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What are different types of business loans in Singapore?

In this article, we will discuss the different types of business loan in Singapore. Also, we will discuss why your SME loan might be unsuccessful.

What are the different types of business loans in Singapore?

There are different types of business loans that you can find either on the internet or in the market. Choosing the correct one will depend on the need for the money for your business activities. There are different activities that a business performs, and the amount will depend on a particular one. Here is the list of different types of business loans that you will find in Singapore.

 Government-assisted loan schemes

  • Enterprise Financing Scheme – Working capital

In this type of loan, the maximum amount will be S$1 million no matter the size of the business. This kind of loan is compulsory to have a government risk share of 90%. These kinds of loans are only available for SMEs means small and medium businesses only.

  • Enterprise Financing Scheme – Trade loan

The maximum amount of loan which can be taken by any business is S$10 million. This kind of loan is compulsory to have a government risk share of 90%.

  • Temporary Bridging Loan Program

In this kind of loan category, anyone can take a loan of S$5 million. Also, this kind of loan has a government risk share of 90%.

  •  Unsecured business term loan

These are the kind of loans which you can rarely find in the market nowadays. This is because many frauds and different things are going on in the market. To avoid a loss to their loan business, many banks and financial institutions have stopped this kind of loan. In this loan, you don’t have to keep anything as physical collateral like property or car, etc.

These loans are the most popular among SMEs which cannot afford to keep collateral. These loans are used to fund their daily operations and also other things.

  •  Merchant cash advance

Merchant Cash Advice (MCA) is a good financing option for SME businesses. This is only good for those who are ready to take credit card payments at their store. They evaluate the following by checking the credit card transactions done in the last six months. The total amount of the MCA will depend on the profits, financials, and business done by the SME.

  •  Invoice Financing

This is the kind of loan which uses these invoice bills as collateral. They take these invoice bills from the SME, and in return, they give them the money on the bill. This is done by the owner of the SME if they require the money. The main evaluation of this is done by checking their financial strength.

  •  Business overdraft

A business overdraft is also called an Unsecured Overdraft (OD). This is a facility that is viewed as an alternative to the business loan and short-term working capital loan. This is because this gives a negative balance payment for the user decided by the bank. There is no difference in the evaluation of the unsecured business loan and a business overdraft.

  •  Business first loan

This is the unsecured term loan that is taken by most of the SME who are just young startups. Usually, this kind of loan is taken by a company which is between 6 months to 2 years old. These are some of the few business loans that allow young startups to take a loan. Also, their evaluation is different from an unsecured business loan.

  •  Venture Debt Financing

Venture Debt Financing is a type of unsecured business term loan which is also available for startups. These kinds of loans have been backed up by venture capitalists and capital investors. Banks are not fit for giving out this kind of loan in the market. This is because the banks do not want to give loans to the unprofitable company.

Venture Debt Financing was created to close the gap between the companies. Many startups have been able to raise multi-million or billion-dollar from these investors.

Why are some SME loans unsuccessful in the market?

There are several reasons why your instant business loan for SME Singapore might be unsuccessful. Below we will discuss some of the reasons why your SME loan might be unsuccessful.

  •  Track record

If you have or own a business, then it should be at least six months old in the market. This is because six months have been kept as the original limit for businesses to take SME loans. Many of the investors think that a business, even after its six months, may not qualify. You will need to provide proof of finance to the investor to get a business loan.

  •  Business ownership

The government of Singapore is supporting those businesses that are based in Singapore. Also, they have another condition that 30% of the company should be owned by Singaporeans. If you do not have enough Singaporean shareholders, you might not get an SME loan.

  •  Credit score

This is known to be the most important factor whenever you are taking a loan or applying for a job. If you have a poor or a low credit score, you might get a loan for the low amount that you want. The low credit scores created a doubt in the mind of the person who is lending. The credit score will also affect the amount of loan and interest rate of the loan you are taking.

  •  Multiple bounced cheque

If you are making most of the payments by using a cheque, then make sure they are successful. This is because when they check your financial statement, they will see how many cheques you have spent. After which, they will also check if the cheques have been bounced back or completed successfully. If the cheque bounces back, there is only one main reason for it. That your business bank account does not have enough money to make the payment to another business.