With the adverse effects of the COVID-19 crisis on the economy, small-medium enterprises (SMEs) in Singapore are still facing challenges while on their road to recovery.
This was revealed by a study conducted by Mastercard, who found that 3/4 of Singapore’s SMEs declared that they have not yet recovered company operations.
Fortunately, there are small business loans.
As of 24 June 2021, the Monetary Authority of Singapore (MAS) and the financial industry extended their support measures for individuals and SMEs who struggle with finances due to the COVID-19 pandemic.
In light of this, we looked for the top financial products and best business loan options for SMEs to help you decide which loan best fits you.
What are the business loan options in Singapore?
SME Business Loan is a secured credit facility that offers financing needs of entrepreneurs and business owners. The best small business loans in Singapore range from government-assisted financing schemes, bank business loans, moneylenders and a lot more financing needs options offered by various banks and financial institutions.
For your convenience, we categorized these loan options for you:
- SME Working Loan (WCL) – Best small business loan
- Temporary Bridging Loan (YBL) – Best high business loan
Bank Business Loans – Best alternative financing option
- DBS Digital Loan
- OCBC Business First Loan
- UOB BizMoney Loan
- Maybank Business Term Loan
- Standard Chartered Business Instalment Loan
Moneylenders unsecured business loans – Best for fast cash disbursal
- Bugis Credit Business Loan
Other business loan options:
- Personal loans
- Invoice Factoring
- Credit line
|Name of Loan||Interest||Maximum Loan||Tenure||Eligibility|
|SME Working Capital Loan (WCL)||Will be determined by the bank or financial institution (FI) based on their risk and credit assessment (It could range from 6% to 7.5% per annum)||S$300k per borrower (50% Government risk sharing; 70% for young company – those who were formed with the past 5 years, with at least 1 employee, and more than 50% equity owned by individuals)||5 years(Most FIs offer no early repayment for early redemption of loan; subject to terms and conditions agreement)||Business must be registered and operating in Singapore with at least 30% local shareholdingsGroup annual revenue of not more than S$100 million or group employment size of not more than 200 employees|
|Temporary Bridging Loan Programme (TBLP)||Capped at 5% per annum||S$ 3 Million (70% Government risk sharing)||5 years.(Borrowers can also apply for 1 year deferral of principal repayment, subject to FI’s assessment and approval)||Business must be registered and operating in Singapore with at least 30% local shareholdings.(extended until 31 March 2022)|
|DBS Business Loan||Per bank assessment||Up to S$ 500,000(Loan amount depends on bank’s assessment)||Flexible repayment period of 1-5 years||Open to all businesses, including companies that don’t qualify for government-assisted loans|
|OCBC Business First Loan||Per bank assessment||S$ 100,000||Up to 4 years||Any business registered and operating in Singapore between 6 months and 2 yearsAt least 30% local ownershipNo more than 10 employees or S$ 1 million annual turnoverAt least 1 guarantor required|
|UOB BizMoney Loan||10.88% per annum2% facility rateS$ 500 annual fee||S$ 350,000||Up to 5 Years||Sole proprietorship, Partnership, or Private Limited CompanyRegistered and operating in Singapore for at least 3 years|
|Maybank Business Term Loan||Per bank assessment||Up to S$ 500,000 for working capital||Up to 5 Years||Business must be established for at least 3 years with at least 30% local shareholding;S$ 300,000 minimum turnover per annum;At least 1 guarantor|
|Standard Chartered Business Instalment Loan||up to 11 % per annumAnnual Fee: 2% of the approved loan amount for the first year, S$ 100 for the subsequent years||S$ 300,000||3 Years||Sole proprietorship, Partnership, or Private Limited CompanyRegistered and operating in Singapore for at least 3 years with 50% local ownership, and a minimum turnover of S$ 750,000|
|Bugis Credit Business Loan||Will be calculated and discussed to you by a loan officer; might range from 5% – 15%.||S$ 200,000||Depends on the business loan plan||Business must be registered and operating in Singapore for at least 1 year; and must have a minimum turnover of S$ 60,000|
SME Working Capital Loan (SME WCL) – Best for a small business loan
This is one of the six financial schemes of the Singapore government under the Enterprise Financing Scheme (EFS) administered by Enterprise Singapore (ES), a statutory board under the Ministry of Trade and Industry. It is the best business loan for small businesses since it aims to provide targeted business financing to better support Singapore SMEs throughout their various phases and growth.
SME Working Capital Loans in Singapore are common because, unlike other business loans, you are not required to state the purpose of the borrowing. These loans are short-term and intended to cover temporary financing issues and aspects of what makes up working capital, such as payrolls, rentals, and stocking up inventory. With the unprecedented challenges of the pandemic, having enough financing for daily operations is critical, especially for small businesses, and taking up working capital loans may just be what you need.
Temporary Bridging Loan Programme (TBPL)- Best for a high business loan
The Temporary Bridging Loan Programme is another government-assisted financing scheme to help SMEs cope with the impact of Covid-19 on the economy. Compared to the SME WCL, medium enterprise loans like TBLP is best for a high business loan – those who need larger working capital for their businesses. A business owner can borrow a huge maximum loan amount of up to S$ 3 Million with a very minimal interest rate capped at 5% per year. Note that this programme only runs until 31 March 2022.
Bank Business Loans: Best for alternative financing options
Choosing government-assisted loans (i.e. SME Working Capital Loan and Temporary Bridging Loan Programme) may be the best loan option for you but there is a chance that your loan application is not qualified and approved. As an alternative, bank business loans are great to keep your new business going amidst the pandemic. Most banks that offer business loans are now going digital (for contact-free and faster transactions) and offer SME business loans with no collateral required.
