What are the different loans available for my small business?
If you are reading this article, you must be a small business owner in Singapore who is looking for funding to expand your business, or start a new one. This means you must have done a feasibility study that your business can be profitable and earn a good return on investments (ROI).
Most of the time, the banks will not lend money to small businesses because they do not seem to be profitable enough
This is where the non-bank lenders come in. They are willing to take risks and invest in businesses that sound risky like yours.
There are many types of loans available for your small business in Singapore, but here are the top few:
If you have a good credit history and a stable, regular source of income, you can get a secured personal loan from the banks.
This is the same type of loan that you get to buy a car or a house. The bank will ask for collateral in case your business fails and they need to recover their losses. This is why it is important to start your business with enough capital and not over-leverage yourself.
If you do not have collateral, you will need unsecured loans from the banks. It is very difficult for small businesses to get an unsecured personal loan because most banks will require at least 10 years of steady employment history and stable income from your employer before they will even consider lending money to you. If this is the case, the next option is to get a business loan.
A business loan is the type of loan that you will need if you already have a business and want to expand it or start a new one. Usually, banks and non-bank lenders will not lend money for second businesses because they see it as a riskier investment than the first one. This means that you will probably need to self-finance your business with your own savings or through family and friends first before looking for funding from other sources like banks or non-bank lenders.
You can get an SME loan from the government, banks, or non-bank lenders in Singapore if you have a good business plan with the potential to earn good returns on investments (ROI). The ROI must be at least 1% or higher to be approved for an SME Loan. The typical amount of an SME loan is between S$10,000 – S$200,000 and it can be used for any purpose including working capital for your existing small business in Singapore. It should also be noted that SMEs are not allowed to borrow more than 80% of their original investment amount.
A bridge loan is a type of short-term loan that can be used to maintain your cash flow until you receive more substantial funding from other sources like equity investments, venture capital, or SME loans. The main thing that you should consider when getting a bridge loan is the interest rate because it will have a big impact on your cash flow and profit margins. Most banks will offer bridge loans with interest rates between 10% – 15%. This means the repayment of the loan will eat up most of your profit margins and leave you with very little money to run and grow your business.
This is a type of loan for your small business in Singapore that can be used to finance your inventory. This is a good option if you have a business selling products that are not easy to sell like real estate, cars, or building materials. This type of loan is also good when your customers are slow in paying for the items they purchased. Invoice financing allows you to collect the money from your customer on the spot when they purchase your products or services instead of waiting for them to pay you in full before you can get paid.