SME Working Capital Loan in Singapore

The Singaporean government is in favour of promoting regional entrepreneurship and aiding the expansion of homegrown SMEs. Small firms have access to funding programs with government assistance. A well-liked funding option for SMEs is the SME Working Capital Loan, which is a component of the Enterprise Financing Scheme.

A Covid-19 business loan program, the Temporary Bridging Loan, was also developed to assist SMEs in reducing the negative economic impact of the pandemic in 2020. This program greatly subsidizes business loan interest rates, which reached an unheard-before historical low of 2.5% p.a.

However, these government business loans, which are made possible by banks and other commercial financial institutions, are primarily intended for established SMEs with at least a year of operational experience.

Government funding for business startups or bank loans to do so are rare and in short supply. Options for business loans for young companies are extremely scarce.

However, the Startup SG Tech scheme or the Startup SG Founder programs are government-supported programs and subsidies for companies that could be used for innovative, scalable technology startups.

These awards and startup funding are intended to promote tech entrepreneurship and accelerate the development of creative firms with scalable business models.

Alternative strategies

Most banks believe that new start-ups have an excessively high risk of failure. Consider other funding sources if you're an entrepreneur hoping to launch a firm rather than taking out a loan.

Individual loans

When considering how to obtain a loan to launch business, personal loans from banks is a reasonable option to take into account. Since business owners are required to provide personal guarantees for all unsecured business loans, the liability risk is the same as it would be for a conventional SME loan.

Most banks will only provide personal loans up to four times your monthly salary. So, as opposed to company loans, do anticipate starting with a smaller loan amount. Applying to many banks at once could result in a greater aggregated loan amount, but this would take more time.

Substitute financiers

In addition to conventional mainstream banks and financial institutions, alternative financiers also provide loans for SMEs. They might have laxer credit requirements than banks do. However, do anticipate less advantageous conditions than banks. Compared to bank loans, interest rates are higher, and loan amounts are frequently less.

The MAS regulates P2P fundraising platforms like Funding Societies as alternative financiers. SMEs can use a variety of online banking and financing options from neo-bank alternative financiers like INFT.

The majority of these alternative lenders does not offer loans to sole proprietorship businesses and only finance private limited companies. The Money Lending Act rules are probably to blame for this.

Home loan funding

Consider property finance for new businesses that cannot obtain business funding if the

Home loan funding

If the business owner owns a private property, consider property finance for new companies that are unable to obtain business funding. If the loan-to-value ratio is not excessively high (i.e., below 60%) or if the property is entirely paid for, property may be pledged to banks for financing.

Consider refinancing an existing real estate loan to a bank that offers lower interest rates and, if the loan-to-value ratio allows it, ask for a larger equity gear up loan to release more cash.

We advise against using mortgage loans to fund your business operations excessively, nevertheless, if the property is your principal dwelling.

Equity investment

Angel investors, venture capitalists, or private equity firms can provide equity funding for software enterprises with the potential to scale.

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