What are the bank loans available to SMEs in Singapore

What are the bank loans available to SMEs in Singapore

Have you ever thought of taking up a business loan in Singapore but am unsure of which loan to take up? Or have you experienced going to so many banks asking for the loan details you desperately need, and end up being mindblown by all the things you’ve been told?

We understand how that feels! To whip you into shape to become that loan guru you want to be, today’s article brings you a holistic, concise compilation of the bank loans available for SMEs in Singapore. No more researching on your own, just read on to find out more!

1.       Unsecured Business Term Loans

The Unsecured Business Term Loan is the most typical loan that SMEs in Singapore apply for. No collateral is involved. The loan amount ranges between $50K to $300K for each bank. The repayments are made by equal monthly installments, through a loan tenure of 1 to 5 years.

2.       Government Financing Schemes

There are various types of SME loans in Singapore that are co-funded by the government and financial institutions.

These include the SME Micro Loan, SME Working Capital Loan and more.

–          SME Micro Loan

 The SME Micro Loan is a financial loan scheme that only small local firms qualify for. A maximum loan amount of $100K is available for SMEs with 10 or less employers OR an annual turnover of less than $1M.

 –          SME Working Capital Loan

The SME Working Capital Loan is an upgraded version of the SME Micro Loan that targets larger companies here. Specifically, Singapore SMEs with less than 200 employers OR an anuual turnover of less than $100M can apply. This loan provides up to $300K worth of funding.

–          Other Loans

 Other niche loans that are available for Singapore SMEs to take up include the Bridging Loan for Marine and Offshore Engineering Companies, SME Equipment and Factory Loans and Loan Insurance Scheme.

3.       Equipment and Machinery Loan

This loan is for SMEs that wish to seek funding to purchase fixed assets like equipment and machinery. It is usually structured as hire purchase or leasing. It has lower interest rates than unsecured loans, and lenders normally finance 70% to 90% of purchasing price of the equipment.

4.       Commercial and Industrial Property Loan

The Commercial and Industrial Property Loan is a loan for SMEs with the purchased industrial property acting as collateral. It has the lowest interest rates out of all the loans available to SMEs. Lenders normally finance 70% of the property price.

5.       Factoring and Receivables Invoice Financing

Factoring or Receivables Invoice Financing involves a firm selling its invoices to a financier (factor) and receiving 80% to 90% of the value of outstanding invoices as cash advance upfront. The remaining amount is paid to the firm after the financier receives the full payment from the customer.

This form of loan is recommended for SMEs supporting big companies. It allows SMEs to gain (almost) instant access to capital when they require it urgently.  

6.       Trade Financing

Trade financing is simply a revolving credit line to finance inventories or items from suppliers. The bank’s Letters of Credit (LC) can be issued to overseas suppliers and LCs can be converted to Trust Receipts (TR) with 90 to 120 credit terms.

7.       Business Overdraft

Overdraft is a revolving credit line to a company. Cash can be withdrawn within an initial credit limit granted. Once this credit limit is exceeded, interest is incurred.  This interest is usually higher than term loans.

Final Note

The options you have for loans are aplenty, so pick the one that matches your requirements the most! No matter which loan you are intending to take up, we are sure that you would be in the best of hands, and we wish you and your company all the best moving forward!