Whether you’re planning on starting an SME (medium-sized enterprise) or any other form of business, loans are the best source of funding. For example, in Singapore, numerous institutions can help you with the needed finance to start your business. Before you can obtain a loan for that purpose, there are things you ought to know.
I will review seven essential items that can guide you when applying for a business loan in Singapore.
Photo by Andrea Piacquadio
Know Why You Need the Loan and the Amount
Established businesses will automatically know why they might require loans and how much of that is needed while a startup might not. It’s advisable that before you proceed to apply for a loan, you should be aware of the reason for doing so and how much you require. can help you select the best l That would depend on the kind of business you’re planning to start. If possible, prepare a financial statement to help you determine the amount you need. Going for funding without addressing this point might hinder you from the following actions to be taken toward your loan application.
Where to Apply for Business Loans in Singapore
You’ll also have to review the available borrowers that are in the country. Please do a thorough analysis of where you want to obtain your loan as this will impact the outcome, whether you get it or not. Singapore offers many options for funding that include banks and financial institutions.
Banks– they’ll likely be the first option to consider. Their loans are usually the cheapest funding option. Even so, getting your loan approved is difficult since banks have strict credit assessment. Several banks, like Citibank, UOB, DBS, and OCBC, can offer financial assistance. Their interest rates, credit criteria, and other terms of service vary, thus it’s wise to evaluate their products before making a choice.
Financial institutions– these are also ideal solutions to your business loan needs. They majorly provide unsecured loans, though, most are specialist creditors. That means they offer asset-based funding like equipment loans. There are many financial institutions you can seek help from like Singapura, Hong Leong, and Sing Finance.
Other lending options– you can also receive finances directly from investors and private lenders. Some of them operate from online platforms, whereas others might be located within a particular market niche. They’re usually the last option you have and can trust for your startup loan. Their approval is quicker than other lenders, but they charge the highest interest rates.
When to Apply for the Loans
The next question to ask is when you can approach a particular lender for help once you know where to obtain finances. Some like banks are strict in their lending and might require a reliable business record and evidence of repayment capability. So, when do you seek funding from these lenders? Check out below.
Use banks when you have a security to offer, good credit, ability to repay, and don’t need money quickly. It’s practical to plan and begin a bank loan application when your business is in perfect financial shape.
Use financial institutions when you can’t get a bank loan, probably because you are either a startup or lack collateral. They can also offer loans for small, established businesses that can’t qualify for bank funding.
Use private lenders when you lack collateral, are a startup, and require quick funding. Their loans are often approved even within a day.
Types of Business Loans You Can Apply for in Singapore
Depending on your needs, here is a list of the loans you can apply to start your business.
It is meant for buying fixed assets like machinery and is generally obtained under a hire purchase deal. Its interest is lower than unsecured loans since the lender can take the equipment as collateral.
Commercial and industrial property loan
It’s given for the purchase of business property, and you can receive up to 80% of the banks’ purchase price. It has the lowest interest compared to other loans as the bank can use the purchased property as collateral.
Are used to finance your business’ trade cycle like import costs. It is credit offered to pay for raw materials or other stock purchases from your suppliers.
Unsecured business term loans
They are loans given without security. You repay monthly for some time, usually between one and five years. It’s the most popular funding for businesses and has no restriction on how you use the funds.
It is a revolving line of credit given to a business with a higher interest rate than term loans. A person can make cash withdrawals within the given credit limit at any time for any purpose.
Loan Qualification Criteria
It’s crucial to know if you’ll be able to qualify for a particular loan. The criteria for qualification include; – your business operational history, annual revenue, financial records analysis, business nature, and bank statement analysis. The potential lenders will have to cross-check such necessary information to determine your eligibility for the loan. For a startup, an excellent credit score, a clear business plan, and evidence of repayment ability will provide the basis for your loan qualification.
The Documents You Need for Your Loan Application
Different lenders will require you to submit particular documents to apply for a loan. These will assist them in ascertaining your request and processing the approval. The various documents that you might need to provide to the lenders include; – personal & business bank statements, tax returns, financial statements, and legal documents like a franchise agreement. Others might also need creditors’ ageing list, director’s notice of assessment if any, resume of the business and GST form F5 in case your business is GST registered.
Finalize on Your Funding Application
At this point, you should know your qualification status so that you optimize your loan approval. You can visit your local lender offices to get assured if you qualify. If that’s so, then proceed to take the necessary steps to get your financing approved. Make plans to apply earlier, regularly assess your bank statements, improve your credit score by paying credit bills on time, and follow through your application status to ensure you’re on the right track to acquiring the loan.
The Bottom Line
With the proper guidelines for applying for business loans in Singapore, what’s next? Make it your goal not to give up trying to chase after your business dreams because of finances. Follow the guides listed in this blog the next time you apply for a loan and get your business started.