Best Small Business and SME Loans in Singapore 2024

In need of funding for your business? Find out which are the best options for SME and small business loans in Singapore.

Small businesses and SMEs make up the backbone of the Singapore economy, with over 90% of all enterprises on our tiny island being SMEs. It’s no wonder that there is such robust support for SME funding, which recently gained a boost with the launch of the Enterprise Financing Scheme administered by Enterprise Singapore. 

As a result, there are plenty of options for business owners seeking SME/small business loans, ranging from government-assisted dancing schemes to bank business loans. 

Table of contents

• Understanding small business/SME loans in Singapore
  • What are small business loans?
  • How do business loans work?
  • What are the different types of business loans?
• Best small business loans in Singapore
  
  • Government-assisted funding: SME Working Capital Loan
  • Small business/SME loans under S$500,000
  • Small business/SME loans S$500,000 and above
• What to look out for when applying for a business loan?
• Can you use personal loans instead of business loans?
• Frequently Asked Questions (FAQs)

Understanding small business/SME loans in Singapore

What are small business loans?

Small business loans are loans that are designed to suit the needs of smaller businesses such as SMEs and startups. They are flexible and convenient financing solutions, offered without the need for any collateral. This helps small businesses obtain the funds they need to maintain their business operations or expand the scope of their business 

Once granted, a business loan may be used at the discretion of the company. There are no restrictions on how the funds may be used, which means business owners are free to use the loan to pay for equipment, manage employee payroll, carry out research and development, or for any other business use. 

How do business loans work?

Business loans work exactly the same as a personal loan. The difference is that the loan is taken by a company, and not an individual. 

As such, there are additional requirements and paperwork that need to be fulfilled, such as a minimum level of local shareholding, a certain period of business operations, and, of course, the company should be registered and operating in Singapore. 

When applying for a business loan, you can specify the amount you need (up to the lender’s limit) as well as the loan duration. Your lender will then offer you a loan package with an interest rate based on their assessment of your company’s credit risk. 

If the terms of the loan are acceptable to you, you can accept the loan package, and the funds will be disbursed to your company’s account. Thereafter, you will need to repay the loan via fixed monthly instalments throughout the loan tenure. 

What are the different types of business loans?

Business term loans that are structured around monthly instalment payments are among the most common types of business loans available in Singapore. 

However, there are also other types of business loans and commercial financing options that small businesses can tap on. These include:

• Business green loans, which are used to help cover the cost of business process improvements, consultancy and certification for ESG purposes.
• Invoice factoring. This is a facility that lets you borrow against the value of your outstanding invoices. Useful for bridging cashflow.
• Line of credit. This is a revolving credit facility that lets you draw down upon it as needed. You are also free to repay your credit line balance at your own pace, although you would be required to pay monthly maintenance fees and/or make a minimum payment each month.

To keep the discussion concise, we will be focusing on small business term loans in Singapore from this point onwards. 

Best small business loans in Singapore

Government-assisted funding: SME Working Capital Loan

SMEs and small businesses looking for government-assisted funding should apply for the SME Working Capital Loan. 

Under this loan, the Singapore government, via Enterprise Singapore, offers risk-sharing of 50% of the loan – up to 70% for startups and young enterprises. This helps SMEs and small businesses obtain the funding they need. 

Another benefit is that this loan is offered by several retail and commercial banks in Singapore, which provides ample choices to compare packages and get the best interest rates. 

The SME Working Capital Loan provides up to S$500,000 per borrower, with loan tenures of up to five years. To qualify, companies need to be registered and operating in Singapore; java at least 30 local shareholding; with annual sales turnover under S$500 million; and maximum revenue of S$100 million or 200 employees. 

Also read: Best SME Grants in Singapore

Small business/SME loans under S$500,000

OCBC Business First Loan – up to S$100,000

Made for startups and micro-enterprises, the OCBC Business First Loan lets you borrow up to S$100,000 with loan tenures of one to five years. The indicative interest rate is 8% p.a. to 11% p.a.

This loan is entrepreneur-friendly, as businesses as young as six months (and up to two years old) can qualify for the loan. The company should be at least 30% owned by Singaporean or PR, and with at least 1 employee and more than 50% equity owned by individuals.  

