In general, setting up a start up business in Singapore is no easy feat. The importance of start up business loans is to provide financing options to small businesses to support its success. When a small business lacks business financing to pursue their venture, they usually go to banks and licensed money lenders to acquire small business loans.
The following lists the types of business loans or in Singapore:
|Start-up Loan Product||Bank/Financial Institution||Interest Rate||Maximum Loan Amount||Repayment Period|
|SME Micro Loan||DBS bank
Standard Chartered Bank
IFS Capital (a bundle with Invoice Factoring)
|3.5% – 4.5% p.a||SGD 100,000||1- 5 years|
|SME Venture Loan||2.5% – 11% p.a||SGD 5 million||3- 50 years|
|First Business Loans||OCBC||3.2% – 4.5% p.a||SGD 300,000||1- 5 years|
|Startup Loan for Medical Doctors and Dentists||Orix Leasing
|2.5% – 4.5% p.a||SGD 500,000||1- 5 years|
|Personal Loan for Business||6 – 9% p.a||12x of monthly income||1- 5 years|
|Crowdfunding: Unsecured Loan||12% – 18% p.a||SGD 200,000||3- 24 months|
|Crowdfunding: Invoice Factoring||Minterest
IFS Capital (a bundle with SME Micro Loan)
|1% – 1.5% per month||Up to 80% of the invoice value||30- 120 days|
Which Business Loan Best Suits My Business?
SME Working Capital Loan
Enterprises with a maximum of 200 employees and business owners made up of at least 30% Singapore residents qualify for the SME Working Capital Loan. Funding of up to SGD 1 million may be granted for every borrower, with a repayment period of 1-5 years. The interest rate is modified according to the personal credit and financial risks involved with the business.
Temporary Bridging Loan
This other type of financing scheme is funded by the government due to the economical effect of the Covid 19 pandemic to every small business in Singapore. The maximum loan amount that may be granted is SGD 5 million and can be repaid within a 5-year period with a 5% starting interest rate.
Startup Business Loan
As the name suggests, this loan is granted to a new business that needs financing. Must at least start operations at least 6 months and does not require a high credit score for approval. The funding can be up to SGD 100,000 while the interest rate falls at 10.88% with a 5 year loan term.
SME Venture Loan
With up a maximum amount of SGD 6 million, this type of SME loan (small to medium enterprise loan) in Singapore is perfect for those who seek to consolidate their businesses. The repayment processing time is up to 3 years. Interest rates are obtainable after the business’ track record is evaluated.
Startup Loan for Medical Doctors and Dentists
Not all those who practice in the field of medicine have enough financing options for their businesses. Through Startup Loan, up to SGD 500,000 may be granted with a maximum repayment period of 5 years and 2.5% for starting interest rates.
Personal Loan for Business
To improve operations, proper financing should be set. Personal loans may help you achieve this. The maximum loan amount may vary from person to person as it is multiplied by a factor of 12. Rates can fall at 6% to 9% with a loan tenure of 1-5 years. Credit score and personal bank account statements may also reflect on your loan application.
A business loan of this type can be those that are not secured with any valuable asset that can be a vehicle, land, or home. Significantly, a maximum amount of SGD 200,000 can be granted with this type of loan while the low interest rates start at 12% to 18% and must be paid within 3 to 24 months.
This is still among the various SME loan options you can get by selling an entity’s account receivables. The amount received is significantly lower than the original amount and in most cases, the receivable must be collected within 30 to 120 days. Interest rates can fall between 1% to 1.5%.
How Can a Startup Business Loan Help Entrepreneurs?
1. Improve cash flow
In general, translating your visions for your businesses need financing to make it happen. In most cases, these funds can be scarce and might need to get assistance from banks and other loan options. Once your loan application is approved, your business can take it as a stepping stone to expand.
2. Enhanced financial budgeting
Always make sure that you are efficient in spending the money you received from a bank loan so that your company will see long-term growth and income. Having a startup business loan helps you in reducing the burden of financing your business.
3. Seize expansion opportunities
As it increases the influx of money, which effectively helps in expanding the opportunities of your business, if your operations require extra equipment that does not suit your current facility, a start-up loan can help you cope with the preliminary leasing costs.
