Singapore’s Circuit Breaker has saved many lives, but it has left economic scars that the small and medium enterprises(SMEs) felt more harshly than other businesses. One of Singapore’s economic cornerstones, small and medium businesses need to stay afloat to keep the economy balanced. Thankfully, the government has provided them with exceptional bridging loan products to help them during the lockdown period.
Even if they were projected to have slower growth in the country, small and medium businesses in Singapore had mainly contributed to the economy. According to a report by Singapore’s crowdsourcing SME financial company Validus Capital, SMEs have contributed more than S$1 billion to Singapore’s GDP from 2017-2019.
Therefore, they’re essential, and the government eases some of its restrictions to keep businesses afloat despite the ongoing economically-freezing effects of the pandemic.
The Relaxed Financing Restrictions in Singapore
The Monetary Authority of Singapore (MAS) has made practical steps in providing financial recourse for individuals and businesses. To ease expenses and keep business afloat, MAS allowed businesses to defer their payment of principal for secured loans. Furthermore, it continues to work with Singapore’s banks to lower SME financing interest rates, which has yielded the SME Working Capital and Temporary Bridging Loan Program. We will discuss these two financing products later in the post.
According to the MAS, the country’s banks are committed to “easing the financial strain on SMEs” during the Circuit Breaker period. It said that it has “worked with financial institutions in Singapore to offer options for SMEs in need to lower their short-term repayment obligations for their secured loans and to stay insured despite facing financial difficulties.”
How Helpful Are Specialized Financing for Small Businesses?
It might only take a modest personal loan to finance a start-up business. However, when your brand has gained momentum and lost it quickly, you feel the immense pressure of rebuilding your brand. It’s even challenging to repay all your financial commitments before they balloon. The best solution to resolve this is by using a low-interest loan from financial institutions to keep yourself afloat.
Brands can use their business loans in Singapore not just to keep afloat but meet rising demand. Better demands will mean having better equipment and facilities for the manufacturer and providing service to customers. Here are three ways most businesses can use to fund their business.
1. Business Expansion
One of the advantages of small operations is the capability to scale your business at will. If you’re seeing your demand grow even during the Circuit Breaker period, it’s great to use a bridging loan. This option can give you the means to expand your business’ capacity to produce more goods and employ more individuals, which help boost the country’s economy even with limited mobilization.
However, before you consider taking out an SME loan Singapore, consider the consequences of taking out Singapore business loans. Check if your cash flow is enough to repay your incoming business debt. You can start by calculating your debt-to-income ratio, which is one of the primary basis of banks in approving your business loan.
2. Floating Through The Toughest Times
For established business brands, sales become slower due to decreased demand. Mobility and physical presence-dependent businesses, such as clothing, appliance, and entertainment establishments, will see weakened sales performance throughout the lockdown period.
Specialized emergency funding can keep small businesses afloat by balancing their supply and demand with ample resources. Additionally, they can stimulate sales by using part of their loan to finance online advertising and developing innovations that help maintain brand relevance and integrity.
3. Tangible Asset Procurement
It might not be the best time to have more physical branches for other businesses, but acquiring more tangible assets is still in order if demand continues to grow. Additionally, business loans in Singapore can help traditional businesses invest in their employees’ work-from-home infrastructure if the Circuit Breaker continues to become a massive burden to operations
As Singapore’s Phase 2 comes in full force, some businesses can use business loans Singapore to refurbish or replace some of their existing machines, systems, and other equipment completely. Having locked down for a quarter of a year takes its toll on forcefully neglected equipment, and capital is necessary to revive them.
Singapore Government Aid
The government of Singapore provides financial aid for businesses by deferring payment of principle for and lowering interest on secured SME loans. The government-sponsored Enterprise Singapore (ESG) has launched its Enhanced Enterprise Financing Scheme, which includes these two loan programs from the government.
1. SME Working Capital
Taking a traditional Singapore business loan from a bank has high interest and is of low advantageous yield. However, the Enterprise Singapore loan that serves as a relief for SMEs provides a better interest rate, repayment period, and is an all-around exceptional business loan.
Under this loan, an SME can borrow up to S$1million. An SME will need to complete all their payments within a maximum payment period of 5 years. All total repayment period in years and the interest rate are subject to the Participating Financial Institution (PFI)’s assessment of business risks. Businesses can expect a lower-than-usual rate than commercial loans with the working capital loan.
2. Temporary Bridging Loan
If businesses need a little more to restore and boost their business activities, they can turn to Enterprise Singapore’s Temporary Bridging Loan. Its primary difference against ESG’s Working Capital Loan is its fixed rate of 5% additional per year. Furthermore, it requires a borrower group of three or more to take out a loan maximum of 5 Million.
However, similar to the Working Capital Loan, it has a repayment period of over 5 years. Additionally, when defaults occur in both Working Capital and Temporary Bridging Loan, PFIs can provide aid through standard commercial recovery procedures.
An SME Loan Perfect For Small Companies
All PFIs and commercial banks offer SME loans with varying interest that can be suitable for small and medium businesses looking for a loan to recover and improve their activities. However, they will have to go through the usual steps to apply for a business loan in Singapore and handle shorter repayment periods.
Here are some of the best SME loans businesses can apply for during these trying times.
