SME Loan Singapore 2023 – Guidance and Overview
What is the best way to obtain an SME loan if you own a business that needs funding to expand?
Many Singapore banks offer this financing, but they might be confusing at first. In this article, we will discuss everything you need to know about SME loan Singapore so that you can make an informed decision about your application process.
What Does An SME Loan Singapore Mean?
Small and medium-sized businesses (SMEs) play a significant role in Singapore’s economic system and specifically, SMEs are organizations with less than 499 employees. Over 90% of Singapore’s GDP comes from SMEs with a total employee of 2 million people, making them became the foundation of Singapore’s economy.
These Enterprises Require Cash to Develop and Flourish
These businesses need financing to grow, expand or just even stay afloat in today’s competitive business environment. This is where small business loans come in handy for SME owners who may want to purchase new equipments or hire more staff members but do not have enough money on hand for such investments at any given time.
Types of SME Loans
• Business Term Loan
The most common type of business loan offers fixed monthly payments and a set interest rate over an agreed-upon term (length). The interest paid on this type of loan will usually be based on your business’ credit score as well as other factors such as your operating history.
• Invoice Financing (Invoice Factoring, Invoice Discounting)
This type of financing allows you to receive cash upfront in exchange for your outstanding invoices—meaning you no longer have to wait 30 or more days after the sale occurs before receiving payment on the invoice itself! You’ll still need a certain amount ($50K+) in outstanding invoices though so make sure yours meet this requirement before applying for this kind of financing option.
(Note: while there are some similarities between invoice discounting/factoring companies, one thing sets them apart from each other; discounting companies give clients access to their funds immediately, whereas factoring companies wait until they’ve collected all their client’s outstanding invoices before paying out any funds.)
• Working Capital Loan
This loan is normally for the working capital purpose for business expansion, for a project cost as a working capital for an existing project, or as a working capital to buy inventories.
How to Choose the Right SME Loan?
When choosing a loan, you can apply for loans that match your business needs. For instance, if you need to buy new equipments or expand your operations, then choose a loan that allows you to do so.
However, if it is just one-off expenses like paying off debts or repairing your vehicle, then there are other options available such as applying for a business term loan for immediate cashflow needs.
Also when choosing an SME loan, such as for working capital purposes; make sure that the interest rate on the loan does not exceed what is your business profit margin and will not burden your company financially in any way. For example, if your margin is 20% if the loan is 8%, it is still reasonable to take the loan and get a lesser margin of 12%, than not to do the project without any funding.
What Are the Charges/Fees Involved in an SME Loan?
If you have a good credit score and a regular cash flow from your business, then it’s possible to get an SME loan at a higher approval rate. Nowadays, most Singapore banks charge interest rates of between 8%p.a. and 11%p.a. You should also keep in mind that the processing fee is usually 1-2% of the total borrowed amount. It’s important to note that there are other charges involved with taking out an SME loan:
How Much Can I Borrow?
The amount you can borrow will depend on the following factors:
Your business’s cash flowYour business’s financialsYour business’s credit ratingYour director’s personal credit ratingDirector’s income
What Will the Bank Take into Consideration?
How Do I Apply for an SME Loan?
To apply for an SME loan Singapore, you simply need to:
Get a copy of the loan application form from your bank.Fill in the application form and submit it to the bank.Wait for your application to be reviewed by the bank. If they approve your loan, they will contact you directly with more information about how to proceed with making payments on that loan and any other information that they consider relevant to your business needs.
Applying is easy, however, getting it approved is not. Do you know that if you get rejected, you will need to wait for 6 months to 12 months before you can re-apply again?
So if you wouldn’t wish to take the risk, you may consult with Bizsquare Management Consultant Pte Ltd for help and we’ll be happy to assist you.
Conclusion
Applying is easy, however, getting it approved is not. Do you know that if you get rejected, you will need to wait for 6 months to 12 months before you can re-apply again?
So if you wouldn’t wish to take the risk, you may consult with Bizsquare Management Consultant Pte Ltd for help and we’ll be happy to assist you.
Director of Bizsquare is registered Practising Management Consultant under Enterprise Singapore.
Bizsquare is a one-stop business consultancy firm providing Loan Consultancy Services, Accounting and Corporate Secretarial Services, Branding and Marketing Consultancy, Strategy Management and Start-up Mentorship.
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