Start-Up Business Loans in Singapore

These days, we’re all looking for a way to do some social good—in light of living with a pandemic for close to 2 years. On the other hand, there are many who are trying to start up businesses during the ongoing pandemic, but funding may be the biggest problem faced by these SMEs. If you’re wondering what you can do for the SME community or for your own start-up business, here are a couple of options you can look into:


Start-Up Business Loan in Singapore

If you are a small and medium-sized enterprise (SME) business owner in Singapore, you will most likely require business financing at some point, especially during the Covid-19 pandemic. Business loans in Singapore can be used to expand your business, plug working capital gaps, finance inventory purchases, commercial property rental or purchases.

Also called a “first business loan”, the startup business loan is a relatively smaller version of the regular business loan, offering a smaller cap of, up to $100,000. It is fairly easy to get a startup business loan, as you only need to be in operation for a few months and do not need a strong financial history as proof.

The start-up business loan has a similar structure as the term loan. SMEs will receive a lump sum amount at the start, and will be required to make equal monthly repayments for a maximum tenor of 4 years. Unlike the usual unsecured business term loan, there will be less emphasis on the financial performance and history of the company due to the lack of records. The main criteria for this facility is the company directors’ declared incomes and personal credit records. Following that, at least 1 guarantor must have a minimum income of S$30,000 per annum.

Government-backed Loans

Government-assisted loans give SMEs more access to cheaper financing. Interest rates on these loans are relatively lower as compared to a “standard” commercial loan, mainly due to the government lowering the funding costs for banks and the cost savings are passed onto SMEs and the government being a “70% guarantor” on such loans, shouldering up to a 70% risk-share, so as to lower the risk for banks. However, this applies only until 30 September 2021.

By using government-backed loans, SMEs can benefit from more financing at cheaper rates. However, keep in mind that a 70% risk-share does not mean that the borrower only has to repay 30% of the loan. The borrower is still very much responsible for 100% of the loan amount. Only as a last resort, after all available options are exhausted, can the banks claim 70% of the loan amount from the Government, in the event of a loan default.

Bank Loans

This option is the most common form of loan capital for a business. It provides medium or long-term finance. The bank will set the fixed period over which the loan is provided, the rate of interest, and the timing and amount of repayments.

The banks will usually require the business to provide some security for the loan, although in the case of a start-up this security often comes in the form of personal guarantees provided by the entrepreneur.

Bank loans tend not to be offered to SMEs or businesses with a track record of poor profitability and cash flow, as such businesses are perceived as being high-risk by banks that, as a result of the credit crunch, have to be more cautious about the kind of lending they offer.

Invoice Financing

Invoice finance is a collective term for the different types of invoice based lending such as invoice discounting, selective invoice discounting , invoice factoring, and spot factoring. This option uses invoices as a way for businesses to unlock cash strapped up invoices and therefore speeding up cash flow. This is done by selling their invoices to a third party who will advance some of the funds the invoice is worth up front, for a cut of the invoice.

The clear advantage of invoice finance is, being paid the majority of an invoice within 48 hours, instead of waiting over 30 days. This will then help businesses manage their cash flow. Another significant advantage is that it gives businesses a way to fund their growth without taking on extra liabilities or debt, and using assets they already have.

Online Financing Platform (SmartFunding)

Last but not least, there are online financing platforms such as SmartFunding which lets you opt for not only Singaporean but also Malaysian MSMEs/SMEs to support and earn returns of up to 24% along the way.

SmartFunding is an online financing platform regulated by the Monetary Authority of Singapore (MAS) that connects Investors and Borrowers. They offer alternative short-term financing and Buy Now, Pay Later (BNPL) options for SMEs and startups that are funded by individual and institutional investors. SmartFunding’s goal is to help finance emerging economies in Southeast Asia through a transparent financing platform geared towards long-term growth for small businesses and start-ups.

If you’re looking for fast approval financing, receive up to SGD 500K with SmartFunding instantly and securely through the BNPL option. On the other hand, grow your business with SmartFunding’s Term Financing that provides financing between SGD20,000 to SGD200K, interest rates as low as 0.5% to 1.5% per month, no collateral required, and no lock-in periods.

SMEs and businesses that are interested will have to be in operation for more than a year and a minimum annual revenue of SGD150,000 to be eligible. Once you’re proven eligible, you’ll be able to enjoy low interest rates and flexible repayment tenures of up to 12 months, easy and seamless application, no collateral financing, and full transparency without any hidden fees to worry about.

Source 1, 2, 3, 4, 5

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