1. UOB Business Loan
An SME financing UOB is drastically different from PFI-backed government loans in the maximum loan amount, interest, and maximum repayment period. The financing requires businesses to repay their loan in 3 years, which is two years shorter than the 5 years to pay PFI loan programs. Businesses can take out a maximum of S 100 000.
UOB’s loan for small businesses requires the SME to be at least 1 year old. Then, it has to be locally-owned with a 50% Singaporean equity share. UOB will not provide this financing to any business with more than 200 employees and annual profit beyond S 100 million.
2. DBS Digital Bank Loan
If you need a nominal loan to recover your business’ losses and continue to improve its performance, DBS offers up to S 100 000 – 200,000 with its Digital Bank Loan for SMEs. DBS’ loan is unique because it’s part of Singapore’s Resilience Budget, allowing borrowers to pay interest charges during the first year of the loan. This relief is excellent for businesses struggling to get back on their feet.
The repayment period for the DBS Digital Bank Loan has a maximum of 5 years. Additionally, it has a hefty 10% interest added per year and requires businesses to have at least a 30% Singaporean equity share.
3. Aspire Line of Credit
The most friendly financial institution to Singapore’s small businesses, Aspire has no specific operational or financial requirements but offers lines of credit that can reach a maximum of S 100 000 – 150,000 and subjects it to a 1-3.9% interest monthly. Their loan product is ideal for capitalist looking to improve their operations but requires a fast-paying solution.
Truthfully, their approval process is fast. However, businesses must understand that Aspire is technically providing unsecured financing that functions similar to a line of credit. This aspect explains the interest that they charge on borrowers per month
4. FS Bolt
Funding societies have a loan readily available for SMEs. The FS Bolt only needs two minutes to apply and two hours to receive a financing application decision after submitting the necessary documents for verification.
However, it uses a crowdfunding model, which means your loan approval receives confirmation, but it requires funding from investors in Funding Societies. If your approved financing application does not receive full funding, their team will provide additional options to help you receive funding.
5. Validus Capital
Like FS Bolt’s peer-to-peer (P2P) financing products, Validus Capital focuses on receiving crowdfunded money to provide loans for small and medium business owners, especially now during the trying period of the lockdown.
Validus Capital speedily approves loan applications upon submission of your documents. However, communicating the business’ needs in their respective funding pages will require additional information about your business and performance. In doing so, Singapore local and foreign investors might find it compelling to fund your financing needs fully.
6. OCBC Business First Loan
OCBC Business’ financing allows establishments to receive up to S$100,000 in financing and a loan term of 4 years, which beats the short 3 years to pay term and too-long and expensive 5 years to pay duration. Furthermore, businesses won’t need to be at least 30 years established and physically present.
As long as the company exists in Singapore for 6-24 months, 30% of its ownership belongs to Singaporeans and has less than 10 employees qualified for OCBC’s available financing.
Moderately-Sized Business Business Loan For Expanding Businesses
Small businesses can do well with financing products oriented towards their recovery and funding. However, medium-sized business brands that intend to expand their operations and keep up their momentum despite the circuit breaker will need additional funding beyond S100 000. In some cases, these financing can reach up to S 100 million if the medium-sized business’ performance qualifies for it.
Here are some of the best financial products in Singapore that best benefit a medium-sized business. Most of them have a loan tenure of over 3 years – 5 years. However, Singapore business owners must remember that they can only receive these financing if they have been in business for at least 30 months.
1. UOB BizMoney Loan
BizMoney requires that a business have at least 30 months establishment in Singapore. In doing so, they can receive proper documentation, such as income and expense reports, and other necessary documents when reviewing loan applications.
Once approved, BizMoney can provide business owners more than the S 100 000 that small businesses receive on average. A medium-sized business can receive up to S$350,000 and pay this financing up to 5 years. However, businesses should consider the 10.88% yearly additional interest, 2% facility rate, and S$500 annual fee it comprises.
2. Standard Chartered Business Installment Loan
Like UOB’s BizMoney, SC’s business instalments allow a medium-sized business to amount up to S$300,000, which goes beyond S$100,000 but is lower than S 100 million. Additionally, it requires businesses to have at least 30 years of physical presence and business.
Once qualified, a business can receive up to S$300,000 and a loan term to pay the entire principal inclusive of interest by 3 years. Furthermore, a business must deal with an 11% yearly additional interest and default fee of S$100.
3. DBS SME Loan
It’s perfect for small businesses that need a little bit more money and medium-sized businesses to handle higher financing amounts. DBS small to medium enterprise financing provides up to S$200,000 with a loan tenor of up to 5 years. Furthermore, its interest depends on the bank’s risk assessment of the business.
This business-friendly loan qualifies most Singaporean businesses as long as it has registration and is currently present physically. However, it requires that 30% of the business ownership belongs to Singaporeans.
How Easy Is It To Apply for A Small to Medium Enterprise Financing?
The first step is to for you to prepare and submit the following documents to your lenders:
- Income and expense reports in the last two years
- Documents that establish the owners of your business
- Additional documents that financial institutions specifically request
To find the best financing for your company, you can use the list of financial products that are friendly to enterprises above. Check and calculate if its principal, interest rates, and potential regular payments can work for you.
Lastly, if you’re finding it difficult to find a perfect financial product, you can trust Raffles Credit to provide you with exceptional small company financing options. Visit our site to learn more about our offers and affordable repayment schemes tailored to your business needs.