At some point of your journey towards building and expanding your business, you may need some form of business financing.
Perhaps you may have already known a couple of them, but let us introduce you to the most common one - the unsecured business term loan.
An unsecured business term loan is a loan that is issued and supported by the borrower's/guarantor’s creditworthiness and some other factors. Borrowers do not need to pledge any form of collaterals to apply. For this reason, unsecured business term loans can be assessed and disbursed at short notice.
Unsecured business term loans are popular amongst SMEs due to their flexibility. They can be used to fund daily operational needs such as inventory purchases and payroll, or to finance business expansion plans such as leasing a new retail outlet.
However, since unsecured business term loans are not secured with any form of collaterals, the interest rates that entail are much higher as compared to secured loans (loans that require collaterals).
A typical unsecured business term loan funds up to $500,000 with a repayment period of 1 to 5 years.
The interest rate chargeable ranges from 7% to 12% per annum and administration fees are levied at 1% to 5% of the approved loan amount.
Unsecured business term loans usually have a Principal + Interest repayment pattern. However, for exceptional cases, these term loans may also have an Interest Servicing Only + Bullet Repayment repayment pattern.
The loan amount, tenor, charges and repayment schedule varies across different institutions. It is important to choose an unsecured business term loan that is affordable to you and at the same time, solves your business needs.
The following process is a rundown of how a typical business loan process works in Singapore and some of the things that you need to prepare at each stage.
1. Apply online or at the branch
2. First call back from financial institution
3. Document submission
4. Second call back from financial institution
5. Process for approval
6. Presentation of business loan proposal
7. Site visit
8. Sign documents
9. Disbursement of funds
Before taking up an unsecured business term loan, take time to consider what the funds will be used for.
If your business needs extra funds quickly to bridge your working capital gap or take advantage of a good business opportunity, then an unsecured business term loan may be a good option for you.
Be mindful to use the right financial product for the right purpose. Doing so will put your funds to good use and scale your business in the long run.
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
Jennifer loves helping SMEs in their business growth journey. She is also an epicurean and has perpetual wanderlust. During the weekend, she weaves poems out of thin air and buries herself in books.