Best SME Loans for Small Businesses 2023

A business loan Singapore is a type of financing that is used to fund your business’s expenses. Typically it’s used for the business’s expansion – purchasing inventory, new business locations, or expanding your staff headcount.

Business loans in Singapore are typically available through banks, credit unions, and even moneylenders, though there are certain stipulations attached before a business can take out a loan with them. Some of the most common factors include the length of time the business has been in operation, its yearly revenue, your credit score, the type of SME loan required, and more.

The most common type of business loans in Singapore are secured loans, which require collateral, and unsecured loans, which do not require collateral.

There are also other types of SME loans available which are listed below:

Unsecured Business Term Loans – these are loans that are usually unsecured and used to cover a one-time expense. The business will receive a lump sum loan amount and then repay back the loan, interest, and fees over a period of time. 

Lines of Credit – this loan is similar to a credit card, where you receive access to a line of credit that your business can draw from. Depending on the lender and terms of the agreement, you will have to repay the minimum loan amount monthly or through installments.

Equipment & Vehicle Financing – while working akin to a term loan, the loan is secured by the vehicle or equipment you are buying, with lower interest rates and better terms. However, should you default on the loan, the risk is that the item will be repossessed by the lender.

Short-term Business Loans – these loans for SMEs are ideal for any that need funds quickly. They are also more expensive, with tighter and more stringent terms associated.

SME Micro Loan – Small amounts of capital that smaller and newer businesses would go for as the loan amount isn’t very large.

Receivables Financing / Invoice Financing – The financing allows you to receive a percentage of your invoice amount paid earlier. Once the sale has been completed, the financier will give you the remaining percentage from the invoice, after deducting the fees.

SME Working Capital Loan – Is a loan taken out to finance a business’s daily operations. They are not used to purchase equipment or any other long term plans, but to keep the daily operations running smoothly.

Trade Financing – These are short term loans used for import and export transactions, regardless of how the transportation works, be it road, sea or air. 

Property Loan – A loan for a business to acquire more property relating to the business in order for the business to expand its operations or franchise.

Depending on the lender itself, the average approval time could be anywhere from a day to a week. Typically, licensed moneylenders will approve your loan application within a day, should you present all relevant documentation and necessary identification correctly.

Banks, like Citibank, would take a longer period of time to approve your loan application, with some taking more than a week to approve. 

Depending on the lender or bank, your credit score could mean the difference between an approved loan or a rejected loan. Banks typically require great credit scores, with most wanting to see your credit repayment trends over the last 12 months, and records of your credit history.

On the other hand, licensed moneylenders do not take into account your previous credit scores, only the ability to repay the loan itself. This would be good for any business owner with less than stellar credit scores who need a loan in order to grow their business further.

According to the Ministry of Law Moneylenders’ Act, the maximum rate of interest a licensed money lender can charge is 4% per month.

Citibank however, will charge 6.25% – 15% per annum depending on the loan amount sought after.

The biggest difference between a licensed moneylender and a bank is the amount of loan available to the borrower. While a bank loan oftentimes offers lower business loan rates due to their access to larger sources of funds, the process of application and difficulty in approval means that smaller lenders should also be considered.

Moneylenders might not have access to a large amount of funds, but the ease of their loan application and fewer restrictions would make it easier for small businesses to obtain the funds they need for their businesses.

Singapore business owners do not have to worry about that. All you need to do is to apply to a licensed lender and bring along the following documents.

• You and all other directors and partner’s National Registration Identity Cards
• All recent information reports from the Accounting & Corporate Regulatory Authority (ACRA)
• Your personal and business’s most recent income tax assessment notice
• Your company’s most recent financial statement
• All recent invoices or business contracts
• Recent utility bills under the company name
• Your company’s recent 6-month bank statements
• The list of assets owned by the company, directors & partners

Your company’s office/shop tenancy agreement

• Expanding Your Operations

All businesses seek to expand, be it opening new franchises or expanding their operations. A business is unlikely to remain small for long, especially when it could be offering its products or services to a wider group of people out there.

• Purchasing Additional Inventory

If your business involves retail or seasonal items, you need to ensure you already have supplies and inventory ready before the next season comes in or before stocks run out. SME business loans would help you purchase the required inventory needed to get things ready to ensure you have enough to meet the rising demand of your customers.

• Boosting Your Business Capital

A business capital or working capital is the money you use to ensure your operations continue daily, which presents the need to have a large overhead and working capital to run your daily operations.

• Improving Your Business Credit

 A short-term SME loan with a fixed-term loan can help you develop a good credit history for your business, allowing you to take out larger loans in the future when you need to expand your business.

• Enable New Business Opportunities

When opportunity knocks, you need to ensure that you have enough working capital to meet those opportunities, be it an expansion, new business partnerships, or even further investments in the company. Such opportunities need money, something that an SME loan provides.

• Recruiting & Refining Talent For Your Business

If you want to stay in business and keep competitive, you and your employees need to keep up with developing trends and innovation. A business that doesn’t innovate will stagnate and fail.