Guide To SME Loan In Singapore

A Beginner’s Guide On How To Find The Best SME Loan Singapore

Small and medium enterprises are among the most vulnerable sectors in Singapore, with most still facing repercussions due to the pandemic. Whether it’s dealing with temporary shutdowns, not having enough cash reserves, reduced work hours, or mass layoffs, the SME sector has gone through so many challenges.

In the same way, aspiring SME business owners also need to get past many hurdles to make their dream come to life.

What should entrepreneurs in Singapore do to start a business, keep an existing business afloat, or expand their reach and operations? The solution lies in the best SME loans for small businesses.

Here at OMY Singapore, you will discover the following:

Types Of Business Loans In Singapore

To help you find the SME loans that fit your situation best, here’s our SME Loan in Singapore guide.

SME Loan in Singapore

1. Government-Assisted Business Loan Schemes

In 2020, different government-assisted business loan schemes were introduced as a way for the government to keep supporting businesses that were affected by COVID-19. These loans are administered by Enterprise Singapore, as well as participating financial institutions.

This type of SME loan is extremely beneficial for entrepreneurs because it includes a government risk share of up to a staggering 90%. Enterprise Singapore offers 3 various credit facilities for SMEs.

More From OMY: SMEs able to expand ventures through Scale-up SG Programme

EFS-WCL (SME Working Capital Loans)

Maximum loan quantum
  • S$300,000 per borrower
  • S$500,000 per borrower (effective from 1 October 2022 to 31 March 2023)
  • Borrowers are subject to an overall borrower group limit of S$5 million for EFS-WCL
Maximum repayment period
  • 5 years
ESG risk-share
  • 50%
  • Young enterprises may receive a 70% risk share
Interest rate
  • Subject to PFI’s assessment of risks involved

Eligibility:

  • Must be a business entity that is registered and physically present in Singapore
  • Must have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership
  • Must have Group Annual Sales Turnover of not more than S$500 million

*For “SME Working Capital”, the definition refers to businesses with a group revenue of up to S$100 million or maximum employment of 200 employees For more information, visit this page.

ETS-TL (Enhanced EFS – Trade Loan)

Maximum loan quantum
  • S$5 million per borrower
  • S$10 million per borrower (effective from 1 July 2022 to 31 March 2023)
  • Borrowers are subject to an overall borrower group limit of S$20 million for EFS-TL. There is an overall loan exposure limit of S$50 million per borrower group across all facilities.
Maximum repayment period
  • 1 year
ESG risk-share
  • 70%
  • Young enterprises may receive a 70% risk share
Interest rate
  • Subject to PFI’s assessment of risks involved

Eligibility:

  • Must be a business entity that is registered and physically present in Singapore, and
  • Must have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership, and
  • Must have a Group Annual Sales Turnover of not more than S$500 million

For more information, visit this page.

TBLP (Temporary Bridging Loan Programme)

Maximum loan quantum
  • S$3 million Per Borrower
  • S$1 million Per Borrower (Effective From 1 April 2022 to 30 September 2022)
  • Borrowers are Subject to an overall borrower group limit of S$20 million for TBLP. There is an overall Loan Exposure Limit Of S$50 million per borrower group across all facilities.
Maximum repayment period
  • 5 year
ESG risk-share
  • 70%
  • Young enterprises may receive a 70% risk share
Interest rate
  • Capped At 5% Per Annum Until 31 March 2022
  • Capped At 5.5% Per Annum From 1 April 2022 to 30 September 2022

Eligibility:

  • Must be a business entity that is registered and physically present in Singapore
  • Must have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership

2. Business Loans From Banks

All major banks in the country offer this type of SME loan to local businesses, but entrepreneurs may be asked to present certain requirements to prove the legitimacy of their business.

But how is a business loan different from a personal loan? Take a look at the table below.

Personal loan Business loan
Loan amount Lesser Larger
Loan terms Up to 7 years Up to 5 years
Documents required Personal salary records Financial reports, ACRA records, and many more
Business age requirement Minimum 6 months to 2 years n/a
Processing days Less than a week Up to 2 weeks or more depending on bank

Personal loans are a great choice for people who are just starting their business. Despite the smaller loan amount (usually only 6x your salary), it is easier to acquire.

Want to know the best business loans offered by banks in Singapore? Take a look at this table below.

