[2024 Edition] Complete Guide To SME Business Loans In Singapore

Getting an SME business loan and working more closely with your bank for financing could be a “coming of age” moment for your start-up. You can no longer simply think of internal cash flow and bootstrapping to run your company.

There are no fixed reasons to apply for an SME business loan – you could just as easily do it in a positive or negative economy or business cycle. Your reasons may range from weathering a downturn – such as the COVID-19 pandemic – or even riding an upturn – expanding your business presence, introducing new products and penetrating new markets.

Even if you think your business is stable or has sufficient internal funds, having additional cash flow to ride out periods of uncertainty is something no business owner should overlook.

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 to pass up on lucrative business opportunities, damage your business reputation by failing to make timely payments, or worse, go into personal debt to keep the business going.

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

Common Types Of SME Business Loans In Singapore

Government-Assisted SME Business Loans 

Enterprise Singapore (ESG) provides a slew of government-assisted loans that businesses in Singapore can tap on for your financing needs. These can range from SME Working Capital Loans and Trade Loans to SME Fixed Assets Loans – when you purchase equipment and/or machines for automation and upgrading and to purchase or build business premises such as factories.

Businesses can approach majority of banks in Singapore, including OCBC, DBS, UOB and others, 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).

SME Working Capital Loan

SME Working Capital Loans are typically collateral-free business loans designed to be inclusive, supporting businesses from all industries and at all stages of growth.

As interest rates are determined by individual banks, the government steps in to enhance 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 Sustainable Financing

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

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

Short-Term Financing (Trade Financing)

Trade financing can help SMEs get funding for purchases and sales, as well boost working capital in the short-term.

Businesses would usually take Invoice Financing in order to fulfil a sale. This means that they can receive financing to purchase materials that will help them make a sale. Alternatively, you can also receive upfront payment for sales that you have made to customers on a credit term.

Trade financing solutions can be used to protect your business as well, especially when working with overseas customers and suppliers – where trade documentation is frequently required. In such instances, a Letter-of-Credit or LC would be used. There are also other types of trade financing loans that can facilitate your sales, including a Banker’s Guarantee, Packing Loan and others.

How To Apply For SME Loans

Before you apply for an SME loan, you should ensure you know how you’re going to put the money to good use. This will help you apply for the right type of SME Loan – which can minimise your interest rate expenses.

After identifying the SME loan, you need to prepare the required documents for your application. Having these documents beforehand will also save you some time in your application.

Some of the documents you need include:

  • Company’s bank statements and financial reports
  • Identification details, such as NRIC of Directors
  • Company’s Notice of Assessment and GST statements (if applicable)
  • Proof of director’s personal income, such as income tax statement

Often, you can complete your loan application online in 5-10 minutes. SME loan applications are typically processed quickly, so you can expect to receive updates on your loan status shortly after that.

Need Financing Support During This Period?

Enjoy fast access to funds and receive your loan approval status instantly when you apply online with OCBC.

For SMEs that are just six months into operations, secure up to S$100,000 with the OCBC Business First Loan . If your SME is above two years old, secure up to S$700,000 with the OCBC Business Term Loan – good for funding business operations or expansion. Terms and conditions apply.

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