This article is written in collaboration with OCBC Business Banking. Views expressed in the article is the independent opinion of DollarsAndSense.sg.
For a person, being in debt is usually regarded as somewhat of a negative thing. However, taking up business loans, also known as “financing”, is a common practice for most companies big and small.
When used strategically, loans provide businesses with the ammunition they need in order to scale up operations and to seize opportunities which come their way.
If you want your company to operate effectively, as a business owner, you need to understand the various financing options available to you.
In this article, we will introduce you to 3 of the most common types of business loans, and which business loan would be most suitable for your business based on your needs.
# 1 Unsecured Business Loans
Suitable for: Businesses which need operational cashflow; businesses looking to expand; asset-light businesses
These loans are termed as “unsecured” because the bank doesn’t need you to pledge any of your assets as collateral when they approve your loan. However, the bank will require a guarantor to support the loan.
What many first-time entrepreneurs in Singapore may not know is that the Singapore government has partnered up with banks in order to provide government-assisted loans to entrepreneurs.
One such government-assisted loan that you can tap on is the Business First Loan.
The Business First Loan is a fuss-free loan that allows businesses from as young as 6 months old to borrow up to $100,000, over a 4-year period, with no collateral required. You can apply for this loan via MyInfo or MyInfo Business without having to submit additional paperwork.
Mature businesses that require higher amount of financing can also consider the SME Working Capital Loan, which is another government-assisted loan that provides collateral-free financing of up to $300,000, over a 5-year repayment period. Businesses need to be at least 2 years old to be eligible for this loan.
Another unique unsecured business loan is a revolving short-term loan, which offers businesses flexibility. Your business can draw, repay and redraw from the credit line and pay interest only on the amount you need. You can read up more about how a revolving short-term loan works in this article here by Lendingpot.
As finding a business loan to meet your needs can be confusing, we suggest check out this loan widget from OCBC to find which type of unsecured business loan will be most suitable for your business.
Source: OCBC Business Banking
# 2 Commercial Property Loan
Suitable for: Businesses which are looking to buy their own commercial property
Similar to buying a house, with most of us needing to take a residential housing loan, businesses looking to buy their own commercial property would typically need to take a commercial property loan.
Business owner can borrow up to 80% of the purchase price or valuation of the property, whichever is lower, with a repayment period of up to 30 years.
# 3 Equipment Financing
Suitable for: Businesses which need to purchase equipment and machinery
If your business requires equipment or machinery, you can opt to take an equipment and machinery financing loan, instead of taking an unsecured loan.
This loan allows you to borrow up to 90% of the valuation or purchase price of the equipment or machinery, whichever is lower, with a repayment period of up to 8 years. This can be used to buy both new or used equipment.
In addition, you also have the option of tapping on government-assisted loan offered through the Enterprise Singapore Scheme.
Business Financing Provides Additional Resources When They Are Needed The Most
If you are a business owner today, taking a loan is a fairly common practice in order to expand your operations.
So, it’s important to make sure that you are familiar with the business loan options that you have in Singapore, and to take the right type of business loans based on the requirements of your business.