Loan interest tenure Maximum loan Eligibility
DBS Business Loan To be assessed by the bank 1-5 years Up to S$500,000 or depending on the bank’s assessment
  • Open to all businesses, including ones that don’t qualify for government-assisted loans
OCBC Business First Loan To be assessed by the bank Up to 4 years S$100,000
  • Business must be operating in Singapore between 6 months to 2 years
  • Must have at least 30% local ownership
  • Must have no more than 10 employees
  • Must have S$1 million annual turnover
  • At least 1 guarantor required
UOB BizMoney Loan 10.88% per annum Up to 5 years Up to S$350,000
  • Sole proprietorship/ Partnership/Private Limited Company
  • Must be registered and operating in Singapore for at least 3 years
Maybank Business term loan To be assessed by the bank Up to 5 years Up to S$500,000 (for working capital)
  • Must be established for at least 3 years
  • Must have at least 30% local shareholding
  • Must have S$ 300,000 minimum turnover per annum
  • At least 1 guarantor required
Standard Chartered Business Instalment Loan Up to 11% per annum 3 years Up to S$300,000
  • Sole proprietorship/Partnership/Private Limited Company
  • Must be registered and operating in Singapore for at least 3 years
  • Must have at least 50% local ownership
  • Must have a minimum turnover of S$750,000

3. Business Loans From Finance Institutions

Many financial institutions also offer lending options to SMEs. These business loans are unsecured similar to banks. The only difference is that loans from financial institutions usually focus more on equipment loans, factoring, and other asset-based lending options.

Fastest Online SME Loans

Fastest Online SME Loans

Need an instant loan for your business today? You may consider applying from Capitall Pte Ltd. If your application meets all eligibility and credit risk criteria, your application approval can only take hours.

Also, when all the documents required and all information are submitted properly, you can receive your loan within 24 hours of application.

Apply for an SME loan in Singapore. Also, they provide auto financing.

More Best Business Loans

Take a look at some of the best business loans offered by financial institutions below.

Hong Leong Finance Fixed Assets loan Singapura Finance Inventory Loan Sing Investments and Finance Machinery Loan
Financing percentage Up to 90% Up to 80% of purchase price or valuation Up to 90%
Interest rate Fixed interest rate n/a Fixed repayment terms
Tenure Up to 7 years Up to 180 days Up to 5 years
Best for Purchase of new equipment, machinery, and other fixed assets Purchase of new and used motorcar and commercial vehicles Purchase of new or used machines
Eligibility
  • Must be incorporated and operating in Singapore
  • Must have a minimum of 30% local shareholding (Singaporeans or Singapore PRs)
  • Must have Group’s annual sales turnover not exceeding S$100 million or group’s employment size not more than 200
  • Maximum Borrower Group revenue cap at S$500 million for all enterprises
  • Must be a Singapore-incorporated company in motor vehicle trade for at least two years
  • Alternatively, businesses may be a new set-up with your principal directors having at least two years active business experience in the auto trade business
  • Must have a minimum paid-up capital of $30,000
  • Must have personal guarantees of principal directors & shareholders
n/a

Other loans to consider:

P2P Crowdfunding

Whether your business has been operating for a few years and you need funds for expansion, or you simply need capital to start your dream business, you can take advantage of crowdfunding.

For lending-based crowdfunding, individuals lend you money and you commit to repay the loan at a predetermined interest rate and period.

Here are some of the best crowdfunding platforms you can take advantage of in Singapore.

Crowdfunding Platform Highlights
Funding Societies
  • Over 25,000 registered investors in Singapore
  • 1-12 months loan tenor
Kapital Boost
  • Islamic-based peer to peer platforms in Indonesia and Singapore
  • No investor fees
  • 1-6 months tenor
Minterest
  • Over S$298 million raised
  • 88% of deals funded in a day
FundedHere
  • S$20 million raised for 30 startups

4. Merchant Cash Advance

This is a type of financing option that F&B businesses that use credit card terminals can take advantage of. The major criteria for this kind of credit facility include the SME’s credit card transactions for the past 6 months. Other factors include profitability, financials, and guarantors.

When it comes to this type of loan, the advance amount is calculated by averaging the monthly credit card transaction over the last 6 months. Then, it is multiplied 1.5-4 times. The repayment period for this type of loan is usually 6-9 months.

Here are some merchant cash advance providers in Singapore.

Merchant Cash Advance Highlights
Monetium Leasing merchant Cash Advance
  • Flexible repayment terms
  • Best suited for bars and restaurants, retail stores, clinics, petrol stations, online shops, and beauty salons
Grab Merchant Cash Advance
  • Borrow up to S$100,000
  • Loan tenure up to 6 months
  • 0% interest and late charges
Majesty Funding Merchant Cash Advance Consolidation & Refinance
  • For funds that require minimal documentation
  • Cash amount up to 4 times monthly card sales
  • 24-hour turnaround time

Discover more about merchant cash advance.

5. Invoice Financing

For this type of loan, invoices are used as collateral. To qualify for this loan, the customers of a business must show financial strength.

When it comes to SMEs, they usually issue invoices after completing a sale. SMEs use invoices as collateral while they await payment for the sale. Once approved, they can collect up to 80% of the invoice value for each invoice until they reach their credit limit.

