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7 SME Loan Tips for a Startup in Singapore

Singapore being a business reliant economy registers a significant number of small scale business startups. It has been reported that in the last decade, the economies with the highest growth rate of the economy had micro, small, and medium scale enterprises coming up at a high rate as well. These small businesses formed the high economic boom seen in these countries. One of those economies that had unprecedented growth in the economy due to trade in Singapore. 

This tells you that the banking industry is as vibrant as the sector it supports. The government has further made things easier by approving and implanting favorable macroeconomic policies that seem to cushion these businesses. The ease to obtain financing is one of the factors that lead to the boom in the SME sector. In view of this, this article seeks to explore some of the proven tips to obtain loans that support business startups in Singapore.

Tips:            optimize your loan approval chances

  • Avail the documents required in time
  • Increase your qualification probability
  • Know the type of SME financing you want
  • Choose your lender wisely

Optimize your loan approval chances

To enhance your chances of getting your loan approved, ensure you do the following:

Timely submission of the application: lenders will always take high risks with desperation for financing. Therefore, if you are to ensure that you increase your chances to receive funding then plan to deliver your application ahead of the demand. Do not wait for a time when you are pushed beyond limit to apply for financial assistance because you may never receive it.

Review your financial statements: always be on top of your financials. Loosen up your cash flows by getting more cash from your debtors or have your creditors give you more terms of repayment on the debts.

Timely repayment of debts: prompt repayment of debts always shines well on your credit score. SME loan lenders will not hesitate to dig into your credit history. Tidying it up guarantees security.

Keep your loan options open: it is advisable to be flexible when considering the loans to apply for due to loan terms and the lenders.

Avail the required documents and information

A majority of lenders will require the following documents or an alternative of the same:

Bank statements: the lenders usually demand for your latest bank statements for three consecutive latest months. The statements are used as proof of income. Also, they are used to gauge if the borrower will be capable of repaying the loan. Furthermore, the statements can be used in underwriting to establish the amount of money the applicant can qualify for and repay comfortably.

Business plan: a business plan is a brief company write up telling of the name of business objective, management, how it raises funds, target market, etc. A copy of the company or business profile may be required alongside this information.

Site photos: site pictures are supposed to enable the lender to conduct due diligence on the company premises as well as confirm the physical address of the facility.

Furthermore, information such as the tax statements on the GST forms F5 if the company is duly registered. Also, established businesses will be required to attach the director’s IC and a notice of assessment.

Choose the type of financing you want

Unsecured business term credits: These types of financing do not attract collateral. Due to this, they are the most common loan products in Singapore. If you were to get the best package and favorable loan terms, then, struggling during loan repayment would be prevented.

Government financing schemes: as earlier stated, the government has plans where they share the lending risk with the borrower. By so doing the government seeks to ensure lower rates of interest on the loans that are advanced by the business starters. Enterprise Singapore is the government agency that runs this sector. The following are some of the schemes that are sponsored by the government:

SME microloan

The scheme is extended to SMEs with a net turnover of $1 M annually or with a total of 10plus employees. They can be furnished with $100, 000 worth of financing which is repaid in four years’ loan term.

Working capital loan

Fund for a local SME with a net annual turnover of less than $100,000. Here the maximum funding can reach up to $300,000 repaid in 5 years.

Equipment and factory loans

Used for the purchase or upgrading of the business premises. The maximum allowable package is $15M.

The government also issues loan insurance schemes. Equipment and machinery loan. This is an equipment loan offered by a lender for the purpose of the acquisition of business equipment such as computers, vehicles, machinery, stationery, business ledgers, etc. The equipment becomes the loan collateral. Lenders may finance the full price of the equipment, however, a majority of lenders finance from 70% to 90% of the cost price.

Choose a lender wisely

Lenders differ so are the terms of loans. Therefore, you need to choose a lender who provides lower rates of interest and over a longer time. You can choose between the banks, financial institutions, and peer-to-peer crowdfunding.

Banks

Many banks in Singapore such as the DBS, OCBC, HSBC, RHB, Citibank, etc. have SME products. Banks usually have a reputation for applying stringent measures in the assessment of creditworthiness. This is due to the high perceived risk that borrowers carry.

Financial institutions

Financial institutions to offer credit facilities to SMEs. However, they do not have full banking licenses. They include singapura finance, Hong Leong Finance.

P2P crowdfunding

This is an online facilitated credit platform that provides financing to companies by pooling funds together from a group of investors. This service can be ideal for those SMEs that do not qualify for conventional funding.

The Bottom Line

SME financing is an open platform for both lenders and borrowers. The government of Singapore plays a monitoring role in a bid to protect vulnerable entrepreneurs from exploitation by unscrupulous lenders. Also, the role of the government in promoting the sector is informed by the need to create employment for all and by so doing, enhance economic development.

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