Being one the major global financial hub in the region, Singapore is home to both local and international banks. It remains as one of the most attractive places to start a business.
Getting started with a business loan
There are at least 20 banks and organizations that offer some form of business loan if that is what you are looking for. Depending on the criteria and objective of your loan, there should be something for you in the cards. What you need is to first know what types of small business loans are available.
What are the loans available?
Below are some of the common loans you will come across in Singapore.
- Business Loans – The standard loan to help with your working capital. You would be able to borrow between $50,000 and $300,000 depending on your eligibility and could be between 3 to 5 years
- SME Micro Loan – provided by the government, it is to help local companies in the SME sector. Eligibility includes annual revenue of less than $1,000,000 or not more than 10 employees up to $100,000.
- SME Working Capital Loan – This is a government assisted financing scheme for local SMEs of up to $300,000.
- Trade Financing – This loan helps with purchasing of inventories with up to 120 days credit terms through TR or Trust Receipts
- Factoring / Receivables Financing – Catered for SMEs working with reliable companies with long credit terms
- Property Financing – Used to purchase properties for commercial or industry purposes
- Equipment Financing – For buying of equipment or machinery through hire purchase or leasing schemes
When you intend to apply for a business loan, the one issue that you would be interested to know would be the interest rate. Different banks will have varying products that come with different interest rates. This could range between 3 to 6% depending on the institution. Besides that, you might need to have certain criteria like:
- Minimum annual revenue – usually starts from $300,000
- Amount maintained in bank account – Usually about $10,000
- Years in operations – Most bank would like this to be 2 years but 1 year might be sufficient
- Term or duration – Could range from 3 years and above
What’s in store for new businesses?
Banks and financial institutions are not very keen in offering unsecured financing for new setups. This means that there are very few, it not none who provide startup business loans in Singapore. This is why among the important criteria for taking a business loan is to have at least 1 or 2 years in operation. Without a proven track record, it would be virtually impossible to secure a business loan.
For businesses that have been operational for less than 2 years, the approval chances might not be very positive. However, you can try to send in your application with a sound business plan or a good cash flow projection in the near future.
If you are a new business and looking for some form of funding, getting a business loan from the bank might not be the best game plan. Instead, you should be seeking your injections from other sources like:
- Obtaining a personal loan
- registered moneylenders
Banks with business loans to consider
In Singapore, the banking sector is very much dominated by the top 3 banks and if you are an SME operating in the country, you would most likely have an account with either one or all three of them. After all, they would collectively offer the largest banking network and stability for anyone to do business with. They are:
- DBS Bank
Take note that besides being the top 3 banks in Singapore, they have been ranked as being the safest banks in Asia as well. the following are among the products offered by these banks.
DBS Business Loan
The DBS Business Loan is an unsecured term loan offered for SMEs and companies in this sector. Its features include:
- You can loan up to $500,000
- the term loan can be up to 5 years maximum
- Very attractive interest rate that starts from 10.88% per annum
- there will be no penalty imposed for early repayment.
- repayment is based on equal monthly payment counted based on reducing principal
OCBC Business Loan
The OCBC Business Loan is an unsecured business term loan that offers
- Loan amount of up to $500,000
- A processing fee of 2% is applicable
- The loan term can be up to 5 years
- Attractive interest rates
- 3% penalty imposed for early repayment
UOB Business loan
This is known as the Biz Money Loan and is an unsecured term loan for businesses. Features include:
- Loan amount up to $350,000
- Repayment period of up to 4 years at 10.88% interest rate
- This loan has the highest penalty for early repayment which is at 6.88%
What to be aware of when applying for business loan?
You will notice that the interest rates between the 3 banks are quite similar which means you will be required to make your allocations for payback accordingly. However, you must know that the amount (maximum) is never guaranteed. While a bank might offer up to $500,000 of the maximum allowed, you might not get that figure. Hence, you need to be careful before applying. You must consider the early repayment penalty because if your business succeeds, you might want to clear the loan in a time earlier than scheduled.
Another major factor that you must consider is how long your company needs to be operational before you are eligible to apply for this loan. Most banks will need you to be at least 2 years old. It would be most ideal to speak to the bank staff if your business is less than 2 years and what should you do in order to improve your approval chances.