SME Loans in Singapore- An Ultimate Guide

A business loan can help small business owners to create new products and services and to grow their businesses. The loan aids cash flow and liquidity. As the COVID-19 pandemic worsened, many Singaporean SMEs closed within weeks. This was largely due to the stricter quarantine rules that made it difficult for customers and sales to continue. The economy also fell, with Singapore’s GDP falling 5.8% by 2020. To help businesses recover, the government began offering small-to-medium-sized business loans last year. Banks have also been funding businesses during this time. Here are the five steps you need to take if you’re looking for a business loan in Singapore.

An Overview of Exploring Options, Factoring, Invoice Financing & Discounting

When considering a business loan, it’s essential to understand the associated costs and risks. Depending on your needs, various loans are available to small and medium-sized businesses. Here, we’ll explore your options and help you find the best loan for your business.

Business Loan Options

Small businesses in Singapore can now apply for loans of up to $500,000 from local banks with similar terms. The Business term loan, also called the working capital loan, is available to businesses that have been open for two to three years. This financing option does not require collateral and is an excellent way for businesses to get the money they need to grow.

Two types of business loans are available to Singapore SMEs: the SME Working Capital Loan and the Temporary Bridging Loan. The SME Working Capital Loan lets businesses borrow up to $1 million and pay it back over five years. The government and 17 other financial institutions share 50–70% risk. The Temporary Bridging Loan Programme provides SMEs with credit of up to $5 million at 5% per year. The 19 financial institutions in this financing option share 70% of the risk with the government.

The SME Working Capital Loan and Temporary Bridging Loan Programme are financing options that provide SMEs in Singapore with credit up to $5M. The loans can be repaid over five years, and the government shares 50–75% risk with the financial institutions participating in these schemes.

Small businesses can borrow up to $100,000 through an SME Micro Loan. This loan is for four years and can help cover daily expenses and maintain cash flow. However, startups and solopreneurs often need help to obtain business-term loans quickly. This can make it difficult to maintain cash flow for these businesses.

Factoring, invoice financing and discounting are all ways for small businesses to improve their cash flow. SMEs can find invoice factoring online, which is when they sell their accounts receivables to a third party. Unlike invoice financing and discounting, the SME sells the invoice to a third party at a steep discount. The third party will then seek full repayment from the SME. Late payments from clients can be turned into immediate cash through these methods.

Factoring Invoices

Factoring invoices, for example, allows businesses to sell their unpaid invoices at a discount to get the cash they need quickly.

Invoice Financing

Invoice financing is a way to get cash for your invoices before they are due. It’s a good option for businesses that have good credit.

Invoice Discounting

Invoice discounting is a way for businesses to get cash flow by using their unpaid invoices as collateral. The business collects payments from customers and then pays the invoice discounter. The discounter then pays the business when the customer pays the discounter.

A Brief on Credit Lines & Machinery Loan

Credit lines are a useful way for businesses to borrow money when needed. A credit line is a loan that a business can access whenever it needs money, up to a certain amount. This amount can be as high as $300,000 for small and medium-sized businesses. The biggest benefit of using a credit line is that the business only has to go through the approval process once. After setting up the credit line, the SME can borrow money “as needed” without loan approval.

When looking for a business loan, it’s important to understand the different types of loans available. Some local banks offer equipment and machinery loans for purchasing equipment and machinery. Other options include the Venture Debt Loan, Trade Loan, Project Loan, and Mergers & Acquisitions Loan from Enterprise Singapore. Each type of loan has its own benefits and drawbacks, so choosing the loan that best meets your needs is essential.

Also Read: Temporary Bridging Loan Programme: Explored & Explained

Significant Steps to Follow to Get Business Loan

After analyzing the available options, organizing your business records is important when looking for a loan. Ensure you keep copies of all documentation related to your business assets, such as bills and receipts. Banks need to see your financial history, so it’s crucial to have accurate and up-to-date bank statements, payment records, and other bills and receipts.

Maintaining good credit can be beneficial when taking out a loan. A credit score is often used to determine if an applicant is a low-risk borrower, and a high credit score could result in a faster application process and a more favourable interest rate. A low credit score could lead to a longer application process and a higher interest rate.

When applying for a business loan, you must make sure you can repay the loan. This includes understanding the different interest rates and comparing them to your current debt.

When applying for a business loan, it’s important to have your paperwork in order. This way, you’ll know what information you need ahead of time and will save time rushing to get it.

The Takeaway
When finding the best small business loans, your business’s financial needs are a major factor. Do your research to find loans with flexible terms and good interest rates that can be paid back differently. This will help you find the right loan for your small business.

MSMEBlog offers insights into the Govt. Schemes available for MSMEs. Learn more about government MSME schemes by visiting

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