What Is SME Loan? Basics Of SME Business Loan For Startups

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How to Get a Business Loan for Start-ups?

Did you know that small and medium-sized enterprises (SMEs) account for nearly half of the total gross domestic product (GDP) in Southeast Asia? Despite their critical role in Singapore’s economy, SMEs often face a US$300 billion funding gap in Southeast Asia. Loans for business startups in Singapore are vital as they help small businesses operate smoothly and create jobs, driving significant economic impact.

What is an SME Loan?

SME loans are designed to meet the financial needs of growing businesses and startups. These loans provide a financial boost, helping bridge funding gaps to achieve business goals such as purchasing equipment, hiring staff, or launching marketing campaigns. SME loans are essential for startups to build a strong foundation and take their business to the next level.

Who Offers SME Loans in Singapore?

There are many options for SME loans in Singapore, each with unique requirements and criteria:

Traditional Banks:
- Banks like OCBC, DBS, Citibank, and HSBC offer business loans but have stringent approval processes that may be challenging for startups.
Financial Institutions:
- Companies like Hong Leong Finance and Singapura Finance offer loans to expand business assets, such as equipment loans and factoring.
Digital Financing Platforms:
- Platforms like Funding Societies provide digital financing through debt investments. These platforms enable SMEs to secure business loans funded by individuals or institutional investors, often with faster and more streamlined processes compared to traditional banks.

Who Qualifies for SME Loans?

Almost all types of startup businesses in Singapore can apply for SME loans. Whether you’re a self-employed professional, an online business, or a private company, eligibility depends on several factors like credit score, business experience, and profitability. Loan providers will assess these aspects, along with a business’s financial reports and growth potential, to determine eligibility.

Types of SME Loans Available in Singapore

Here are some common types of SME loans that startups can consider:

Term Loans:
- A lump sum of money is provided, which must be repaid with interest over a fixed term, usually from 3 months to 1 year.
Working Capital Loan:
- This is a government-backed financing option for SMEs with less than 200 employees, offering loans of up to SGD 1 million.
Revolving Credit:
- Similar to a credit card, revolving credit allows businesses to borrow repeatedly up to a credit limit, repaying only the used amount along with interest.
Micro Loan:
- Micro loans from Funding Societies range from S$3,000 to S$100,000 and can be used to finance marketing campaigns, inventory purchases, or other business needs. Approval and disbursement can happen within 24 hours.
Accounts Payable (AP) Financing:
- AP financing provides advance funds against invoices issued to suppliers, helping businesses manage cash flow and streamline payments.
Accounts Receivable (AR) Financing:
- AR financing allows businesses to access cash by pledging their outstanding invoices. This option is ideal for firms with recurring invoices on credit terms and provides a credit line of up to S$1 million.
Supply Chain Financing:
- Supply chain financing improves cash flow by extending payment terms with suppliers while offering early repayment options.

When Should Business Startups Apply for These Loans?

The decision to apply for a business loan depends on individual circumstances. Some entrepreneurs believe loans should be taken before a financial crisis arises, while others suggest waiting until a genuine need occurs. What’s important is recognizing that loans are a strategic tool for business growth, not just a sign of financial difficulty.

How to Apply for Business Loans in Singapore

Once you’ve chosen a suitable loan, follow these steps to improve your chances of approval:

Plan and Apply Early:
- Don’t wait until the last minute. Prepare your application ahead of time to avoid unnecessary delays.
Organize Documents Carefully:
- Ensure all required documents, such as financial statements and bank records, are up-to-date and accurately prepared.
Monitor Financial Health:
- Stay on top of your company’s financials and repay existing debts on time to demonstrate your creditworthiness.
Compare Financing Options:
- Explore various loan options to find one that suits your business needs.

By familiarising yourself with SME loans, you can better navigate the financing options available for your business. Funding Societies supports SMEs in Singapore by offering flexible financing solutions with a quick and seamless application process—100% online.

How to Apply for Start-up Financing?

Are you interested in reaping the benefits of financing above? Luckily, many institutions have made startup funding in Singapore easier — and Funding Societies Start-up Financing stands out with its fuss-free application process. Additionally, all Singapore business entities, whether at their early-stage or established*, are qualified to submit funding applications for project or operational commencement (*subjected to the terms & conditions). With Funding Societies, you can get S$10,000 worth of extra working capital and 5 months of repayment tenor, all with zero interest and fees! Plus, you only need less than 10 minutes to apply digitally. Here’s how:

Register or log into your Elevate account here;
Click on the “Yes, apply for financing” button when prompted on the home screen;
Input your financing requirements and click on “View financing options”;
Click “Apply,” then prepare the necessary documents, such as a Credit Bureau Singapore (CBS) report in the last 30 days;
When prompted, click on “Retrieve MyInfo Business with Singpass” and agree to the terms;
Verify your business details and the listed Business Interest Parties;
Upload your CBS report and ensure it has a JPEG or PDF format;
Click Submit, and wait for the Funding Societies team to process your application within three working days.

You can also download a copy of the guide for Funding Societies Start-up Financing here.

Financing for Singapore startups will significantly benefit startups in all business areas, from operations to marketing and product offerings There are many accessible options in Singapore, such as Funding Societies Start-Up Financing. This financing solution provides quick access to the working capital that startups need for growth. Click here to learn more about the benefits, and don’t be afraid to take the first step now!