How To Get A Business Loan: A Guide To Small Business Personal Loans In Singapore
September 11, 2023
Securing small business personal loans poses greater difficulties for startups in Singapore than larger enterprises. While it remains an achievable attempt, new business owners can enhance the likelihood of approval by selecting an appropriate kind of funding.
Loan terms understanding is crucial, as well as acquainting yourself with your scores and finding the most competitive lending alternatives currently accessible in Singapore.
The following guidelines outline the process of how to get a business loan.
How To Apply For A Small Business Personal Loan In Singapore
A small business loan is commercial finance from various sources, including physical banks and other financial institutions. Businesses can use funding for multiple purposes, like general running expenses (payroll and rent), and capital expenditures (computers, and inventory).
Suppose one operates a small firm in its early stages or does not generate sufficient revenue to meet the eligibility criteria for a conventional business loan. In that case, it may be prudent to explore applying for a specialised business loan for smaller enterprises or those facing financial challenges.
Below are the types of loans for small businesses:
SME Working Capital Loan
Local Singapore-registered small and medium-sized enterprises (SMEs) can avail themselves of a specific category of affordable business loans at relatively low cost. This loan option allows SMEs to submit applications and repay the loan amount over a period ranging from one to five years.
However, it is comparable to a conventional business loan, featuring a lower maximum loan amount threshold. This credit option is advantageous for enterprises with a relatively short operational history, typically spanning a few months.
A Temporary Bridging Loan
This loan option may be suitable for a Singapore-registered small and medium-sized enterprise that possesses a minimum of 30% ownership by Singaporean individuals. The maximum duration for repayment extends to a period of five years.
In summary, those who find themselves in the initial stages of a business venture or are actively working towards transforming their entrepreneurial aspirations into tangible outcomes may find it more advantageous to pursue either a small business loan or a personal loan.
Steps To Apply For A Small Business Personal Loan In Singapore
Before applying for the business, there are loan application steps that you must fulfil. The first and obvious one is to identify the type of business loan you want to apply. The others include the following.
Credit Score Checking
Lenders look at a borrower’s credit history to approximate the risk they represent. The probability of on-time payments increases for applicants with higher credit scores.
New firms, especially startups, may not yet have a business credit score because these reports are accessible after a business has existed for six months to a year.
However, lenders often consider the applicant’s or business owner’s credit score. This is because they sometimes sign a personal guarantee on loan, promising to repay the loan with their own money if the firm defaults on its payments.
Before applying for the loan, you should check your credit score and order duplicates of the company’s credit reports to familiarise yourself with the process and calculate your probability of obtaining the loan.
Regulatory Document Requirements
When applying for your business’s loan, you may find that different lenders have distinct prerequisites. However, most loan providers rely on specific paperwork to verify the applicants’ and firms’ identities.
For example, it’s common practice for loan officers to request documentation like:
- Banking records
- Receivables account
- transactions with credit cards
- Unpaid invoices from the last four months
Additionally, they commonly request tax returns going back at least two years.
A comprehensive business plan might enhance the likelihood of securing startup entrepreneurs’ finances. Utilising upcoming revenue and expenditure statistics can demonstrate to creditors that the organisation possesses the financial stability to fulfil its repayment commitments.
Furthermore, creditors may request copies of relevant business licenses and certifications pertaining to your specific industry and personal banking information to facilitate direct deposit.
Choosing The Right Lender
You may be able to get startup funding from more than one source, depending on your individual and business credentials. Compare lenders according to these parameters to locate the most favourable starting company loan for your needs:
Interest Rates Per Year
The company loans’ Annual percentage rates (APRs) typically begin around 9% but can be higher for startups and considerably lower for creditworthy borrowers. You should check their websites or contact their customer service departments to learn the APRs various lenders offer.
Various Charges And Fees
The origination amount that commercial lenders often charge ranges from 3%- 5% of the total loan sum. The money stands for the expenses incurred when processing the loan application.
Loans paid off early are subject to prepayment penalties, and those paid after the deadline date are subject to late payment costs.
Some lenders remove them to maintain competitiveness because they can raise borrowing costs.
Reputation Of The Lender
Despite a lender seeming solid on paper, you should still check out what other borrowers say about their online experience with the company. It’s also good to ask your local business community about the bank in question.
If your research reveals warning signs, such as complaints about the lender’s customer service, you may want to look elsewhere for financing.
Ready to take your small business to the next level? Explore our range of tailored business loan solutions at Credit Thirty3. Whether you need funds to expand, purchase equipment, or manage cash flow, we’ve got you covered. Click here to apply now, and let us help fuel your business’s success.
