Understanding Business Loan Applications Singapore

Business Loan Applications

At any point, a business loan in Singapore may be necessary for any business to help them raise their operating capital or to fund an expansion project that will help grow their business. Companies may approach banks and other lending companies, but expectations still remain the same for all. Get your act together and be smart on your business loan application to improve your approved changes.

All businesses have critical risk factors, and you should include an unbiased analysis of this too. Before presenting your plan, study it very well and anticipate possible questions that lenders may have. Be prepared with strong and straightforward answers.

Impeccable credit history also increases your chances of finding a good business loan in Singapore, so start building a good one right away. You can basically build your credit by purchasing on credit and pay back debts on time and in full always. Take good care of your credit and ensure that it’s error-free. Creditors all want their business and money to be secured. If you’re able to show that you are a responsible lender and that you can be entrusted with their money, then business loans will be easier for you in the future.

If you have a couple of assets or properties that can back up your business loan in Singapore as collateral, this could increase your chances too of getting approved. Lenders always think about the worst-case scenario – in such an event that the borrower is unable to pay, how can I recover my money? Having collateral tells your creditor that your loan is basically secured.

Unless you are confident about your eligibility, don’t shoot for the sky. The lesser the amount you ask for in your business loan in Singapore for business, the more chances you get approved. This is why it is very important that you project thoroughly the amount that you’ll need for your loan. Too much and you risk getting rejected and less, you risk not covering the amount you need for your business expansion. Lastly, don’t give up if you fail the first time. If you can get your business loan approved on your first try, consider yourself lucky. Many people get rejected a couple of times first from different banks and lenders. What’s important is that you learn from your experience and be prepared to make better presentations.

Perfect guide to follow on getting business loans in Singapore (2020)

You can require the idea of business financing, especially if you are an SME business owner in Singapore. Indeed, it can be seen as a necessity at some point of time in your business journey! To help you more, the business loans in Singapore can be used to expand your plug-working capital gaps, commercial property, business, inventory purchases, and different rentals purchases. To get started with, here are the simplest tips and steps that you can follow for a functional approach!

Types of business loans in Singapore

Indeed, you will find different types of business loans in Singapore. Follow the list to identify one that suits you best-

Unsecured business term loan

Any of the physical collateral does not sanction these types of loans. That is you cannot use the equipment or the property to secure this type of loan. The company director’s personal guarantees only secure the unsecured business term loan. Indeed, these are the most popular loan type for SMEs due to their flexibility. Right from funding your daily operational needs such as payroll and inventory purchases to the different finance business expansion, this can be a perfect choice!

Invoice financing

Contextually, if we put it in simple terms, it refers to all the credit facilities that use invoices as collaterals. The next thing that gets qualifies for being discussed here is the evaluation criteria. It can be stated that the financial strength of the SME customers are the major prospect while you are choosing this type. The MNCs and the government are usually preferred over SME customers.

Business first loan

This facility is majorly the bet for the use of the start-ups and is a type of unsecured term loan. It is operating and is registered in Singapore between 6 months and two years! Yes, we can say that this type of loan is one of those few available loans to young start-ups. Interestingly, this is offered by OCBC Bank. Here, there is less emphasis on financial performance and the concerned company’s history due to a lack of records.

Merchant cash advance

MCA is a niche financing product that is usually only available to retail and the different F&B businesses. This type uses the concept of credit card terminals. The financials, profitability, and the SME guarantors are known to play a smaller role here. The structure for opting for this type is slightly different from others.

Business overdraft

If you are looking for the perfect alternative for the business term loans, the business overdraft can be the perfect option for you! It works great on short-term working capital. Contextually, talking about the evaluation criteria is the same as that of the unsecured OD facility and unsecured business term loan.

Venture debt financing

It is a type of unsecured business term loan. Yes, these are available to the start-ups and have been backed by venture capital investors. This facility is known to be effectively offered by DBC and OCBC.

Application process for a business loan in Singapore

Opting for a functional approach to draft the application can be a great deal! Here are the steps which you can follow for a gearing head-start!

Applying online or in the branch

You can apply through any financial institution or the branch that offers an online application platform. Or you can even visit their premises. Next is to prepare MyInfo login for online application and your NRIC. Following this, you would receive a call back from the Relationship Manager (RM). This would be just to know more about your company and business. Next, you would be allowed to submit your documents for verification. A second call back may also be experienced for many of you for any of the clarification parts for your documents. Then finally, you are ready for the process for approval.

Which bank gives the lowest business loan interest rate?

You will find different corporate loan products and banks bears different interest rate! If you see a typical business term loan interest rate can range between the mentioned rates. The rates are set at, 3.5% to 7% p.a. The effective interest rate is, thus, around 6.5% to 13%.

The typical business financing criteria and the requirement for the business loan in Singapore is given as-

  • It would be best if you had a minimum annual revenue of $300K
  • You must have an operational history of 1year, and would more be preferred if it is for 2 years.
  • The minimum average daily balance to qualify for this loan would be $10K maintained in a bank account.

The bottom line

If you have just started with your new business and effectively sourced out for a business loan in Singapore, the above points might help you understand the basics. Remember that most of the banks require the borrowers to have 2 to 3 years of operational history before opting for the loan.