During your entrepreneurial journey, it’s natural to find yourself in a cash crunch once in a while.
This is why owners of small or medium-sized enterprises (SMEs) in Singapore often require business financing that facilitates the expansion of their organisation and improves corporate processes.
These corporate loans come from multiple sources and have specific requirements. Short-term business loans support owners in bridging the gap in financial management or handling monetary emergencies.
Also called quick-turnaround loans, this credit transaction demands an SME owner to fully repay the amount within a few years.
Before you approach a bank or licensed money lender for quick monetary help, you should know how to find the best short term business loan.
Short-term business loans are pretty much like long-term loans – but with shorter repayment periods.
Most banks offer SMEs one year to pay back, while licensed money lenders can give you less than two years to repay the loan.
However, most creditors usually take an average of 120 days to resolve the debt. This flexibility in clearing financial debts allows borrowers to approach short-term loans with confidence.
Here are a few points that you should consider while thinking about how to find the best short term business loan:
Identify your business problem before approaching a bank or licensed money lender for a short-term business loan.
If you need financial support to buy a subsidiary firm for instance, such loans aren’t applicable. Note that not every emergency requires a short-tenure loan.
You must decide if you have the capacity to repay the outstanding amount within a short period.
The interest rates depend on your lender. It’s always advisable to look up the interest rates that various banks and private lenders are charging before you make a choice.
You can also use an online Equated Monthly Installment (EMI) calculator to get the exact figures. Ensure that you don’t borrow more than you need. Overestimating your funding needs can incur more interest.
Read the scheme-related documents and terms of repayment thoroughly before deciding on the credit amount.
You should also understand the monthly installment amount breakdown and decide if you can afford it. Consider your financial situation and determine if you can pay back the loan within the stipulated period.
If the terms seem too complicated to fulfil, seek another lender whose payback policies match your requirements.
Alternatively, speak to your current lender and ask to extend your payment tenure, which will also increase the amount of interest you pay.
Lending agencies, whether banks or licensed money lenders, determine the quality of your loan. So choose a good lender that guides you through the entire process and suggests alternatives.
While researching a reliable organisation, read online reviews and learn about customers’ experiences.
Make sure the lender is dedicated to their clients’ interests and ask for referrals from their former customers.
You can obtain some loans from various sources, including banks and licensed money lenders.
Another financing trend called peer-to-peer (P2P) crowdfunding provides monetary support through the pooling of funds.
Here are some options to consider:
These are the first choices for SME loan sources. Their well-structured and regulated loans cover multiple sectors.
Various banks have SME facilities, including notable local ones such as OCBC Bank, DBS Bank, and United Overseas Bank.
Apart from them, many foreign banks are actively offering loans to SMEs. These include Maybank, Standard Chartered Bank, Citibank, HSBC, and RHB Bank.
These banks have their specific stipulations, which range from the interest rate to financing terms. It’s advised that you shop around before applying for a loan.
Legal money lenders can provide you with short-term loans quickly and a flexible repayment scheme.
You need to submit six months’ of bank statements, your business portfolio, a financial report for at least the last six months, and the tenancy agreement of your office space.
In addition, money lenders may check your credit report to analyse your credit score.
After you’ve submitted your directors’ and shareholders’ documents, a licensed money lender will take approximately a week to sanction your loan. Reliable money lenders such as CreditMaster offer quick loans and reasonable terms.
When settling on any particular SME loan, you must compare the loans available. Here are the steps to compare SME loans:
Some short-term government-backed loans are:
SME Working Capital Loan (WCL)
This is a government-financed loan scheme that shares 50% of the risk with the SME. Companies can access this financing facility under an Enterprise Financing Scheme (EFS-WCL).
In this financing strategy, businesses can use 90% of the unpaid invoices and access immediate cashflow. Your customer and the supplier, with their invoices, will support your short-term loan. Note that you pay only the interest on the amount you have used.
This is a fixed-asset loan that falls under the EFS scheme where the government assists with half the risk. This loan enables you to buy new and used assets across industries.
You can apply for SME Sustainable Financing loans if you develop environmentally sustainable products or venture into organic agriculture. You don’t need any prior experience or certification while approaching the loan scheme.
Companies that need money for purchasing inventory or stocks can apply for this. It falls under the category of Enhanced EFS. A company that meets the eligibility will have access to its financing facility.
Start-Up Business Loan
These are designed to assist first-time entrepreneurs with their organisations. Companies must be in operation for at least six months and a maximum of two years. Small companies can apply for this loan since it comes with a minimum amount cap.
A few of the short-term loans available in Singapore are:
Lines of Credit
These are short-term loans that allow you to borrow repeatedly once you have repaid your credit limit. Their higher credit limits enable customers to use this loan to cover unexpected expenses. But the interest can be high.
Merchant Cash Advance (MCA)
A MCA is most suitable for businesses with high credit sales. With this loan, you can get a loan based on your future sales. This allows you to get capital without putting up any collateral.
As a business owner, you may run into cashflow issues from time to time. Now that you know how to find the best short term business loan, you can find a lender.
In such situations, banks and licensed money lenders can offer short-term business loan schemes.
CreditMaster is one of the top licensed money lenders in Singapore, offering some of the most affordable interest rates and flexible terms.