Comprehensive guide


Learn about SME business loan with LoanSg

Are you looking for a SME business loan to help fund the growth of your business? If yes, read on.

As the saying goes, it takes money to make money. In the normal circumstances of things, all businesses should – and need to – have a ready availability of money to invest in development of new capabilities and pay for ongoing expenses such as wages and material costs among other consumption that fuel the business operations.

Every business will also inevitably face financial challenges at various points in its lifecycle that may require a short term injection of funds to carry on with the usual business operations, or to capitalise on a new growth opportunity.

For startups and young businesses, the financial difficulties can come knocking quite early on and can pose an existential threat to the whole enterprise if not resolved.

In these situations, taking up a business loan can be a viable and effective option to deal with the problem at hand, so that your business can move on and stay on track in alignment with its growth direction and goals.

In fact, proper use of debt financing as a way to fund a business’ ambitions is considered good financial management practice.

What is a SME business loan

A SME business loan is a form of unsecured loan that is offered specifically to businesses to help them alleviate their immediate cash flow situations. It is also commonly referred to as a working capital loan, or bridging loan.

As an unsecured loan, there is generally no restriction on what you can use the money for once you’re approved to borrow it.

What can you do with a SME business loan

As mentioned earlier, there is typically no restriction on how to use the borrowed funds and what to use it on once you’ve acquired it.

A common use for it is to settle required upfront payment materials or inventory that you need to fulfill a business deal where the proceeds will only come in a few months down the road.

In many cases, the borrowed money can also be used for paying off staff salaries and operating expenses that are due.

Other times, the loan can also be used to invest in the development of new capabilities, as well as purchase of new software and machinery, that will help the business generate more income in future

In times when the markets are not performing well, businesses are likely to experience depressed earnings and tight cash flows. A SME business loan in this case can be a much needed lifeline to help the business stay afloat and ride out the tough period.

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Where can you apply a SME business loan from

Financing options for commercial entities in Singapore are readily available via banks and similar financial institutions.

To provide support and assistance to Singapore SMEs where possible, the Singapore Government often implements financial schemes to guarantee a significant portion of the loan quantums that banks offer to businesses.

This reduces much of the risks that banks carry when dispensing out the business loans, and thus encourages them to be more willing to provide loans to more businesses in the market.

Nevertheless, given the nature of how banks and such financial institutions work, not to mention the amount of paperwork required for submission as part of the loan application process, getting a business loan from them – even with Government’s support – can more often than not be elusive.

Therefore, many businesses turn to licensed money lenders whenever a short term injection of working capital is needed.

Besides being faster to apply and get approval for, dealing with moneylenders is also more convenient and less of a hassle compared to banks. The amount of paperwork required is definitely lesser in comparison as well.

The other big plus point to go with money lenders is that unlike loans offered by banks which are templated offerings and rigidly structured, a business loan from a licensed money lender can be flexible and customised to your specific needs, depending on the discussion and negotiation with your preferred lender.

Types of business loans for SMEs

There are typically 2 types of loans that you as a small business owner can take up with licensed lenders, namely long-term loan and short-term loan.

Long-term loan

These are loans involving large sums of money with a longer tenure usually covering over many months and may even stretch into a number for years, depending on the terms and conditions under which they are structured.

Such loans are typically only offered by established lenders with years of experience in the money lending industry.

The loan amount is usually massive, and can be used to cover significant expenditure, such as setting up a new factory, undertaking a R&D effort and investing in new machinery equipment.

Short-term loan

This would be the typical business loan as described so far in this article, which is usually for a smaller amount of money and matures within a few months.

Unlike a long-term loan which needs to be repaid in monthly instalments, a short-term loan is typically paid at the end of the loan term as defined in the loan agreement. As such, the interest rate on such loans are usually higher than that of long-term loans.

This type of loan is particularly useful for financing short projects with quick turnaround and high profit margins.

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Where to find the best SME business loans

You can do a search on Google and go from one moneylender website to another and learn about the types of personal loans they offer, and the terms that come with those loans. You can also call them up one by one and ask.

A better and easier solution would be to use a quote aggregation platform such as Loanhere.

With a simple enquiry request, Loanhere will generate your customised loan quotes from a curated selection of the best licensed moneylenders in Singapore and send them straight to your email almost instantly.

If you’re looking to apply for a SME business loan, click here to get a quote now.

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