If you’re an aspiring entrepreneur with a groundbreaking idea, Singapore is one of the best places for you. According to the Economic Development Board (EDB) Singapore plays host to more than 4,000 startups and 200 incubators, ranking within the top 10 globally for startup ecosystems, based on factors such as performance, market reach, infrastructure and the quality of the talent pool.
But turning a great idea into a business requires more than gumption and enthusiasm, one also needs funds to cover initial expenses and sustain operations until the business becomes profitable. In this article, we’ll share some of the best SME business loans for new businesses in Singapore.
Startup SG was established in 2017 to encourage the proliferation of innovative and collaborative partnerships. It provides a platform where both startups and their ecosystem partners can access various avenues of support, including but not limited to funding.Here are some of the financing programmes available to new businesses:
The Startup SG Founder programme is meant for first time entrepreneurs, and encompasses financial grants as well as support from Accredited Mentor Partners (AMPs). These AMPs will be able to provide you with networking opportunities, pitch training, as well as secretarial and accounting support. You’ll also be able to apply for grants between $20,000 to $50,000.
Upon successful grant applications, you are expected to co-match the grant with a capital injection at a ratio of 1:1. This external capital can be provided by your AMP or by a third-party investor.
The Startup SG Loan facility provides financial support in 7 financing areas to help young entrepreneurs launch and scale their ventures successfully. The scope of loans includes SME Working capitals, SME fixed assets, Venture Debt, Green loan, Trade loan, Project loan and Mergers & Acquisition Loans. Each of these have different loan limits per borrower and can be quite generous. For instance, applicants can look forward to a maximum Project loan quantum of $30 million for domestic projects and $50 million for overseas projects. Each borrower is limited to a maximum of $50 million across all credit facilities.
Yet another government body that offers SME business loans to new businesses is Enterprise Singapore. This loan is not specifically for new businesses, but rather SMEs in general that need to bridge operational cashflow gaps.
Starting 1st April 2024 onwards, the maximum borrowing limit has been enhanced to $500,000 permanently. Maximum repayment periods stretch to 5 years and young enterprises less than 5 years in operation have the benefit of receiving up to 70% risk share.
These working capital loans are offered by about 15 mainstream banks and financial institutions in Singapore, including DBS Bank Ltd., Hong Leong Finance Ltd., and CIMB Bank Berhad.
New business owners can also consider several startup business loan options from banks and private lenders. Although not specifically limited to startups, these loans allow you to obtain financing at any stage of your business. Here are some of the start-ups loans you can consider from both banks and private money lenders.
Many business loans require businesses to have operated for a specific period, posing a challenge for new business owners seeking to secure initial funding and establish their operations. Personal loans are a viable solution, allowing you to obtain financing using your own name rather than that of your establishment.
The benefits of personal loans is that you will enjoy interest rates that are lower if you have a good credit score around 5-8% per annum. You can even bring this interest rate down even lower to 2-3% if you take a collateral backed loan. Loan quantums go as high as 8X your monthly income and you won’t need to provide business administrative documents such as financial statements, bank statements and the like.
This form of financing is backed by assets such as shares. While the more common practice is to cash out a loan backed by property, new business owners may not have that option. This form of financing allows you to use company shares as a collateral for a loan.
In general, loan tenors last up to 2 years and the average interest rate hovers around 3.5-4.5%. You’ll be able to enjoy financing of up to 70% your asset value, but must have an annual income of at least $100,000 per annum or transferable assets of $250,000.
For insurance backed financing, you’ll be able to borrow against the surrender value of your insurance policy. Loan quantums can go as high as 90% of your insurance value, and you can still enjoy the benefits of your insurance policy as long as loan repayments are made.
The other aspects of this financing is pretty similar to share-backed financing, except that the type of asset used as collateral differs. The minimum quantum of financing you can expect from these two asset-backed loans is about $50,000.
As we’ve highlighted above, if you plan on starting a new business, there are many financing options available to you from government and private financial institutions. If you’re looking for a loan, Lendingpot offers a convenient way to compare and apply for various loan options and financing types best suited to your current situation.
Sign up easily with your Singpass Myinfo business account or your personal Myinfo, and start receiving loan offers. Our platform has been built from the ground up to save time and effort otherwise needed for research and long application procedures, so you can focus on the processes and operations that matter in your business.
Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.