Submitting Application As Per Financial Institutions’ Guidelines
After selecting a lender, it is advisable to acquaint oneself with the lender’s application procedure and ensure you gather the appropriate documents. The application and underwriting procedures exhibit variability across lenders.
Hence, it is advisable to inquire about the available application options, such as online or telephone applications, or the necessity of visiting a physical location.
Upon request submission, a lending institution representative may contact you to solicit supplementary documentation, such as evidence of collateral or additional banking information.
Benefits Of Small Business Personal Loans In Singapore
Swift Fund Access Within The Singaporean Financial System
It’s impossible to know what problems you’ll encounter in business. An SME loan could be the ideal option to keep your firm afloat when prompt action and creative problem-solving are essential.
Quick approval times for small and medium-sized business loans mean you can immediately put the money to work. Small and medium-sized business loans are the way to go when time is of the essence for your company. This type of loan typically takes 24 hours to process.
Loan Flexibility Tailored To Singapore’s Business Environment
There are various customisable choices for loan repayment with SME business loans. Banks and financial institutions are now aware of small business owners’ difficulties.
You can pay off the loan earlier once your profits increase. Whatever the circumstance, you can return the loan according to your business needs with flexible repayment alternatives.
Potential For Lower Interest Rates Compared To Other Countries
The latter usually comes out on top when comparing credit card and business loan interest rates and fees. Interest rates on company loans can be anything from 4.9% to 9.83% for entrepreneurs with excellent credit.
The typical APR for business credit cards is 24.2%. Remember that your credit score significantly impacts your interest rate on every loan you take out.
Considerations Before Applying In Singapore
Before you apply for a business loan in Singapore, you must consider several factors, such as:
- Financial situation assessment in the context of Singapore’s economy.
- Understand the terms and conditions set by Singaporean lenders.
- Consider the interest rates and fees in the Singaporean market.
- Repayment term evaluation offered by Singapore-based institutions.
Alternatives To Small Business Personal Loans In Singapore
The alternatives available include:
Business Credit Cards
Credit cards for businesses provide convenient, revolving access to funding for expenses that you were not expecting. Use the money for anything from paying for rent and utilities to making significant investments in machinery and other equipment, and the application process is far more straightforward than for traditional company loans.
Company credit cards are often more accessible than loans because lenders can base their choices on the owner’s credit history.
Annual percentage rates (APRs) average about 13% to 25%, with some cards offering initial 0% APRs for up to two years when business owners make purchases with zero interest. Cardholders also pay interest on delinquent accounts that go to the subsequent billing cycle.
Thus, credit cards can be a valuable tool for new businesses to pay for monthly expenses without accruing interest charges.
Lines Of Credit
A line of credit is a versatile form of finance that one can use toward several goals, such as:
- Working capital
- Equipment acquisitions
Lines of credit generally offer more favourable interest rates than alternative loan options, rendering them a viable choice for firms experiencing variable or seasonal income patterns. Additionally, their flexible nature allows enterprises to utilise funds as necessary.
Secured Business Loans
Entrepreneurs who cannot meet the eligibility criteria for a business loan may find tremendous success by pursuing a personal loan instead. In addition to the comparatively less stringent nature of the application process for business loans, personal loan qualification standards usually differ by a relatively lower level of stringency.
Moreover, although the loan amounts available from personal lenders may be smaller than those from business lenders, individuals who meet the necessary criteria may be eligible for personal loans with lower annual percentage rates (APRs) than business loans. The most creditworthy applicants may secure personal loans with APRs as low as 3%.
Merchant Cash Advances
A company can qualify for this loan form with a high volume of monthly credit card transactions. The standard advance for businesses is double the volume of their monthly transactions.
The business environment tailoring allows lenders to choose their terms for repayment. Some deduct a certain sum daily from a company’s merchant account, and those deduct a percentage of every day’s credit card sales.
Obtaining an MCA is simple. Short funding times are standard, and the loan repayment is through a percentage of future credit card proceeds. The cost is the main drawback. Monthly interest rates may exceed 30%, which varies widely by loan amount and creditor.
Click here to discover new possibilities for financing your small business with Credit Thirty3 in Singapore.
Suppose you put in the time and effort to gather the necessary documents and demonstrate your creditworthiness. In that case, you may boost your chances of receiving approval for a highly advantageous business loan from retail sector financing.
By planning, you can avoid defaulting on your loan and the corresponding penalties and interest. Applying for a loan after knowing how to get a business loan is smart since you must invest before seeing a profit.