Everything Inc.

Small and Medium-sized Enterprises (SMEs) form the backbone of Singapore’s economy. They contribute over 43% of the national GDP and employ more than two-thirds of the workforce, playing a vital role in driving innovation, providing employment, and supporting economic resilience.

Despite their importance, SMEs frequently encounter challenges in securing adequate financing. Issues such as inconsistent cash flow, stringent collateral requirements, and perceived higher credit risk often deter traditional lenders. Moreover, many SMEs are unaware of the broad spectrum of loan and grant schemes available to them.

Business loans can serve as powerful catalysts for growth—whether to support daily operations, finance expansion, purchase new equipment, or tide over short-term cash flow gaps. This guide aims to empower SME owners with the clarity and confidence to navigate Singapore’s complex, yet opportunity-rich, business loan landscape.

Demystifying the Options: A Spectrum of Business Loans for Singapore SMEs

Traditional Bank Loans

• SME Working Capital Loan (EFS-WCL)
  Backed by Enterprise Singapore, this scheme provides financing of up to S$500,000 (as permanently enhanced from April 2024). It is designed for working capital needs such as paying suppliers, salaries, or rent.
  • Repayment period: Up to 5 years
  • Eligibility: Singapore-registered SMEs with at least 30% local ownership and < S$100M in annual revenue or < 200 employees
  • Risk-sharing: Enterprise Singapore shares up to 50% of the default risk with participating financial institutions
• Business Term Loans
  These unsecured loans support expansion or day-to-day operations. Depending on the bank, SMEs can borrow between S$50,000 to S$500,000, with varying interest rates and tenures. Collateral is not typically required, but strong financials are.
• Commercial Property Loans
  Ideal for businesses purchasing or refinancing office space or industrial property. Loan-to-value ratios can reach up to 80%, and interest rates are generally competitive.
• Trade Loans
  These support import/export activities, including invoice financing and letters of credit. Suitable for SMEs in wholesale trade or logistics.
• Green Loans and Sustainable Financing
  These emerging loan types incentivise eco-friendly business practices and sustainability-driven projects. Banks like DBS and OCBC now offer specific green financing schemes aligned with ESG goals.

Government-Assisted Grants and Schemes

• Enterprise Development Grant (EDG)
  Supports projects that enhance capabilities, innovation, or market access. Covers up to 50% of qualifying costs, or 70% for sustainability projects.
  Learn more from Enterprise Singapore
• Productivity Solutions Grant (PSG)
  Covers up to 50% of costs for SMEs adopting approved IT solutions and equipment to enhance productivity.
• Market Readiness Assistance (MRA) Grant
  Offers support for overseas expansion, covering up to 50% of costs related to market entry, promotion, and overseas business development.
• SkillsFuture Enterprise Credit (SFEC)
  Encourages workforce transformation by covering up to S$10,000 of eligible training and transformation costs.

Alternative Financing Options

• Fintech/Digital Lenders
  Peer-to-peer platforms (e.g., Funding Societies, Validus) offer faster processing, less paperwork, and more flexible requirements.
• Invoice Financing
  Converts outstanding invoices into immediate cash, improving liquidity without taking on new debt.
• Crowdfunding
  Equity or rewards-based crowdfunding is ideal for innovative startups with community backing.
• Venture Capital (VC) and Angel Investors
  Suitable for high-growth startups, these offer capital and mentorship, often in exchange for equity.
• Revenue-Based Financing
  Repayments are based on a fixed percentage of monthly revenue, aligning payments with business performance.

Eligibility Unpacked: What Lenders Look for in Singapore

Basic Requirements

• Must be registered and operating in Singapore
• Minimum 30% local shareholding (Singaporean or PR)
• Operating history:
  • 6 months for some fintechs
  • 2–3 years for traditional banks
• Annual revenue and employee count must fall within SME thresholds (e.g., < S$100M, < 200 staff)

Financial Health Indicators

• Audited financial statements: Essential for showcasing profitability and stability
• Bank statements: Demonstrate cash flow, consistency, and financial discipline
• Director’s creditworthiness: Assessed through Notice of Assessment (NOA) and Credit Bureau Singapore (CBS) reports
• Credit history: A clean record boosts approval chances

💡 Tip: Maintain accurate, up-to-date financial records and separate business and personal accounts to ensure transparency.

The Application Journey: Your Step-by-Step Guide

Preparation

• Define your financing goal: Purpose, amount, timeline, and expected ROI
• Choose a loan type: Match your business needs to the appropriate facility
• Gather documents:
  • ACRA Bizfile
  • Latest 2 years’ financial statements
  • 6-12 months of bank statements
  • NOA and CBS report for directors
  • GST returns, debtor/creditor ageing lists, business plan

The Application Process

• Online vs. In-Person: Most major banks and fintechs allow digital submission via MyInfo Business and Singpass, reducing paperwork and speeding up approvals
• Financial Institutions to Consider: DBS, OCBC, UOB, Standard Chartered, Hong Leong Finance, and Maybank
• Turnaround Times:
  • Fintech lenders: 24–72 hours
  • Traditional banks: 1–3 weeks

Key Considerations

• Effective Interest Rate (EIR): More accurate than flat interest rate—it includes fees and charges
• Collateral & Guarantors: Know if you’re applying for a secured or unsecured loan
• Lock-in Clauses & Early Repayment Penalties: Understand the costs of settling early
• Strategic Use of Funds: Allocate borrowed funds to initiatives that drive sustainable growth

Success Stories and Strategic Advice from Singapore’s SME Landscape

Case Study Snapshots

• A hawker stall used an SME loan to expand into a food court chain
• A tech startup used venture debt to build its AI software prototype
• A traditional retailer accessed PSG and EDG grants to digitalise operations and build an e-commerce site

Expert Tips

• Build relationships with your bank or financing partner early
• Update your financial forecasts quarterly
• Seek guidance from SME Centres or business advisors (IMDA’s SME Go Digital programme)
• Combine grants and loans to create a sustainable funding ecosystem
• Use accounting software to streamline financial reporting and improve loan readiness

Conclusion: Empowering Your Singapore SME’s Future

Financing is not just a one-time solution—it is a strategic enabler for business growth and resilience. With an array of government-backed schemes, digital lenders, and traditional banks at your disposal, Singapore SMEs have never been better positioned to access capital.

By proactively planning your financing strategy, maintaining healthy financials, and understanding your options, your business can thrive even in uncertain times. The right loan, used wisely, can be the launchpad that propels your SME from stability to scale.

Your journey starts with informed decisions—make smart money choices for smarter growth.