UOB BizMoney – up to S$350,000

SMEs in need of a larger loan should consider UOB BizMoney, which offers loan amounts up to S$350,000. Available loan tenures are one to five years, with an indicative interest rate of 10.88% p.a.

Companies registered and operating in Singapore for at least one year may qualify – including sole proprietors, partnerships, or private limited companies. There should also be at least 30% local shareholding. 

CIMB BizGrow – up to S$400,000

Another option for small businesses is the CIMB BizGrow loan, which offers up to S$400,000 at interest rates up to 9.88% p.a. The available loan tenure is up to five years. 

The eligibility requirements are not published on their website, but interested parties can always send in an enquiry to find out. 

Small business/SME loans S$500,000 and above

DBS Business Loan

The DBS Business Loan is open to all Singapore-registered businesses, including those that did not qualify for the government-assisted SME Working Capital Loan. It offers the same level of funding, up to S$500,000 per loan. 

Borrowers can access interest rates starting from 7% p.a. and choose from loan tenures between one to five years. 

Standard Chartered Business Instalment Loan – up to S$500,000

Another option is the Standard Chartered Business Instalment Loan, which also provides up to S$500,000 in funding per loan. The indicative interest rate is 9% p.a., and borrowers can choose loan tenures of up to five years. 

To qualify, companies should be Singapore-registered sole proprietors, partnerships or private limited companies with 50% or more Singaporean or PR shareholding. The company should be in operation for at least three years, and should have a minimum turnover of S$750,000. 

OCBC Business Term Loan – up to S$700,000

For SMEs looking for a business loan exceeding S$500,000, they should consider the OCBC Business Term Loan. This loan has a maximum loan amount of S$700,000, with indicative interest rates of 7% p.a. to 11% p.a. Loan tenures range from one to five years. 

To apply for this loan, companies should be locally incorporated, and with operations for at least two years. It should also be at least 30% owned by Singaporeans or PRs.

What to look out for when applying for a business loan?

Fees and charges

Small business term loans come with fees and charges that add to the overall cost of your loan. Thus, it’s important to check how much these charges are before signing up. 

The majority of business loans charge a fee for processing your loan. This may be known as an admin fee or a processing fee and is typically a percentage of your loan amount. Although some banks may charge a fixed rate instead. 

Another common fee to look out for is an annual fee – a fixed sum payable once a year for the duration of your loan. 

Affordability 

Loan affordability refers to the ease with which you are able to make monthly repayments. It is determined by loan tenure and interest rate. 

Generally, the longer your loan, the more interest you will have to pay by the end. However, longer loan tenures also mean smaller monthly repayment amounts. Meanwhile, higher interest will increase the amount you have to pay each month. 

You should choose a loan tenure and interest rate that allows you to comfortably pay off your loan each month. This means choosing an amount that your company can afford even during periods of slow sales. 

Otherwise, missing business loan repayments will incur penalty fees and potentially higher interest on overdue amounts, further straining your company finances. This would defeat the purpose of getting a small business loan in the first place!

Can you use personal loans instead of business loans?

Personal loans may seem like a tempting option for some business owners, but they may only be of limited help. 

This is because personal loans are typically smaller, as you can only loan up to 4x your monthly income, 10x if you’re earning at least S$120,000 a year. Viewed this way, personal loans can only match up to the smaller business loans on the market. 

In addition, you will be personally liable for a personal loan, which means you will have to repay the loan even if your business fails. In contrast, business owners are generally not held liable for company debts unless they have co-signed the business loan as a guarantor. 

Frequently Asked Questions (FAQs)

Which loan is best for business?

Locally incorporated businesses seeking government-aided business financing should try applying for the SME Working Capital Loan. The risk-share by the Government helps make it easier for your business to secure the loan. 

Alternatively, businesses that don’t qualify for the SME Working Capital Loan can try the DBS Business Loan, which is open to all Singapore-registered businesses. 

How much is the interest rate for a business loan?

The indicative interest rate for small business loans in Singapore ranges from 7% p.a. to 11% p.a. Please note that the actual interest rate you will be offered is determined solely by the lender based on their risk assessment standards. 

Where is the easiest place to get a business loan?

Banks are among the easiest places to get a business loan. This is because several of the retail and commercial banks in Singapore offer the SME Working Capital Loan. In addition, many banks also offer a suite of business loans and financing solutions. 

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