipment financing, or short on funds to pay off employees’ monthly salaries and continue daily operations during business days. Most banks will have different business loan options for you.
Why choose business loans from banks?
- If you only want to borrow a smaller business loan amount
- Banks and financial institutions provide long-term loans with competitive rates at any given point.
- Often has no collateral required
- Some requirements may be ideal for your business.
1. UOB Bizmoney SME Loan
Among the SME business loans provided by banks is the UOB Bizmoney Business Loan. It has a maximum loan amount of S$350,000 and a repayment period of up to 3 years.
The current effective 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. The loan is an unsecured business term loan, as such does not require the applicant company to pledge any property or deposit as collateral, but personal guarantee(s) may be required.
This loan is available to sole proprietorships, partnerships, or private limited companies that are registered and have been operating in the country for at least 3 years.
2. OCBC Business First Loan
OCBC’s Business First Loan is one of the SME micro-loans in Singapore that offers financing of up to S$100,000 with a longer tenure of 4 years. This startup business loan is similarly an unsecured business term loan, and, as is the case with unsecured loans, OCBC’s offer requires no collateral.
Start-ups of less than 10 personnel can take full advantage of the loan, as the demanded group employment size must not exceed that number. However, there must be at least one guarantor who is a Singapore Citizen or PR, aged 21 to 62 years old, and has a minimum annual income of S$30,000. The interest rate will also depend on bank assessment.
3. DBS Business Loan
DBS Business Loan offers loan financing for a hefty amount of S$500,000 and tenure that can stretch as long as 5 years for repayment. This similarly does not require any collateral.
In addition, DBS also offers a variety of loan options to cater to your specific need, with micro-loans applicable for a small business and financial products that will be better tailored to your financial situation. Interest rates will depend on bank assessment.
4. Standard Chartered Installment Loan
This business financing option offers a loan amount that can range from S$70,000 to S$300,000 with flexible tenure from 1 year to 3 years. Like most small and medium enterprise loans, the package has collateral-free financing.
To qualify for the business loan application process, the company must be registered in the country and operating for at least three years, with a minimum annual turnover of S$750,000, and 50% shares held by citizens or PRs. The effective interest rate of this loan will vary, but at present, the nominal interest rate is at an 11% maximum.
5. Maybank Business Term Loan
Maybank Business Term Loan makes S$500,000 financing available for a repayment period of up to 5 years and no collateral requirement. The business must be established for at least 3 years, have a minimum annual turnover of no less than S$300,000, and have 30% held by Singapore citizens or PRs.
The interest rate will vary and depend on bank assessment. Maybank also offers an assortment of other loan options, from micro-loans to loans based on fixed assets, a startup business loan for working capital, and more, should you feel the need to explore more options.
Aside from government-assisted schemes and traditional bank loans, borrowing from a licensed money lender in Singapore is also a viable option.
Before dealing with any lender, make sure to verify if they are licensed by the Ministry of Law (MinLaw) of Singapore. You can find the complete list of licensed money lenders on MinLaw’s website.
Unlike banks, licensed money lenders are less stringent in their loan evaluations. As such, business owners will benefit from fast loan disbursement, especially when they need urgent cash.
Why borrow from licensed money lenders?
- Hassle-free application: Simply apply online or reach out to the licensed money lender. A loan officer will get in touch with you to schedule your face-to-face interview where they will explain the terms and conditions of the business loan
- Less stringent eligibility requirements: This is beneficial for start-up business owners whose business doesn’t meet the minimum required operational years or the minimum turnover.
- Flexible repayment terms: Most licensed money lenders can provide tailored business loan plans to suit your financial capacity and situation.
- Interest rate: 5% to 15%
- Loan Amount: Up to S$200,000
- Loan Tenure: Up to 24 months, subject to the terms and conditions of the agreement
- Business must be registered in Singapore
- Must be operational for at least one year
- Has a minimum turnover of S$60,000
A legal money lender may request additional requirements. But here are some of the basic documents you need to prepare:
- All directors and partners NRIC
- Recent information report (Business Profile) from the Accounting and Corporate Regulatory Authority (ACRA)
- Recent Income Tax Assessment Notice (both personal and from the company
- Recent financial statement
- Recent invoices or business contracts
- Recent utility bills under the company name
- Recent 6-month bank statements
- List of assets owned by the company, directors, & partners (if any)
- Office/shop tenancy agreement (if any)
Alternative Financing Options for SMEs
Aside from the above loan options, you have other options to secure the funds you need to continue business operations or development, such as:
- Credit line: Getting your business a line of credit is a convenient way of getting much-needed finances. You may only be limited to a stipulated cap, but the greatest advantage of a credit line is found not only in its convenience but also in its flexibility. The funds in your credit line account are readily available to you should you need them, and you would only need to pay interest based on the amount you have used. What’s more, credit lines also provide debt restructuring options to help you better manage your loans.
- Invoice factoring: By selling your unpaid invoices to a third-party business, they can pay a fraction of your invoices and collect invoices themselves. You can get 90% for your invoices upfront, but you will be sacrificing a portion of your revenue upfront, and still be held liable for any unpaid invoices.
- Personal loans: A personal loan is also a viable option for financing. While limited to around 6 times your monthly income, the loan will be good for an emergency, and usually comes with flexible payment options.
Other Things to Note
1. How long is the Application Process?
As most SME loans, even government-backed programmes, are available at banks, the length of processing may vary, but some promise to respond within a single day, such as the licensed moneylenders.
2. Can I get a Business Loan if I have a Bad Credit Score?
Although a low credit score may limit your options, it is only one of the many factors that a lender takes into consideration. You can still improve your chances by propping up other aspects, like asking for a lower loan amount, having a strong guarantor, opting for a collateral loan, and providing a detailed business plan to make a good argument regarding your company’s ability to repay. It is generally suggested to make good on your loans from here on by making early repayment of your monthly fees.
Don’t be afraid to shop around to find the best business loans that suit your business needs. Aside from government-backed and bank loans, you can also look for licensed money lenders, especially if you need urgent cash.
- The average interest rate on a business loan in Singapore is between 7% and 11% p.a for banks and 5 to 15% p.m for licensed moneylenders.
- The total loan amount will vary depending on several factors, including total business operational years, minimum turnover, and business credit score
- SME Working Capital Loan is a government-assisted scheme that allows SMEs to borrow up to S$500,000 until 31 March 2023
- Legal money lenders are a viable option if you need urgent cash. You can borrow up to S$200,0000 at attractive rates.
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