How Long Is A Small Business Loan Term In Singapore?
February 9, 2023
When you have a business, you may require extra finances to expand it or maintain the cashflow. This is when you may decide to approach a lender in Singapore for a business loan.
But before you take out this loan, you should know how long it will take to repay it. It helps in preparing a repayment plan.
So how long is a small business loan term? What should you look out for?
Keep reading this guide to understand how long it takes to repay small business loans, the loan options available, where to get such loans, and how to apply for the loan.
What Are Small SME Business Loans?
SME business loans are loans offered to small and medium-sized enterprises (SMEs) to cater to their business needs.
There are different types of business loans in Singapore. You can take out a loan for general business needs such as an emergency.
Also, you can borrow for a specific purpose, such as buying a property or machinery.
How Long Is A Small Business Loan Term?
Business loans come with varying terms and conditions. Some are short term while others are long term. Therefore, before you sign a business loan contract, it is best to understand the terms to abide by.
One of the things to look into is the loan term. This is the period in which you should repay your loan.
If you are asking “how long is a small business loan term?”, here it is. You can repay your loan for a period of up to five years.
However, there are particular small business loans with a shorter loan term. For example, if you opt for invoice financing, you will repay once the invoices are paid, which is about 30-120 days.
On the other hand, other loans, such as commercial property loans, have a term of up to 30 years.
When you know the average term of a business loan, you can easily budget your business income and plan the monthly installments accordingly.
Always choose the shortest loan tenure possible. For example, if a loan has up to five years of repayment, you can opt to pay it in two years. This helps you to reduce the interest and the total amount you will pay.
However, when selecting a business loan term, consider the amount you can realistically pay monthly without straining your business.
What Are The Business Loan Options In Singapore?
You can borrow different business loans in Singapore. Here are the common types:
Start-Up Business Loan
This is a loan type for young businesses that have been operating for six months up to two years.
Usually, the loan amount is smaller than other loans. You can borrow up to $100,000 for your young company.
The good thing with this business loan is that you can get quickly approved for it. This is because you don’t need a strong financial history, and your business needs to be operational for only a few months.
SME Working Capital Loan
An SME Working Capital Loan is supported by the Singapore government together with banks for local SMEs.
Your company needs a maximum of 200 employees and must be registered to get this loan. Also, it should have at least 30% owned by Singaporeans or permanent residents (PRs).
An SME can get a loan of up to $1 million, which should be repaid within one to five years.
Do you have unpaid invoices for your business and are short of finances? You can convert up to 80% of unpaid invoices into cash to keep your business running smoothly.
The loan is short term as you have to repay it once the invoices are paid. However, you have to pay interest on the money you have used.
Equipment And Machinery Loan
It is a fixed asset loan that a SME can apply for to buy new or used assets. This allows your business to upgrade, especially in this era of automation. You can get up to 90% of the purchase price of machinery or equipment.
And how long is a small business loan term for a machinery or equipment loan? You will repay this loan for up to one year or renew it yearly.
This is one of the SME business loans in Singapore that allows your company to sell its shares of ownership to investors. As a result, you get finances to meet your business needs.
You can borrow this loan if your business doesn’t qualify for a loan from banks or doesn’t have a satisfactory business performance.
If you have a business operating in the green economy, you can enjoy SME financing in Singapore. The government provides funding to companies promoting sustainability.
You can get up to a $5 million business loan under a 30-year repayment period. You don’t need any certification to secure this loan.
Personal Loan Vs Business Loan
When you take out a personal loan, you can cater to individual needs such as medical treatment. On the other hand, a business loan is only meant for business needs.
However, if your SME loan application has been rejected, you can apply for a personal loan to meet your business needs.
What is the difference between the two loans?
|You can borrow up to 4x your monthly salary
|You can borrow up to $20 million
|The loan term is up to seven years
|The loan term is up to five years. There are also long-term loans with tenures of up to 30 years
|There is no age limit
|Your business must have been operating for at least six months, while others may require at least two years
|The processing time is quicker. It takes a few days
|The processing time is two weeks or more
|You will provide personal documents such as your current salary and credit history
|You will provide business documents such as ACRA or business financial reports
How And Where To Apply
After understanding how long is a small business loan term, you can apply for a loan. The application process is fairly easy and fast, especially in this digital era.
Steps For Applying
1. Find a lender – The first step when looking for SME loans in Singapore is shopping around to find the best lender. This is because lenders have different business loan terms. Therefore, you need to compare them to get the best deal.
2. Send in the loan application – After finding the best lender, you can submit your application. You don’t need to visit the lender’s physical office to apply. Instead, you can apply online using your Singpass. All you need to do is to find the lender’s official website and go to the “apply” page.
3. Provide the required documents – A lender will require you to provide the necessary documents to verify your application. For small business loans in Singapore, you should have the following:
- NRIC or any other identification document for sole proprietors, partners, and directors
- Operating bank current account statements for the last six months of your company
- The GST statements for the previous six months of your business
- Completed Enterprise Singapore Enterprise Financing Scheme (EFS) application form if applicable
- Copy of the partners’ or sole proprietor’s Income Tax Notice of Assessment
- Any required business banking facility forms issued by the bank are to be filled
- Resolution from your company’s board of directors
- Constitutional documents of your company, such as an article of association or memorandum
- Any other document related to your company’s identity or proof of your business address.
4. Select a loan amount and term – State the loan amount you require for your business. Also, give the loan tenure you need to repay the loan. The lender will require you to have a suitable repayment plan and indicate it in your application.
5. Wait to hear back from the lender – The lender will go through your loan application. It can approve or deny you a loan depending on its eligibility criteria. Therefore, be careful to provide every detail required when applying. If you qualify, the money will be disbursed to you.
Where To Apply
You can reach out to the following lenders:
Banks in Singapore offer different business loan packages to business owners. However, the eligibility criteria to qualify for these loans are strict.
For example, your business must have at least 30% ownership by Singaporeans or PRs.
If your business matches this qualification, you can apply for a loan from banks such as OCBC Bank, Standard Chartered Bank, and DBS Bank.
Licensed Money Lenders
These legal money lenders are the perfect option if your business does not meet the banks’ requirements. This is because licensed money lenders are more lenient than banks.
But is it safe to borrow from a licensed money lender?
Yes, every licensed lender operates under guidelines set by the Ministry of Law. Therefore, all legal money lenders cannot go against the provided guidelines, or they risk losing their licences.
Get The Best Small Business Loan Term In Singapore
If you are looking for a small business loan in Singapore, you need to understand how long is a small business loan term.
When you know the time it takes to finance your loan, you can easily plan your repayment schedule.
The repayment period is usually up to five years. However, some loans have a shorter loan term, like invoice financing, while others, such as commercial property loans, have a much longer period.
If you are looking for a financial institution to give you a business loan in Singapore, get in touch with Credit Thirty3.