The Application Process
Develop a Detailed Business Plan
Establishing an organized business plan may set your business in the right direction. Where you are headed, and how do you plan on getting there are crucial to the success of any business.
Moreover, a business plan can give the lender a rough idea about your business and assess if it is the best candidate for success or not.
Illustrate Relevant Industry Experience
Starting a business from scratch can hurt your chances of obtaining a business loan. If you have an existing business and you have acquired expertise over it, it will make you more likely to be granted the loan.
Manage Personal Finances
Having personal loans on top of business loans can be an inadequate combination. It is standard that the lender granting you the loan will assess your ability to repay. A pristine record for outstanding debts can increase your chances of getting the business loan to approval. Your personal finances will also reflect on your ability to comply with the interest rates, fees, and deadlines.
Choose a Financial Institution/Bank
This matter is entirely based on what your business needs. If the terms and interest are within the market standard, then you can choose to have the business loan on any institutions or banks you deem worthy.
How to Increase the Chances of Getting Your Business Loan Approved?
Amid convenient access to funding for small businesses in Singapore, certain stringent guidelines are laid down. In doing so it protects the exploitation of financial institutions and creditors at the same time.
Submit all the required documents on time
Supporting your loan application with the proper documentation can be a plus factor when applying for a business loan. While it may take more effort, the earlier you submit the requirements, the faster the process.
- When you have selected the lender of the loan, ensure you organize all these papers:
- Directors and Partners NRIC
- Recent Accounting and Corporate Regulatory Profile
- New note on income tax assessment (respectively corporate owners and corporation tax evaluation)
- Latest financial results
- Latest invoices and corporate contracts
- Latest energy bills in the name of the company
- Current bank accounts for 6 months
- All properties held by the group, directors, and partners
- Contract for workplace or store tenancy
Resolve All Existing Debt
Some entrepreneurs think that it’s only natural to have outstanding debts because you can pay it off with another debt. This can be unproductive on your part, since most of the banks, financial institutions, and lenders to date are strict with loans in Singapore. Avoid making this mistake and maintain a high credit score.
Improving Business Performance
Financial institutions or banks loan to those who they deem are capable of paying them back with interest. If your business is struggling, it is likely that you will get unfavorable outcomes for your business loan application. Enhancing the quality of operation and services can produce a positive outcome for your loan application.
From Newly Incorporated to Establishing Business
Fresh businesses are still seedlings that can either bloom or rot. Being an established business in the market can give you more chances of being approved for a loan. The reason for this is that banks do not have any guarantee that the business can prosper and it does not want to put money in ventures that can incur losses.
Consider seeking Licensed Moneylenders for Business Loans
In Singapore, the Moneylenders Act caps the maximum loan amount at 6x of the borrower’s monthly income. All assessments for approval are done professionally and in accordance with the law, with attention to confidentiality. Licensed money lenders like A1 Credit can provide a quick financial solution for individuals or entities with low credit scores.
Requirements and Eligibility for startup business loan
Most of the financial institutions in Singapore need a business plan and a dependable income to get approved for a loan. When you have chosen an institution where you will apply for a business loan, you need to qualify for the loan and to present documents on which the approval of the loan will be based.
- SGD 60,000 minimum profit per annum
- Have been in operation for one year
- Business is registered in Singapore
- Any office or shop tenancy agreements
- SingPass to access CPF, HDB, IRAS e-services (Note that we do not ask for username and password)
- Partner, director, and company-owned assets
- Recent utility bills under the company name
- Bank statements in the previous year
- Invoices and business contracts in the past few months
- Personal (partners) and the company’s recent income tax assessment notice
- A few recent months’ financial statements
- Accounting & Corporate Regulatory Authority (ACRA) recent business profile and information report
- All business directors and partner’ NRIC
Which Business Loan Scheme Should You Select?
Many banks typically take 2-3 weeks to apply for a loan. In more difficult situations, the waiting period can take up to one month. If you need urgent money, you can consider us at A1 Credit where your application can be approved in as fast as an hour.