[2021 Edition] Complete Guide To SME Business Loans In Singapore

Few businesses have enough cash to last them through more than a year of their cashflow requirements. This is because keeping too much cash in the bank just means that the business may be out of ideas to expand and/or not investing it to grow or earn a better return.

Of course, there are exceptions to the rule – but not all of us are Apples and Googles, or well-funded tech companies that have raised enough cash to last several years. To bolster your business viability, an SME business loan might be a good option.

Even if you think your business has remained stable or will rebound in the coming months, having the cash flow to ride out the uncertain times is something no business owner should overlook.

In any case, you will need access to cash to keep the doors open – to pay suppliers, rent and employees – to be able to finally see the upturn when it comes. If you’re suddenly caught short, it may take a while for a business loan to be disbursed. In that time, you may be forced into using personal funds or personal debt to keep the business going, or even go out of business.

Read Also: Why Cash In Bank (And Not Profit) Is The Number One Priority That Business Owners Need To Care About

Government-Assisted SME Business Loans 

Enterprise Singapore (ESG) has a slew of government-assisted loans that businesses in Singapore can tap on for your financing needs. These can range from working capital loans to fixed assets investments – when you purchase equipment and/or machines for automation and upgrading and to purchase or build business premises such as factories.

Businesses can approach multiple participating banks, which include majority of the banks in Singapore, to access these loans, as long as they remain within the overall loan limit. Banks may require you to provide a personal guarantee on loans disbursed.

To be eligible for these government-assisted loans, businesses must generally be a Singapore-registered entity with physical operations here. At least 30% of the local equity must also be held directly or indirectly by Singaporean(s) and/or PR(s).

Temporary Bridging Loan (TBL)

The Temporary Bridging Loan (TBL) was introduced in 2020 to help SMEs in Singapore access working capital urgently. 

Eligible businesses can borrow up to a maximum loan quantum of $3 million over a 5-year borrowing period. Interest rates for TBL programme is capped at 5% p.a., hence it might be a lower-cost option for many small businesses.

The government’s risk-share of the TBL is 70%, which perhaps explains the interest rate cap. Businesses have until 30 September 2021 to apply for the Temporary Bridging Loan.

SME Working Capital Loan

The SME Working Capital Loan programme was launched on 29 October 2019, and enhanced during the 2020 COVID-19 pandemic. As a collateral-free business loan, this programme is designed to be inclusive, supporting businesses from all industries and at all stages of growth.

Each company can borrow up to $300,000, with a maximum repayment period of up to 5 years. In addition, SMEs also cannot have a Group revenue of more than $100 million or more than 200 employees.

As interest rates are determined by participating banks, the government provides enhanced support for younger enterprises. When newly established businesses apply for the scheme (within 5 years of incorporation), the government’s risk share is up to 70% – which encourages banks to give them a business loan and/or require a lower interest rate. For other companies, the government’s risk share is only up to 50%.

Risk-share isn’t to be confused with repayment obligation. Businesses still have the obligation to repay 100% of the loan and interest rate. The risk-share only kicks in when businesses are unable to repay banks – in a situation of default.

Read Also: Using The Government-Assisted SME Working Capital Loan To Grow Your Business

Green Loans – Sustainable Financing For SMEs

For SMEs able to consider their longer-term objectives, a green loan offered by a local bank could set you on your way to establishing sustainable goals. Taking on such a loan, businesses will also get access to a bank’s green framework, which will help reduce time, complexity and costs to embark on your sustainability drive.

Moreover, onboarding a green loan will also support your brand image as a business that cares for the environment and champions sustainability. Typically, businesses that are forward-thinking and ensure they offer green solutions are also able to attract talent, partners, investors and consumers to be more loyal to their brand.

SMEs can apply for green loans with most banks in Singapore, including OCBC Green Financing

Read Also: Financial Benefits For SMEs To Take A Green and Sustainability-Linked Loan

Fixed Asset Loans

Apart from working capital loans, SMEs may also require business loans for fixed assets, such as buying a commercial property or to purchase equipment and machinery for your business. For certain fixed asset loans, SMEs can also tap on government-assisted packages.

Commercial Property Loan

Businesses need to operate out of a location, and some may even require your business premises to be outfitted or constructed in a specialised way. You can tap on a commercial property loan to buy your own commercial property.

For example, you can leverage on an OCBC Commercial Property Loan to finance up to 80% of your property purchase price or valuation. You can stretch the loan term up to 30 years.

For certain SME owners, this can also a good way to pay for your asset with funds that would have gone towards rental.

Read Also: Guide To Buying A Commercial Property For Your Business In Singapore

SME Fixed Asset Loans

As a business, you may also require loans to fund your equipment and machinery purchases. These investments can be hefty and require loans in order to afford them.

Banks understand this. For example, on OCBC’s Equipment & Machinery Financing loan, you can borrow up to 90% of the valuation or purchase price of the equipment or machinery you purchased, with a repayment period of up to 8 years.

When taking such a loan, the banks will typically pay the vendor directly, and ownership  of the asset will only be transferred to you once your final instalment is paid.

SMEs can also tap on government-assistance on SME Fixed Assets loan. Enterprise Singapore allows borrowers to take up to a  maximum of $30 million loan, with a repayment period of 15 years. Doing this also makes sense as the government risk share 50% (and up to 70% for young companies).

Read Also: Guide To Opening A Business Account For Your Start-Up In Singapore

Need Financing Support During This Period?

From now till 31 July 2021, SMEs can enjoy extra financing support of up to $3 million through the Temporary Bridging Loan Programme and enjoy 50% off your facility fee when you apply online with OCBC. Terms and conditions apply.

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