Ultimate Guide to Best Small Business or SME Loans in Singapore

Let’s be real – running a small business or startup in Singapore isn’t exactly cheap. Between all the expenses, it’s easy for cash flow to become squeezed. That’s where getting a little extra capital from a business loan can be a total game-changer.

But with so many loan options out there, how do you even begin to narrow it down? Are you better off going to a big bank or keeping it local with a smaller lender? What about all those government-assisted schemes – are they worth jumping through the hoops?

No need to panic. This ultimate guide is about to break it all down into simple chunks.
Whatever your situation is, having a solid loan lined up can be the difference between thriving and barely surviving.

In simple terms, this is any type of financing that a company can get to fund their operations and growth. Unlike personal loans meant for individuals, these loans are designed specifically with the needs of small-to-medium enterprises in mind.

Now, you might be thinking “Can’t I just use my personal credit for my business expenses?” And sure, that could work in a pinch if you’re a tiny side hustle. But once you register as an actual company and start racking up serious overhead costs, you’ll need access to way bigger loan amounts than what personal credit can provide.

That’s where dedicated business loans come in handy. The loan sizes are usually way heftier, with some even letting you borrow up to millions of dollars if your company proves it can handle that kind of financial weight. You’ll also get repayment periods that are structured for a business’ typical cash flow cycles instead of whatever terms personal loans offer.

Another key difference? The application and approval process. When you apply for a personal loan, it’s really just about showing you’ve got enough stable income to make those monthly payments.

At the end of the day, business loans give you a super flexible way to pump working capital into your company without having to rely on personal finances. From hiring staff to investing in new equipment, the extra cash infusion could be exactly what you need to take operations to the next level.

Before even thinking about applying, make sure your accounting records are updated and ready to go. Lenders need to see you’ve got a steady stream of revenue coming in and can actually manage the new debt obligations.

Just like personal loans, your business credit score plays a big role in the application process. Make all existing debt payments on time, minimise outstanding balances, and try to keep that credit utilization ratio below 30%. A solid credit history with no payment issues shows money lenders you’re financially responsible and low-risk.

This detailed plan shows lenders the loan won’t just be funding a pipe dream. Your plan should cover your company’s background, organisational structure, products/services, market opportunities, projections and growth strategies. Don’t slack on this – it’s your chance to showcase why your business model is viable and deserves their support.

Lenders may still require collateral or a personal guarantee as security for the loan, even if you have good credit. If possible, be ready to put up business assets or even cash deposits as collateral before applying. Those with nothing to put down might have to stick to unsecured financing options.

Nowadays, lenders will stalk your online presence as part of their assessments. The company website, social media pages and any review platforms should look professional. Having an active, credible online footprint reinforces you’re a legitimate business.

Don’t just default to a generic business term loan. Lenders in Singapore offer all sorts of specialised financing for different business needs like equipment loans, invoice financing, lines of credit, renovation loans and more. Understanding which loan type fits your specific situation makes the approval process smoother.

Smaller local SMEs should definitely look into government-assisted loan schemes like the SME Working Capital Loan or Temporary Bridging Loan. These offer more affordable rates and higher loan caps, but just note there are strict criteria around percentage of local ownership, annual revenue numbers and operational tenure to qualify.

Lenders naturally prefer giving loans to more established, consistently profitable businesses with a proven track record. So you may want to hold off applying if your company just started out, is in the middle of a slow period or still pretty unstable financially – give it 6-12 months of solid operations at least before trying. Having this history under your belt gives you way better chances of approval.

Getting one lender’s loan offer doesn’t mean you’re done! Take the time to compare interest rates, processing fees, loan tenors and maximum loan amounts across multiple banks, lenders and even P2P platforms. Finding the best overall loan package with affordable rates and terms aligned to your cash flow projections will help maximise those precious funds.

Contrary to popular belief, loan details aren’t always set in stone, especially with smaller lenders and alternative financing. Don’t be afraid to negotiate for better terms if you think the proposed interest rates, fees or repayment schedule simply won’t work for your cashflow situation. But have solid reasoning and backup options to strengthen your position.

Having access to the right financing can change your small business or SME’s growth trajectory. The key is finding a loan package that’s tailored to your unique situation. With so many lenders and financing options out there, it can feel overwhelming trying to identify the best fit while ensuring you don’t get saddled with unfavourable terms.

That’s where loan matching services like Lender SG can be a huge help. Our platform essentially curates personalised lending matches for you based on your specific criteria and financing needs. No more wasting hours hunting around different bank websites or getting rejected left and right.