Whether you want to fund your startup or restock your inventory, a lack of business funds can be frustrating. Fortunately, the good news is that you can get small business loans from different lenders in Singapore for small and medium-sized enterprises (SMEs) like your business. 

One example of such loans is a short-term business loan, which can be used to sort out urgent needs quickly. 

This sounds good – but short-term business loans often have higher interest rates owing to the short tenure. Loan tenures vary across lending institutions, but they are usually no longer than 18 months. 

So how do you get a business loan in Singapore? We will answer this, discuss various types of SME loans, and show you how to find the best short term business loan in Singapore. 

What To Consider

Many lenders issue loans for SMEs, but the deciding on the best short term business loan and lender could be overwhelming. 

Here are factors to consider if you are unsure of how to find the best short term business loan:

Loan Amount

SME loans are generally short-term, so the cash you get will be slightly less than long-term loans. How much do you need, and will the lender approve that amount? 

Check how much you can afford to borrow and consider a lender that can approve the amount that you need. Here is a tip – borrow the exact amount you need to avoid incurring high interest rates. 

Loan Tenure

You must think about how long it will take for you to service business loans for SMEs. Repayment durations vary and are subject to the loan amount you take. Potential lenders should offer flexible loan tenures to ensure you can repay without struggling. 

Company Size 

The size of your business determines if you will qualify for a loan. For example, startup business loans are only ideal for those who have been navigating entrepreneurship for at least six months. 

Microloans are best for companies with less than 10 employees or those with sales not exceeding $1 million. In contrast, SME funding is only available for entrepreneurs in SMEs. So if you are running a startup, the loan amount wouldn’t match that of an established SME. 

Loan Accessibility And Approval

Small business loans are usually easy to access, especially if you opt for licensed money lenders, which tend to process loans more quickly than banks.
Needless to say, the speed of approval can be a dealbreaker, especially if you need a short-term business loan urgently to restock or meet unending client demands. After all, time is money.

Whether it’s a bank or licensed money lender you are considering, always opt for a lender that offers online application for convenience, and quick approval. Most licensed money lenders guarantee 24-hour approvals. 

Lender Accreditation

The last thing you want when looking for a business loan is to become a victim of illegal and malicious lenders. Unlicensed agencies such as loan sharks will resort to threats and harassment to recover their money. Therefore, always verify a money lender’s legality and adherence to the government’s lending laws. Look up the Ministry of Law’s list of licensed money lenders in Singapore and make sure the lender’s details match what is on the list. 

Interest Rates, Fees, And Loan Terms 

The interest rates and terms of service are critical when it comes to how to find the best short term business loan.
The average business loan interest rate in Singapore is 7-12% per annum, but it could be more than this if you are borrowing from private lenders. 

Ask about additional charges such as administration fees and penalties, and check if the loan terms are favourable. The financing options should be convenient to avoid putting your business at stake if you struggle with loan repayments. 

Types Of SME Loans

Depending on your business needs, there are various specialised financial services that you can get for SMEs. 

Knowing the options available makes it easier for you to choose the most customised small business loan for your setup. 

Here is an overview of SME financing solutions you in Singapore:

SME Working Capital Loan (WCL)

This is a government-backed financing programme enabled through the Enterprise Financing Scheme (EFS-WCL). The funds are available for all SMEs regardless of their industries, even though your eligibility is decided by the government.

Singapore’s government has increased the borrowing cap from $300,000 to $500,000. These funds are an option for businesses that have attained the WCL cap. Such loans are viable for leveraging expansion opportunities or funding critical daily operations. 

An example of SME WCL funding is the OCBC SME loan – you can get $400,000 on a five-year repayment plan.

Startup Business Loan

This type of funding is designed for young businesses that are between six to 24 months old. You can only opt for these schemes to fund your startup or get capital to maintain operations. The loan cap doesn’t exceed $100,000.

Commercial Property Loan

Expanding a business requires finances. For example, you may contemplate building new offices, outlets, storage spaces, or refurbish (renovate) commercial property. 

If your finances are an issue, you can consider a commercial property loan to facilitate expansion. 

Invoice Financing

You can use unpaid invoices to secure short-term loans to cushion your business. Invoice financing is a viable option if your customers owe you a good amount in unpaid invoices. The amount could be 70-90% of the total invoiced. 

