There are plenty of loan options available to small and medium sized enterprises (SMEs) in Singapore. Whether you need to borrow a bit of extra money to cover the costs of your daily operations during the COVID-19 pandemic, a working capital loan with a fast application process or a larger amount of money to help fuel your growth ambitions.
That said, a government-assisted SME micro loan might be the best choice for many companies.
This year, the Singapore government has allocated $2 billion specifically for SME loans. This means that companies can potentially access up to $100k in working capital, and enjoy great interest rates and fast approval by applying for a government-backed SME micro loan in collaboration with Enterprise Singapore.
What is a SME micro loan?
An SME micro loan is a government-assisted, short term financing scheme designed to help SMEs and small businesses here in Singapore access working capital financing when they really need it.
Small companies and SMEs that apply will need to undergo a loan assessment to determine whether they are eligible for the low interest rates, low fees and favorable terms offered by the loan. Once approved, small businesses can access an attractive financing amount of up to $100k.
SMEs are free to use these funds to expand and grow their small businesses, keep on top of cash flow and daily operations costs or fuel pretty much any other business ambition or need.
A great interest rate is available because Enterprise Singapore will step in to take on a risk share of the SME micro loan – which is only available through participating financial institutions, banks and other lenders.
SME loans – Top SME micro loan features
Enterprise Singapore is one of many government-linked funding societies that supports the growth of small businesses across Singapore. As such, unlike other loan options, the SME micro loan scheme is specifically targeted at SMEs that are relatively young in their field – and its features are tailored specially to suit these kinds of companies.
Key SME micro loan features include:
- Loan amount
SMEs can access a total amount of up to $100k.
- Interest rate
Moneylenders and most banks involved in the SME micro loan scheme offer low interest of between 3.2 and 4.5% p.a.
- Repayment period
Banks and participating financial institutions will usually grant your business a tenure of 1 to 5 years. An early repayment fee may apply.
- Government risk sharing with banks
Enterprise Singapore provides risk sharing with the financial institutions involved. This enables businesses that qualify to access a range of great benefits, from a favourable interest rate to a greater chance of loan approval.
For larger SME loans and business loans
If you need a larger loan amount than the maximum $100k principal amount offered by standard SME micro loans, the good news is that there are other loan options available in collaboration with Enterprise Singapore and other government-linked funding societies.
Two popular loan options, include:
- SME Working Capital Loan
Businesses that have a percentage 30 local shareholding can borrow unsecured working capital of up to $300k with this type of loan. Participating financial institutions will take on between 50 and 70% risk sharing.
Credit assessment, group employment size and approval criteria can vary quite drastically between banks, but eligible businesses are entitled to borrow for up to five years.
- Temporary Bridging Loan
Eligible SMEs can borrow a loan amount of up to $3m at an interest rate capped at 5% p.a. under the Temporary Bridging Loan program. Your business must be registered in Singapore and have percentage 30 local ownership.
Government risk sharing sits at 70% and there are as many as 19 participating financial institutions here in Singapore that you can submit your documents to in order to get approved.
Which participating financial institutions offer SME micro loan options?
Most SMEs simply looking to cover basic financing costs and fees, and keep their annual sales in check, will probably be better suited to the Enterprise Singapore SME micro loan as opposed to the other loans outlined above.
If you think SME micro loans are a good fit for you, there are currently nine banks registered and operating in Singapore that you can apply to for this kind of short term loan. They are:
- Hong Leong Finance
- DBS Bank
- OCBC Bank
- IFS Capital Limited
Each bank may differ slightly when it comes to eligibility details, so always double-check the terms directly with your preferred provider.
SME micro loan eligibility criteria
If you want your business to qualify for a SME micro loan, you’ll need to meet the following criteria with most banks and moneylenders:
Your SME business must have an annual turnover of at least $300,000 to qualify for a SME micro loan.
- Cash flow and working capital
Businesses seeking a loan must prove they are able to pay off the full financing amount. This means SMEs must have strong cash flow, evidence of success and not too many other business loan debts.
- Company age
All SMEs applying for a SME micro loan must have been operating in Singapore for at least six months.
- Existing credit exposure
Most banks will wish to carry out a credit assessment before granting a business approval on any SME micro loans. If your business or company owners have a good credit history, this will help the application process.
Required documents for SME micro loan application
Before approaching banks and money lenders for SME micro finance, invoice financing or other loan options, it’s important to prepare all the right documents. For an SME micro loan application, your company will need the following in order to get approved:
- NRIC or a passport copy of company directors
- Company financial statements (covering the last two years)
- Income tax notice of assessment (covering the last two years)
- Bank statements (covering the last six months)
How do I compare the best SME loans and business loans?
Applying and seeking approval for any type of company finance will always be a very personal decision that should not be taken lightly. Rather than rushing to whichever banks and lenders offer low interest deals, you should always compare the full range of loan options available to find the best fit for your financial circumstances and the future success of your company or companies.
Always consider the following:
How much money does your company need?
While some companies may simply require a short term loan with low fees and a good interest rate to help cover basic company finance costs, other businesses might want to borrow more funds to fuel growth and success. Think carefully about how much financing or credit you need and consider the full range of options available.
What interest rate can you realistically afford?
Whether you’re applying for a government-assisted loan backed by Enterprise Singapore or a standard business loan, monthly rates are hugely important. Always compare rates between participating financial institutions to get the best deal – and look out for early repayment charges and other fees, too.
Which loan has the lowest total cost?
Ensuring you are fully able to pay off any loan at the end of its term is vital. Don’t forget to consider fees, interest rates and a realistic loan tenure when calculating the total cost of your loan. If collateral is required, make sure you are fully aware of the risks involved to your company and always opt for the cheapest and safest option.
Conclusion – Apply for amazing value SME loans today with GM Creditz
With SME micro loans and many other types of finance, companies must have a percentage 30 local shareholding, be registered and operating in Singapore and meet company group employment size and other eligibility criteria to get their loan approved. Businesses must also undergo credit checks and meet annual sales requirements to obtain finance with many banks.
That said, there are other loan options and alternatives available to those who are worried about their credit score or fail to qualify for Enterprise Singapore government-assisted loans.