Running a business in Singapore is not an easy task. As a business owner, you may face a cashflow crunch and need emergency cash to enable the business to run smoothly.
A business loan could be helpful in many ways. Whether you are considering buying new products or expansion, a small business loan can turn it into reality.
But a good opportunity does not occur twice. Therefore, you would not want to miss this chance of reaping a good profit.
In this case, you can try applying for a business term loan in Singapore to boost your business.
If you are wondering what is business term loan, this article tells you how to apply for business loans in Singapore from a lender. The right business loan can enable you to grow your business sustainably.
Business Loan Options In Singapore
Much of Singapore’s economy comprises small and medium-sized enterprises (SMEs) that face challenges such as stiff competition, as well as high rental and operational costs.
This is why small business loans can help such businesses stay ahead of the competition and relieve their financial burdens. Both banks and licensed money lenders offer business term loans.
Here are various business loans in Singapore that you can choose from:
Standard Business Loan
This type of loan does not require collateral, meaning it is an unsecured business loan. It is a small business term loan that is popular among SMEs in Singapore due to its flexibility.
You can use this loan to settle daily functions such as inventory purchases, rental fees, payroll, and business expansion plans.
For this type of loan, you can choose a repayment plan for up to five years. You can get this loan from major banks such as DBS Bank, United Overseas Bank, and OCBC Bank.
SME Working Capital Loan
This government-backed business loan is available for SMEs with a maximum of 200 employees.
The Singapore government joined hands with banks to offer loans up to $1 million per borrower for a loan repayment period of between one to five years.
The SME Working Capital Loan is only applicable for businesses that are at least 30% owned by Singaporeans or permanent residents (PRs).
Start-Up Business Loan
This unsecured loan caters to new start-ups. A business start-up loan in Singapore is a smaller-scale version of a normal business loan.
Start-ups should be able to qualify for this loan as it offers a lower loan amount of up to $100,000, making it more accessible.
Business Loans Vs Personal Loans
Both business and personal loans are common types of loans in Singapore. But they are not the same.
The main difference between the two is the lender’s requirements to determine your loan eligibility.
Licensed money lenders usually check the debt-to-income ratio for personal loans and may offer you the loan with minimum documentation. Banks are more particular about your credit score.
But for an SME loan, you will need to have good business plans and produce accounts and profit statements.
Here are more differences between a business and personal loan:
- You can get a business loan of up to $20 million, but you can get four to six times your monthly salary for personal loans, depending on the lender.
- The loan tenure for a business term loan is up to five years, but up to seven years for a personal loan.
- A business loan requires documents such as ACRA records and business financial reports, while a personal loan may only need income proof. It is important to find out from your bank or licensed money lender the specific type of documents they require to process your application.
- A business loan may need your business to be at least six months old. Some lenders only loan to businesses that are at least two years old. This does not apply to a personal loan.
- A business loan takes up to two weeks or more for approval, but a personal loan takes a few days.
Eligibility Criteria
Business Loans
When it comes to a business bank loan, the eligibility criteria will vary depending on the bank and the loan type.
Lenders will assess your business based on business credit financial projects and may request a business plan.
For personal loans, they will check your credit report, financial history, and debt-to-income ratio. They will need you to have a good score on your credit report.
Foreigners are eligible to apply for a personal loan based on their monthly income and work permits.
Eligibility for business loans in banks are as follows:
- The business should be registered in Singapore
- It must be at least two years old
- It should have a minimum annual revenue of $300,000
- It must be at least 30% owned by Singapore citizens or PRs
- Its annual group sales should be below $100,000
- It should have a maximum of 200 employees
Personal Loans
For personal loans, lenders will check your credit report, financial history, and debt-to-income ratio. Banks will need you to have a good score on your credit report.
Licensed money lenders tend to be less rigorous about your credit score but will look at your income.
Foreigners are eligible to apply for a personal loan based on their monthly income and work permits.
The applicant will also need to:
- Earn a minimum annual income of $30,000
- Provide recent payslips
- Produce NRIC copies
- Have the latest bank statements
- Be at least 21 to 65 years of age
At licensed money lender CreditMaster, the application process is fairly simple. Fill up an online application form, then prepare the following for approval:
- Recent ACRA business profile
- Company’s financial statements for the past six months
- NRIC copies of the company’s directors
- Applicant’s Notice of Assessment
- Tenancy agreement for the company’s premises
How To Qualify For A Business Loan
To get approved for a business loan in Singapore, follow these tips:
Assess Your Various Business Loan Options
Before committing to a business loan, ensure you understand all the details and assess any potential risks. This will enable you to identify which loan suits your needs best.
Keep Accurate Business Records
When considering a loan, keeping and organising your business records well is important.
A lender will always need to see your transactions, so it’s crucial to have the correct records on hand and submit the required documents.
Maintain A Good Credit Score
You can easily apply and get approved for a loan with a good credit score.
It speeds up the application process and gives you a higher chance of qualifying for the loan or not. A poor credit score may mean you will have to wait longer for your application to go through.
Check If You’re Capable Of Repaying The Loan
Ensuring you can repay the loan before applying helps simplify the whole process. You can start by determining how much you want to borrow and what collateral can be used to secure the loan.
Prepare The Necessary Documents
You should prepare all required documents beforehand. This will enable you to submit the necessary information instead of wasting time and being stressed about the application process.
Fees And Terms
Some lenders may charge you 2% of the approved loan amount on top of the interest rate you’re offered.
Terms and conditions apply. For instance, some banks may need a guarantor to support the loan.
While terms will vary among lenders, one thing stays the same: They reserve the right and discretion to reject loan applications.
Why Your Business Loan Application May Be Rejected
Here are some reasons why your application may have failed.
Poor Credit Score
Small businesses are always connected to their owners. Therefore, the lender will look at your credit score to check how the company will handle debts.
How good your credit score is will determine whether you qualify for the loan or not. Factors leading to a bad credit score may include legal filings and a poor repayment history.
Licensed money lenders will also check your credit score. So your credit score can make or break your business loan application.
Inadequate Business Track Record
A new business will be disadvantaged in two ways: firstly, it may not have had enough time to create a good credit history, and secondly; the company may not be eligible for the loan.
Moneylending is a risky business. Hence, lenders need to safeguard their interests. Most banks have clear requirements of how old a business should be before being eligible for a loan.
Lack Of A Good Business Plan
When applying for a business loan, the money lender will be curious about how you intend to achieve your business goals.
A good business plan shows the lender your vision for the business. Not having a good business plan may affect your application.
Wrong Lender
There are various lenders for a business loan in Singapore, from banks to licensed money lenders.
There could be significant differences among the offerings from different lenders. Sometimes you may not meet the eligibility requirements for one lender, but you may get approved for the loan with another lender.
Find The Right Business Term Loan In Singapore
Now that you know what is business term loan, the best business loan in Singapore is the one that addresses your business’s specific needs.
So get the ball rolling by researching to find the best loan offer for your business.
When applying for a business loan, always use a reputable licensed money lender like CreditMaster that you can trust.
We can offer you better loan services for all your business needs.
Applying for a loan with us is easy, and you can get flexible repayment terms to run your business without worrying. Contact us today.