To get approved for invoice financing, the borrower must provide a clean track record of their past transaction history and service performance. Businesses whose customers are multinational corporations or the government are preferred compared to usual SME customers.

Here are some invoice financing providers in Singapore.

Invoice Financing Highlights
Validus Invocing Financing
  • Borrow up to S$625,000
  • 1-year loan tenure
  • up to 10% interest rate
OCBC Invoice Financing
  • Must have a minimum annual turnover of S$250,000
  • Must be operating for at least 6 months
  • Must have at least one large customer (blue chip, publicly listed, MNC)
  • 24-hour turnaround
Invoice Interchange
  • Must have a minimum annual turnover of S$250,000
  • Must be operating for at least 6 months
  • Must have at least one large customer (blue chip, publicly listed, MNC)
  • 24-hour turnaround

6. Business Overdraft

This loan is usually used as an alternative to business term loans. It is recommended for businesses who need short-term working capital. Despite being used for the same purpose as an unsecured business loan, an OD facility provides SMEs with a line of credit instead of the lump sum amount they need. Considering this, the interest is only charged for the amount used up by the SME.

To be eligible for this loan, an SME’s financial performance and bank statement records need to be evaluated. The personal credit records of the guarantors will also be considered.

These two banks provide business overdraft in Singapore.

Bank Highlights
DBS Revolving Credit Line
  • Secured or unsecured
  • Gives immediate access to funds
CIMB Overdraft
  • Easy access to funds to meet short-term financial obligations
  • Only pay interest for amount used

7. Business First Loan

This type of unsecured loan is geared towards startups that have been operating in the country for 6 months to 2 years.

Just like other unsecured loans, this loan doesn’t put heavy emphasis on financial history and performance because the business has only been operating for a limited time. The major factor in the evaluation process is the company’s directors or guarantor’s personal credit scores, as well as their declared incomes.

Take a look at this table to learn more about OCBC’s Business First Loan.

Loan type Highlights
OCBC Business First Loan
  • Must be at least 30% owned by Singaporean or Singapore PR
  • Must have no more than 10 employees
  • Must have an annual turnover not exceeding S$1 million
  • No paperwork needed
  • Online application

8. Venture Debt Financing

Banks are unable to grant debt financing to unprofitable companies but recently, many startups have obtained multi-million venture investments while still not churning profits. Venture debt financing facilities were created to address these gaps.

To be granted this financing option, the financial institution will evaluate a company based on its equity obtained from venture investors, as well as its business model. There is less emphasis on the financial performance and history since startups are not profitable.

Take a look at this table below to learn about DBS and OCBC Venture Debt Financing.

Venture debt financing Highlights
DBS Venture Debt Financing
  • Access DBS cross-border network
  • Work with seasoned venture professionals
  • Achieve balance between flexibility and dilution
  • Enhance equity returns
  • Extend cash runway
OCBC SME Venture Loan
  • Customised financing for your growth plan
  • Up to S$8 million in financing
  • Company must be incorporated and operating in Singapore
  • Must have at least 30% Singaporean or PR shareholding

Frequently Asked Questions About SME Loan

Here are some commonly asked questions about SME loans.

What is the definition of SMEs?

SMEs are companies with a group annual revenue of less than S$100 million. These companies also have less than 200 employees and have a minimum of 30% shareholdings by Singaporeans and Singapore PRs.

What are the different government financing schemes in Singapore?

The different government financing schemes in Singapore are EFS-WCL (SME Working Capital), ETS-TL (Enhanced EFS – Trade Loan), and TBLP (Temporary Bridging Loan Programme).

What are the documents needed to apply for an SME loan?

When applying for a loan, you need to present documents that prove your positive track record. This includes:
· At least latest 2 years of financial statements and reports
· GST declaration
· 6 months' bank statements
· Proof of your company's ownership (like ACRA records)
· Director’s NOA
· Account receivables & payable ageing list
· List of existing banking facilities
The documents needed for loans for startups are different. This usually focuses on personal income documents.

What is the interest rate for SME loans?

This depends on various factors such as whether it is a secured or unsecured loan, or what the credit risk grade of the borrower is.

How long does a business loan get processed?

Business loans usually take 2 weeks to process since there is a lot of paperwork that needs to be examined and verified.

Can I qualify for a loan to start a business?

You may be able to qualify for a loan from a P2P lending/crowdfunding platform. However, businesses need to be registered or in operation for at least 6 months to qualify for other SME loans.
If you need urgent cash to start a business, try applying for a personal loan instead.

What can SME loans be used for?

SME loans can be used for a variety of reasons such as refinancing existing debt, expansion, purchasing new properties or inventory, and many more.

What is a government guaranteed loan?

This refers to a loan where the government assumes the debt obligation if the borrower defaults.

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