DBS Digital Loan
DBS is one of the first banks to address this. Since the start of the pandemic last year, DBS has issued collateral-free loans for SMEs. The bank also introduced a new digital SME loan acceptance solution to customers for a contact-free and speedier transaction – the DBS Digital Loan.
OCBC Business First Loan
OCBC Business First Loan is another best alternative as a startup business loan. This SME microloan provides an online platform where they grant 80% off facility fee, no paperwork, and will only take less than 5 minutes for business loan application. When applying for this OCBC Business First Loan, take note that they require at least 1 guarantor who is a Singaporean citizen or Singapore PR, aged 21-62, and has a minimum monthly salary of S$ 2,500 or S$30,000 per annum.
UOB BizMoney Loan
UOB BizMoney Loan also introduced an online application process and a collateral-free business loan offer. This SME business loan is open to solo business owners, business partners, and private limited companies registered and operating in Singapore for at least 3 years. If you choose this SME loan, take note that the effective interest rate for this loan is 10.88% every year, with a 2% processing fee, plus an annual fee of S$ 500.
Maybank Business Term Loan
The Maybank Business Term Loan is perfect for those who seek a higher loan amount of up to half a million. This business loan has a repayment period of up to 5 years. The applicant company must have at least 30% local ownership, registered and operating for at least 3 years, and a minimum annual turnover of at least S$300,000.
Standard Chartered Business Instalment Loan
Standard Chartered Business Instalment Loan also offers collateral-free loans where you can borrow S$ 70,000 to S$ 300,000, with a maximum repayment period of up to 3 years (subject to bank’s approval). At present, the effective interest rate of this business loan is capped at a maximum of 11% but can vary based on the Business Instalment Loan (BIL) board rate.
Business loan application for Standard Chartered Business Instalment Loan is also made simple – documents required no longer include business financial statements. To be eligible, your business must be registered and operating in Singapore for a minimum of 3 years, has 50% or more local shareholdings, and has a minimum turnover of S$750,000.
Moneylender unsecured business loans – Best for fast disbursal of cash
Bugis Credit Business Loan
Aside from banks, you can also take a business loan and financing products from financial institutions. Moneylender unsecured business loans, like the Bugis Credit Business Loan, is best for fast disbursal of cash. In no less than an hour, you can instantly receive cash after the contract is signed.
Unlike other lenders of SME business loans, Bugis Credit Business Loan caters to all business financing needs where you can loan as much as S$ 200,000 with the help of a loan officer to discuss your loan plan, including your loan amount, interest rate, monthly repayments, etc. This startup business loan requires a hassle-free qualification to become eligible. Your business should be registered and has been in operation for over a year in Singapore and has an annual minimum turnover of S$ 60,000.
Other Business Loan Options for SMEs
If you do not qualify for any of the SME loans previously mentioned, maybe because you will just start to put your business plan into action, you might want to consider personal loans. However, the loan amount offered in personal loans is much smaller, up to 6x of your monthly salary.
Securing a business term loan for start-ups is harder since most banks require at least 6 months of business operation, proof of annual revenue, at least 30% local ownership, and a good credit score or bank account records. Getting personal loans, on the other hand, requires a more relaxed requirement, making it suitable for foreign business owners and low-income individuals.
Apart from personal loans, you can also consider invoice factoring. This is suitable for businesses that are facing issues with cash flow and/or payment collection from customers. Getting a financial institution to help you with invoice collection will save you time and energy to focus on running and managing your business. With the extra cash, invoice factoring will also help you: manage seasonal fluctuations or unexpected situations like the COVID-19 pandemic; take advantage of bulk order discounts, and; access cash without incurring debt.
Another option available is a credit line. This will allow you to draw on funds directly from your bank account when needed, up to 4x your monthly salary. Unlike personal loans, their interest rate is charged only on credit used or the amount you drew down. Also, there is an application fee for opening and maintaining a credit line.
Some questions to ask yourself before getting an SME business loan
Why do I need a loan?
Knowing your loan purpose helps you identify whether you’re trying to fill a short-term or long-term need. For instance, equipment financing is decided differently than those of financing needs, such as purchasing a quick-turnaround inventory.
How much money do I need?
Determining the loan amount you need helps you choose which lender to approach. The purpose of your loan is important here since it will tell you how much money is required to fulfill your business needs.
How urgently do I need the fund?
Most banks usually take longer business days before your business term loan gets approved. This is why the ETA survey revealed that 63% of respondents listed fast cash disbursal as the primary reason why they choose the loan. This indicates the importance of this question and why you should first ask yourself, ” Why do I need a loan?”.
Despite the vast financing options and SME loans in Singapore to help you with your business financing needs, the government even stepped in to ensure that small businesses have sufficient available funds, especially during these times of economic crisis brought by the COVID-19 pandemic.
Almost all sectors of the industry, especially Singapore’s SMEs, rely on term loans. From working capital, revenue streams, hire purchase, securing business premises and fixed assets, etc., business owners borrow money to keep their business going.
- SME Business Loan is a secured credit facility that offers financing needs of entrepreneurs and business owners.
- The best SME loans in Singapore vary on your different financing needs from working capital loans, temporary bridging loans, microloans, etc.
- Different banks and financial institutions have different requirements in securing a small business loan which your choice of loan will depend on.
- It is important to consider your loan purpose, the amount you need, and the speed of cash disbursal in securing term loans.
Some financial institutions such as Bugis Credit can help you identify and understand these considerations to know which best SME loan is perfect for your business financing needs.