Should I take up a loan for my business in 2020?

Should I take up a loan for my business in 2020?

The Novel Coronavirus (COVID-19) pandemic has set many businesses into cash flows problems. Young start-ups and the small and medium enterprises (SMEs) are bound to face greater financial constraints with the declining economy. To help cushion the financial shock, the Singapore government has been rolling out relief measures to aid these businesses in their operations. Banks and financial institutions are also helping businesses to stay afloat with lower borrowing rates.

Loan schemes such as the Temporary Bridging Loan Programme (TBLP) have catalyzed around $4.5 billion of loans so far, benefitting many businesses. This amount was noted to be more than 3 times the amount in 2019. This programme aims to provide access to working capital for business needs and ease liquidity issues for companies.

According to a DBS Bank survey, which polled 300 firms, cash flow issues seem to have eased for many SMEs with relief measures by the government. 3 in 10 flagged cash flow as a top concern as compared to more than 7 in 10 back in early February. As the country gradually shifts out of the partial lockdown, the immediate concerns for various SMEs have been diverted to generating revenue streams and capturing growth opportunities. As businesses look to digitize and digitalize their operations, capital is often needed. With the TBLP, businesses can take up a loan of up to $5 million, under a repayment period of 5 years and the interest rate being capped at 5% p.a. Businesses can leverage on this scheme to grow their businesses so that it remains sustainable in the long run.

Be it to ease cash flows or to grow your business, there is no better time than now to take up a loan for your business given that interest rates are low so you can expect to save significantly on interest payments. When the economy recovers and interest rates start to climb, you will not be able to enjoy such low rates anymore. Besides, given that the repayment period is 5 years, you will expect the economy to recover and business opportunities to expand in 5 years’ time. Taking up a loan now can therefore help meet your business needs, both in the long and short run.

However, as the nation strives to steer the economy forward and help businesses adapt to the new normal, it has been highlighted in the recent news that a careful balance ought to be struck. Under the TBLP, the government will provide 90% risk share on these loans till 31 March 2021. Despite so, banks and financial institutions still face higher risk in terms of repayment especially since the amount of loans they have dished out has increased tremendously in the short span of a few months and number of deferments soared as well. Being exposed to higher risk may lead them to tighten their credit assessment and it may then be tougher for you to secure a business loan.

Hence, you should tap on a loan broker to secure your loan (read more on why you should engage a loan broker to secure your business loan – link to previous article). Contact us for a free consultation so that we can help you secure a loan at low interest rates to meet your business needs.



Avant Consulting is a Singapore based SME Loan Broker that will assist you with getting the Singapore Bank Loans and Singapore Corporate Loans, speak to us if you need help with this,.

Should I take up a loan for my business in 2020?