If you want to start a business, promote its growth, or are in a cashflow crisis, a business term loan can be a lifesaver.
However, there are vital things to consider before applying for a business term loan in Singapore. Banks will consider the years you have been in business and how much you have made in revenue.
That said, some business loans do not require any collateral. You can also take up to five years to repay the loan. But what is business term loan, really?
Before you take the plunge, there is more to learn about applying for a business loan in Singapore. Read on to see what is the best option for you and how to go about getting a business loan.
From time to time, small to medium-sized enterprise (SME) business owners will require a business term loan.
There are many reasons why such business loans can be beneficial. One significant fact is that they are flexible. Business term loans can be used to:
If you’re still wondering what is business term loan, you’re right to do so – after all, there are many types of business term loans in Singapore.
Some common ones include:
The business startup loan in Singapore is available to an SME with limited or no financial history. However, the loan cap amount may be up to $100,000.
A standard business loan is a good option for businesses that need working capital.
You can use it to finance day-to-day operations such as inventory purchases, payroll, etc. Since this is an unsecured business loan, you don’t need to pledge an asset as collateral.
Besides, it is flexible as you can repay your loan for up to five years. Banks such as United Overseas Bank, DBS Bank, and OCBC Bank offer standard business loans, though each may have different requirements before approval.
This government-assisted business loan is offered to local SMEs with a maximum of 200 employees. It’s available to SMEs and Singapore -registered companies with no less than 30% of the local shareholding. You can get up to $ 1 million with a repayment period of up to five years.
You should be able to enjoy good interest rates on the abovementioned small business loans if you have a good credit score.
If you can’t qualify for a bank loan, you can try other options such as legal money lenders, crowdfunding, etc.
Compared to banks, licensed money lenders are more lenient. But all licensed money lenders have to follow the guidelines of the Ministry of Law concerning interest rates. They are also much more flexible as you can negotiate repayment options with your money lender.
For any business loan in Singapore, financial institutions or lenders will evaluate a company’s financial history or check credit records.
1AP Capital in Singapore proves to be one of the best licensed money lenders with reasonable terms for your business loan.
To get an SME loan, you must pass the credit evaluation.
Yet, licensed money lenders have fewer requirements for business loan applications than banks, as we will see.
Most legal money lenders require that:
Your company must:
Fortunately, the Singapore government plays a huge role in supporting SMEs. One is through risk sharing of the loans, which is between 50-70%.
Any SME opting for a government-backed SME Working Capital Loan has to be incorporated in Singapore, with at least 30% local shareholding. Its annual group revenue must not exceed $100 million, and it must not have more than 200 employees.
Did you apply for a business term loan in Singapore but weren’t successful?
It could be due to any of these reasons:
If you have just started your business, any lender will consider it too young as there will be no financial history to assess your stability to offer a business loan.
At 1AP Capital, we may not require your business to be more than a year old. However, for banks, the requirement varies depending on the institution.
For instance, as United Overseas Bank requires your company to be at least three years old for some loans, while DBS Bank requires an SME to be at least a year old.
Insufficient cashflow is a red flag to lenders. It tells them about your business’s financial health. So it would help optimise your cashflow before borrowing any loan.
A business owner has to provide a personal guarantee for an unsecured business loan. Your credit score helps lenders assess the risk associated with giving you a loan. Those with a bad history of loan repayments are considered a risk.
When applying for a business loan, make sure the business loan has made a profit for the last financial year. Losses mean that your SME has a high chance of becoming insolvent. And no one would want to risk associating with a company that is headed for failure.
When an SME has too many existing debt obligations, meeting the monthly obligations is difficult. The outcome will be more debt for the business.
However, this may not be an issue if an SME can prove it has had good financial management in prior years.
If you need a small business loan in Singapore, you can consider alternatives such as licensed money lenders, peer-to-peer lenders, mortgage financiers, private lenders, etc.
The best thing about licensed money lenders is that they have to follow the rules and regulations set by the Ministry of Law. In addition, they have fewer legal barriers.
If you find the process of getting a business term loan complex, consider taking a personal loan instead of a business loan.
The main differences between business loans and personal loans are:
|Maximum of $20 million
|Maximum of four times your monthly salary
|Ranges between six months to two years
|Business financial records, ACRA records, etc.
|Personal income records
|Loan Processing Time
|Two weeks plus
|Approval within a few days
Here is the application process:
The documents required by most lenders include the following:
Additional documents may be required depending on the lender, the type of business loan you are looking at, and the amount you need.
Any business loan is only applicable to Singapore-incorporated companies.
For most banks, the facility fee is 2% of the loan amount. Again, the administration fees are levied from 1-5% of your approved loan amount. However, this may change depending on your lender.
Most local banks need a guarantor, but licensed money lenders often do not.
Now that you know what is business term loan, you can see that a business loan in Singapore can help you maintain your working capital, improve your cashflow, and boost your profitability.
Whether you require an SME business loan for a startup or established business, 1AP Capital is your best option.
You must submit your application online or in person, and provide relevant documents to get the loan.
Business loans are available from banks, licensed money lenders, peer-to-peer lenders, etc. However, unlike money lenders, most banks may be reluctant to give startup loans.
Typically, most business loan interest rates for banks range between 7-12% per annum. Licensed money lenders cannot charge more than 4% monthly interest.
Once you provide the required documents for your SME loan, the application may take one to two weeks to be reviewed.