Are you a small and medium-sized enterprise (SME) owner looking for ways to finance your business? With so many different types of SME business financing available, it can be difficult to know which one is right for you. This is why we have created this SME business financing guide. In this guide, we will explore the different types of financing available and how they can help your small business grow. Whether you are just starting out or trying to take your business to the next level, this guide will help you make informed decisions about your SME business financing options.

So if you are ready to take the next step in growing your SME, or looking for a loan for business startups in Singapore, read on!

Singapore has a thriving SME sector that plays an important role in the country’s economy. SMEs account for 99% of all businesses in Singapore, employ over 70% of the workforce, and contribute to nearly half of the nation’s GDP. With such a large contribution to the national economy, it is no surprise that financing for SMEs has become a priority for many financial institutions. 

What are the ways to finance my SME?

There are a variety of ways to finance an SME, including equity financing, debt financing, venture capital, angel investors, grants and subsidies, and so on. With the right financing options, you can get the capital you need to grow and expand your business.

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What is Equity Financing?

Equity financing is a type of business financing in which a company raises capital by selling shares of ownership in the company to investors. Simply put, this type of financing allows companies to access funding without taking on additional debt. It can be used by small and medium-sized businesses as an alternative to traditional debt financing, such as bank loans. This can be beneficial for small businesses because it does not require regular payments like debt financing does, and there are no fixed repayment terms. However, equity financing also means that owners must give up some control over their business and share profits with investors.

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What are Angel Investors and Venture Capitalists?

The two main types of equity financing are venture capital and angel investing. Venture capital is provided by firms that specialise in investing in early-stage companies with high growth potential. These investments are usually made in exchange for ownership stakes and managerial control over the company. On the other hand, angel investors are wealthy individuals who provide capital to startups and small businesses in exchange for equity or convertible debt.

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What is IPO, Crowdfunding, ESOPs?

Other types of equity financing include public offerings, crowdfunding, and employee stock options (ESOPs). Public offerings involve the sale of securities to the general public through an initial public offering (IPO). Crowdfunding involves raising funds from a large number of individuals through online platforms such as Kickstarter and Indiegogo, while Employee stock options are typically offered by employers as part of an employee compensation package and allow employees to purchase shares at a discounted price.

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What are some Debt Financing options available to SMEs?

In our guide, we list down the top four types of SME debt financing facilities. Each of these options will fit different requirements, hence it is important to consider the impact, eligibility and processing time to know what financing option is best suited for your SME.

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Option 1. Government-Backed SME Grants and Loans

Enterprise Singapore administers grants and loans to SMEs through a list of Participating Financial Institutions like Funding Societies to meet their business financing needs. In the case of insolvency, the Singapore Government and the Participating Financial Institution will share the loan default risk.

The government introduced SME loans in Singapore such as the Working Capital Loan and various loans under the Enterprise Financing Schemes (EFS) for SMEs at different stages of their growth. The SME Working Capital Loan helps to finance daily operational cash flow needs, while the SME Fixed Assets Loan finances the investment of domestic and overseas fixed assets, among others.

With SMEs comprising 99% of enterprises in Singapore, the Government has been increasing the availability of grants and loan options to better support local businesses.

A grant from the government can be seen as a vote of confidence for the business’ growth, and the approval of the grant is likely to raise the SME’s creditworthiness for future loan applications with financial institutions. This is provided that the SME repays the loan on time and does not default. 

However, government grants and loans require a lengthy and tedious application process before they are approved for the funds to be disbursed. For SMEs, this means a longer waiting time to get access to the financing they urgently need.  

Moreover, the approval criteria are more stringent, and many grants work on a reimbursement basis, which better suit businesses who can afford to wait.

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Option 2. Bank Loans for SMEs

Traditional banks like DBS, UOB, and OCBC offer SME financing under varying credit criteria. Often, banks provide cheaper financing options with a longer tenor for loans, but the whole application and disbursement process tends to be lengthy with complicated loops that SMEs may have difficulty navigating. 

A study by Visa and Deloitte found that as many as 40% of SMEs in Singapore do not have access to bank loan financing despite local SMEs contributing 47% of the country’s GDP.

There are a few reasons for this situation. In certain market conditions, banks have a low appetite for risk. Moreover, SMEs are most often unable to provide collateral for their loan applications. These contribute to a sizable gap of underserved SMEs in need of financing who are rejected by banks due to insufficient information and/or collateral. 

However, SMEs who have strong cash flow and are prepared to wait for a few weeks to a month for the results of their SME business loan application can consider taking up bank loans.

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Option 3. SME Digital Financing Platforms 

SME digital financing is a form of alternative financing that has gained much traction in recent years. It typically involves the use of technology, such as online platforms and mobile applications, to streamline the lending process. One of the ways digital financing works is where retail investors can jointly fund SMEs and earn returns through interest. This is conducted through an online platform that matches investors with SME borrowers. 

SME digital financing can come in the form of loans, lines of credit, or other types of financial products. This type of financing allows SMEs to quickly obtain the funds they need without having to go through traditional banking channels.

Digital financing can be beneficial for SMEs because it eliminates paperwork and provides faster access to funding than traditional bank loans. Additionally, some digital lenders may offer more flexible terms and repayment options than banks do. This makes it easier for SMEs to manage their cash flow and ensure that they have sufficient capital available when the need arises. Furthermore, many digital lenders are able to provide fast decisions on loan applications, making them an attractive option for SMEs who need quick access to funds.

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Option 4. Credit Advances

There are some conventional alternatives to banks and government loans. Credit advances are a type of loan that allows SMEs to access credit against an existing credit card balance. The amount that the business can borrow is typically up to the limit of the credit card, and you can use it for any purpose. Credit advances are different from cash advances because they do not require immediate repayment, as the loan amount is paid back over time in monthly instalments.

The interest rate on credit advances is usually higher than other types of loans, so it is important to consider all options before taking one out. When used responsibly, though, credit advances can be a great way to cover unexpected expenses or pay off large purchases quickly.



From traditional bank loans and government grants to venture capital and SME digital financing, there is something for every business. Each option comes with its own benefits and drawbacks, so it is important for businesses to weigh the pros and cons before deciding which type of financing is right for you. With careful research and planning, SMEs can find the best financing solution that fits your needs and helps you achieve your business goals.

If your business is in need of short term business financing, Funding Societies, Southeast Asia’s largest SME digital financing platform, offers flexible, short term SME loans that can be personalised to fit your business needs. Applications can be done online and processed as quickly as one working day! 

Explore our suite of business financing options to find the most suitable one for your SME now. 

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Disclaimer: The information provided to you in this blog post is intended only for general information purposes only and does not constitute legal or other professional advice on any subject matter. The materials and the information provided are not intended to be and do not constitute an advertisement or solicitation. In no event will Funding Societies be liable to any party for any direct, indirect, incidental, special, consequential or punitive damages for use of such information by you or any unauthorised third party.