Sustainable Financing

Businesses specialising in the sustainability sector and nature-based services can benefit from a sustainable financing programme. 

For example, an OCBC SME loan or EFS-Green programme could help achieve your business dream of going green and enhancing sustainability. 

Trade Loans

The funding is government-backed and provided by the Enhanced Enterprise Funding Scheme for businesses specialising in larger trades. Singapore’s government has doubled the loan cap to $10 million. 

A trade loan is a good example of a revolving loan where businesses can access the funds to finance needs such as acquiring inventory. The loan tenure is renewable annually with 5-8% interest rates.

What They Can Be Used For 

Getting a small business loan in Singapore can be helpful in many ways. You can leverage such financing schemes to cover unplanned costs.
Here are a few ways to use a business loan:

Fund Startups

Upfront costs may not always match your budget, so supplementing them with small business loans can help meet uncovered expenditures and unexpected operational costs. You can opt for these programme if you are optimistic about the cashflow of your business in the upcoming months. 

Cover Startup Expenditures

Insufficient cashflow can affect the stability of your business. For example, making daily or weekly payments for restocking purposes could be challenging if your business is still in its initial stages of growth. 

Besides, purchasing inventory or other discounted products within your specialisation might be unbudgeted. That is why most entrepreneurs leverage SME loans to cater to inventory costs. 

Address Emergencies

Emergencies happen to big, much less small businesses; and when they do, inadequate funds could jeopardise any progress. Fortunately, business loans for SMEs are a perfect funding source for managing unexpected financial scenarios. 

Supplement Cashflow

Managing a small business can be challenging without funds. With enough cashflow, paying suppliers, casual labourers, and other short-term expenses would become an issue. 

Short-term business loans come in handy when facing low cashflow issues.

Comparing SME Loans

Small business loans are readily available in Singapore. But researching and comparing various loans is key to find a perfect lender. The first thing to do is to determine why you need the loan. 

For example, microloans would be good for making one-time purchases or meeting short-term expenses. In contrast, large funding is beneficial for expansion purposes or acquiring must-have assets such as real estate or production equipment.

Clarifying the funding needs makes it easier to decide on the perfect SME loan. You can make an informed decision after comparing loan rates, tenure, additional fees, and loan terms. 

If you’re wondering how to find the best short term business loan, the best small business loans should have the lowest rate, realistic loan terms, affordable fees, and a flexible tenure. Ensure that you are comfortable with the terms of the loan before signing on the dotted line. 

Where To Get A SME Loan

Once you are sure about how to find the best short term business loan, it’s time to seek funding. Depending on your business needs, your choices include:

Banks 

Traditional financial institutions such as banks are an option, but it helps if you have a history with the provider. Examples of banks that provide SME loans in Singapore include United Overseas Bank, OCBC Bank, DBS Bank, HSBC, Standard Chartered Bank, and Citibank.

Funding Societies

You can get quick disbursements from funding societies if you want working capital loans. The maximum loan amount is $100,000, and interest rates start at 1%, exclusive of processing fees (5-7%), with a 12-month loan tenure. 

Line Of Credit

If your startup is on the verge of managing daily costs, you could opt for a line of credit funding if your startup is at least six months old. Monthly interest rates range between 1-3.9%.

Licensed Money Lenders

Many licensed money lenders in Singapore provide unsecured small business loans, provided your business has been running for at least six months. 

Horison Credit is one of the viable options in this category. It takes less than five minutes to apply and up to 24 hours to receive funds. 

Government-Backed Loans

The government has made it possible for entrepreneurs to benefit from startup loans in Singapore. It will bear the 50% risk of defaulting on SME loans.

The government decides the eligibility criteria, while banks set the loan interest rates. A few of the eligibility requirements include the following:

• 30% of the company’s shareholders should be Singaporeans
• The revenue should be approximately $100 million

Though you may meet these criteria, there is no guarantee that you will get approval for government-backed loans.

Learn How To Find The Best Short Term Business Loan 

Often businesses get stuck when they least expect. However, short-term business loans are a relief even when you are on the verge of bankruptcy. 

Never let your enterprise and hard work go down the drain when you can salvage it through timely SME loans from lenders like Horison Credit. 

Is there a business need you would love to cover but are short on finances?
Contact us to find out more, or apply for a loan now and make the most of every opportunity to upscale your business.