Business loans offer multiple benefits to Singaporean business owners, especially those who operate small and medium enterprises (SMEs). You’ll find them in several forms, including, but not limited to government-assisted loan schemes, merchant advances, and SME working capital loans.
While they offer greater financial flexibility and space for your business to grow, the main concern for many is the associated cost. This naturally translates into headache-inducing scrutiny (and stress) over aspects such as how much to borrow, where and how to get the lowest interest rates and more.
In line with our governing ethos, which is to help businesses get the best outcomes in approval and pricing, we thought now couldn’t be a better time to share insights on how to get the best business loan interest rates.
First, it’s important to note that Singaporean lenders, whether banks or private institutions, offer a wide range of interest rates. They can range from as low as 3% to as high as 13%, depending on the loan product. More commonly, you will find interest rates that range from 7% to 12% per annum.
We’d be remiss if we didn’t mention that there’s a difference between advertised interest rates and the true cost of the loan, otherwise known as Effective Interest Rate (EIR). EIR takes into account other factors that might influence the cost of the loan such as administration fees, processing fees, repayment schedule, loan amount and more. MinLaw offers a free EIR calculator for those who wish to do their own calculations. We recommend using it and factoring the results in your deliberations.
Business owners can improve certain aspects of their loan application process to obtain more favourable interest rates from lenders. The most common ways (and interestingly enough, the most common barriers) to do so revolve around researching and comparing options, relying on a good credit score, ensuring all eligibility criteria are met, and avoiding multiple loan applications.
As a platform that seeks to redefine the loan application process, we’ve integrated these elements into our platform to facilitate positive loan outcomes. But before we expand a bit more into that, let’s look at why the aforementioned points are essential to acquiring low interest rates.
Most banks in Singapore have very informative websites outlining their business loan products and the range of interest rates they offer. But opting for the first option you see is not always a good idea.
Different lenders offer different rates and loan products, some of which might be more suited to your specific needs than others. A simple search will give you a good idea of the current market interest rates for the type of business loan you’re looking for. Comparing and contrasting will help you find the most favourable interest rates.
Your credit score as a company will form the basis of the lender’s judgements, because it determines the likelihood that a lender will default on a loan; so a strong credit score will work in your favour. In Singapore, there are a few bureaus that maintain records of commercial credit scores, the main one being the Credit Bureau of Singapore (CBS). Banks and private lenders tend to offer the best rates to companies with credit scores that are above average, preferably more than 75 out of 100.
The eligibility criteria for commercial loans in Singapore differ from lender to lender. However, there are some basic criteria that your establishment has to fulfil. Among these, you should be a Singaporean incorporated company with at least at least 30% of the business owned by a Singaporean or Permanent Resident. Additionally, you should have an annual revenue of at least $300,00 per annum.
While this may sound simple and straightforward, often many SMEs don’t apply for loans (even if they want to) because they are unsure as to whether they qualify for a loan.
Financial institutions inquire into your credit score with CBS every time you apply for a business loan. CBS takes note of all the inquiries and shares them with other financial institutions.
To a lender, multiple business loan applications within a brief period is a red flag and will make it difficult for you to secure a loan. More to the point, it can reduce your credit score because it looks like you are taking on more debt.
Lendingpot was born out of a mission to help address a prevalent issue in Singapore’s financing ecosystem, i.e., the difficulty that SMEs face in obtaining business loans. We took the biggest challenges and found ways to address them in a single platform with the goal of promoting positive loan outcomes. We succeeded. Here’s how Lendingpot can help businesses get the best business loan interest rates in 2024:
Research about corporate loans can take up a lot of time. Exploring the various available options requires you to visit the pages of all the loan providers. This means opening countless tabs to look at their lending terms, including interest rates.
Comparing these rates will be a tedious and confusing process, and you would probably have to note the different interest rates manually.
With Lendingpot, you can compare interest rates at a glance, as all the loan offers from lenders are displayed together. With just one page, you can reap knowledge that will take more effort to do otherwise.
If you are a business that needs financing, but have faced rejections based on your credit history, Lendingpot offers a potential solution. Here, our lending partners will offer you the best rates and quantums based on your application details.
This way, your chances of obtaining financing increases. Lendingpot plays hosts to a wide range of lenders, including private lenders, P2P and venture capitalists who may have more lenient credit worthiness criteria compared to banks.
In addition, smaller lending institutions have more autonomy in making decisions about borrowers, and therefore have less stringent requirements.
Since making multiple applications may diminish your chances of obtaining a favourable interest rate or borrowing terms, Lendingpot offers you the convenience of making just one application. With this one application, you can reach out to multiple lenders including banks.
This way, your application need not be encumbered with records of multiplicity. Only lenders who consider you suitable will reach out with offers, saving you time to focus on more important things, like growing your business.
We hope that the shared insights prove helpful in finding and identifying the best interest rates.Check out our guide, for more information on the business loan process. Our experts explore aspects such as types of business loans, documents required, eligibility requirements, and much more.
If you have any more questions, you can reach out to us here. We’d love to hear from you.
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.
