All About Gaining Unsecured Business Loans in Singapore

An unsecured loan is granted and supported by the creditworthiness of the borrower or guarantor and a few other additional variables. Due to their flexibility, unsecured business term loans are popular among different types of business loans. They can finance daily operations requirements like paying employees, buying products, and funding business expansion plans. In contrast to secured loans, these loans have substantially higher interest rates. Because of this, unsecured business term loans can be evaluated and disbursed quickly.

A Brief About Unsecured Business Loan

The main concern when starting or expanding a business is financing. Unsecured business loans are a fantastic option for any company to raise working capital. An unsecured business term loan can be used for anything company-related because it is very flexible. Small and medium-sized businesses (SMEs) seeking to raise working capital find unsecured business term loans quite alluring. Let us see why.

  • Strong credit scores make it simple to obtain unsecured company capital because the application process can be completed online.
  • Collateral security is not required for unsecured business financing.
  • Loans are disbursed more quickly because the majority of the process is done online, avoiding the need for physical asset verification.
  • Unsecured business loans have less documentation than secured business loans.

The other benefits are:

1. To Establish Business Credit

In order to keep a higher rating for major capital funding, many commercial and trading organizations build their credibility by repaying minor working capital loans.

2. To Enable Business Expansion

For any firm, growth and expansion are crucial. There are times when we need to inject some capital for introducing new products, remodelling, or moving the business site to increase current profitability. Unsecured company loans make it simple to cover these costs.

3. To Handle Fluctuations During Seasonal Sales

The business needs funds to be flexible enough to retain inventory, buy raw materials, and meet other financial requirements. Unsecured business loans are frequently used to fill this funding gap for small businesses.

4. To Allow Acquisition of Business

We must give the seller a lump sum deposit when a contract is reached. Unsecured loans are helpful at this point since they can be disbursed quickly.

Things to Consider When Applying for Unsecured Business Loans

The prerequisites for various unsecured business term loans vary. Businesses registered with ACRA, those who have been in operation for the previous 12 months, and have as Director, a Singaporean/Singapore PR or a foreigner residing in Singapore, are eligible for unsecured business term loans from licenced money lenders. Other things to make note of are:

  • A consistent high credit score: Your ability to repay the borrowed money is measured by your credit score. Before applying for this loan, it is best to look at the company’s liabilities and sources of income.
  • Debt balance and cash flow condition: The best predictor of loans required is the available liquidity.
  • Age of the company: Interest rates for young and established institutions differ significantly.
  • Industry Type: The difference in how an FMCG or pharmaceutical company operates and behaves affects the loan amount.

Unsecured business loans in Singapore are available to business owners from all regulated money lenders, major banks (such as DBS, UOB, OCBC, Standard Chartered Bank), and financial organizations (such as Hong Leong Finance and Singapura Finance). When looking for a loan, keep in mind to compare and research your options before applying.

Also Read: SME in UAE & KSA: An Overview

Different Types of Unsecured Loans-An Overview

SMEs are eligible to qualify for any of the following types of unsecured business loans:

  • Term Loans: In this loan, the company receives lump sum money that it will repay in a certain number of regular installments. These loans carry interest for the duration of the loan. Frequently, terms range from one to twenty-five years.
  • Lines of Credit: Banks and other financial organizations determine the maximum loan amount to be given to businesses. As and when a certain amount of money is borrowed up to that cap, the same sum must be repaid along with interest as principal.
  • Short-term Loans: The only distinction between a short-term loan and a term loan is the length. The company receives this loan as a lump sum, which they repay at regular intervals or installments over a brief period. The duration is typically 3 to 18 months.
  • Merchant Cash Advance: This is a loan from a financial institution to a company that processes a lot of credit and debit card transactions. A firm is given a cash loan in return for a percentage of daily debit and credit card sales as well as an additional fee.

Ways to Apply for Unsecured Business Term Loans With the Help of a Licensed Singaporean Money Lender

The loan application process is much simpler and quicker than at a bank or other financial institution, which is the best thing about borrowing from a licensed money lender in Singapore. The loan can be authorized in a week.

  • Apply online or in person- If a bank or other financial institution provides an online application platform, you can apply there or go to their location.
  • Call from financial institutions- The loan officer will contact you after you submit a loan application to learn more about your business and company.
  • Second call- The banking institution may call you again after you’ve submitted your paperwork to ask questions and get further information.
  • Approval process- The loan officer will submit your paperwork for approval in the approval process.
  • Business loan proposal presentation- Following approval, the loan officer assigned to your case will present recommendations and solutions for your company’s needs.
  • Site examination- The loan officer may ask to visit your factory or business location to better understand your operational procedures, depending on the sort of business you are operating.
  • Signing documents- The loan amount, interest rate, type of rate (simple or effective interest), fines, and defaults should all be noted in the loan agreement before it is signed.
  • Funds disbursement- Funds are often disbursed to your corporate bank account in the form of FAST payments.

The document submission requires five main documents. They are:

  1. NOA of Directors (For the last two years)
  2. CBS (Credit Bureau Singapore) report of all Directors
  3. ACRA Information of business profiles
  4. Bank Statement (For the last six months)
  5. Organization’s Financial Statement (For the last two years)

A few financial institutions request a few other documents apart from the ones mentioned above, depending on the case.

Key Takeaway

Now you would have gained a deep knowledge about the different types of business loans. Consider the intended use of the money before obtaining an unsecured business term loan. It can be an excellent choice if your company urgently requires additional funds to close a working capital shortfall or seize a profitable business opportunity.

MSMEBlog discusses issues with finding suitable funding sources for MSMEs and guides them with the procedures to acquire the necessary financing. Visit MSME Blog website for more information on MSME finance.

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