The objective of gaining opportunities and growth can only be accomplished if you invest in your business. Unfortunately, you might not have enough cash on hand to make these necessary investments. In this case, a small business financing option is exactly what you need. While you research the available financing options, you are likely to come across term loans. So what are term loans?
A term loan provides borrowers, or in this case, SMEs, with an agreed amount of cash upfront in accordance with specific borrowing requirements and terms. Term loans, better known as term financing, allow SMEs to repay funds in monthly instalments. With Funding Societies Singapore, you can apply for working capital from S$100,000 up to S$1 million, in a hassle-free online process.
Table of Contents
The three classifications of Term Financing
Depending on your business needs, you might require a specific type of term financing. Read on to identify which of the three classifications is best suited to your business needs.
Short-term loans
Generally, short-term loans are suitable for day-to-day expenses, and while gaining the funds for this loan is easier to apply for, be sure to expect high rates. Short-term loans have a shorter repayment period, which might span 1 to 2 years.
Intermediate-term loans
Intermediate loans would be described as the ‘sweet spot’. Companies with this kind of financing requirements can expect to hire new employees or expand operations to generate more revenue. Repayments are typically 2 to 5 years, and you can obtain typically up to S$500,000 funding.
Long-term loans
Long-term loans are typically recommended for large enterprises. The requirements for this financing option would depend on the business’ financial record and credit standing. Businesses can access up to millions of dollars in funds, while repayment can be up to 25 years.
Benefits of Term Loans
Free up your cash flow
A business can use a term loan to finance significant capital investments, freeing up cash flow for other purposes. For example, a term loan can be used to cover the costs associated with hiring and training new employees, thereby allowing the company to use their available funds for other expenses until the new hires become profitable contributors to the company’s revenue.
Fast approvals
If you need a fast injection of funds, term loans are the way to go. Funding Societies disburses the standard Business Term Loan in as fast as 7 days of receiving the signed contract.
Preserves equity
Term loans do not impact the shareholder equity of a company, allowing it to remain intact. Furthermore, unlike equity financing, the borrower does not have to give up any level of ownership over their business operations, providing business owners with greater autonomy.
Funding Societies’ Business Term Loan vs. Business Term Loan PRO
Funding Societies actually offers two distinct products under the Business Term Loan umbrella, sized for different needs:
| Feature | Business Term Loan | Business Term Loan PRO |
|---|---|---|
| Loan amount | S$100,000 to S$1 million | S$100,000 to S$300,000 |
| Tenor | Up to 12 months | 12 to 18 months |
| Interest rate | As low as 0.8% per month (~9.6% p.a.), subject to underwriting | Same rate floor as the standard loan |
| Origination fee | From 5% | From 3.5% |
| Minimum annual turnover | S$500,000 | S$500,000 (same eligibility) |
| Disbursement | As fast as 7 days | Only 4 documents required |
The larger standard loan suits a bigger, one-off working capital need; PRO’s smaller quantum, lighter documentation and longer 12 to 18 month tenor suit a business that wants to spread a smaller draw over more time rather than take the largest amount it qualifies for.
Why SMEs Use a Business Term Loan
A term loan tends to get used for a handful of recurring situations rather than open-ended cash flow support:
- Buying or upgrading fixed assets. Equipment, machinery or a new lease are large, lumpy costs; spreading one out over fixed instalments avoids a one-time hit to cash flow, and because the loan is unsecured, the asset itself isn’t pledged as collateral.
- Hiring to close a skills gap. Bringing in staff with a specific capability (or upskilling existing staff) is itself a cash outlay before it pays back in revenue; a term loan bridges that gap.
- Covering a timing gap from slow-paying customers. Long payment terms (60 to 90 days) can leave a business short on payroll or inventory funds even when the underlying business is healthy. A term loan addresses the timing problem directly, distinct from invoice financing, which advances against the specific unpaid invoices rather than lending a lump sum.
Required documents
If Funding Societies piques your interest in Term Loans, the following documents are required for a preliminary loan assessment for our Term Loans:
Business Term Loan PRO (4 documents): latest 6 months’ operating bank statements; guarantor’s latest CBS report; dated Banking Facilities Declaration; coloured NRIC (front and back).
Business Term Loan: latest 6 months’ operating bank statements; latest 2 years’ management or audited financials (within 18 months); list of banking facilities; latest 12 months’ GST Form 5 statements (if applicable); AR ageing list (if applicable); project listing (if applicable); ESG documents, loan exposure check and eligibility checklist (if applicable).
Eligibility and How to Apply
Both products share the same basic eligibility: the business must be registered and operating in Singapore, trading for at least 6 months, with at least 30% local shareholding.
- Apply online. Fill out the form on the Business Term Loan page with your business details.
- Review your offer. If you qualify, Funding Societies sends a loan offer with the amount, rate, repayment terms and fees for you to accept or decline.
- Sign and receive funds. Once the signed Letter of Offer is returned, funds are disbursed as fast as 7 days for the standard Business Term Loan.
What to consider before committing to term loans?
Be aware of the upfront fees before committing to ensure there are no additional fees. Depending on which lender you decide to go with, additional charges might be something to watch out for. Furthermore, your current credit score also plays a part in approval. Consider rebuilding your credit score before applying.
In conclusion, term loans can be an effective financing option for SMEs looking to invest in their business growth. However, it is important to carefully evaluate your business needs, financial situation, and the terms and conditions of the loan before committing. As with any financial decision, it is important to weigh the benefits and potential drawbacks of term loans to determine if it’s the right choice for your business. Visit our website to learn more!
Wondering how a term loan compares to invoice financing, the EFS Working Capital Loan or other options? See business loan types in Singapore compared.
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.
Funding Societies’ Business Term Loans are fulfilled by FS Capital Pte Ltd.
- CBS Credit Report Singapore: What Business Lenders Check Before an SME Loan - October 12, 2026
- Government Grants for SMEs in Singapore 2026: EDGE Guide - September 30, 2026
- 9 Financial Habits of Successful Singapore SME Owners - August 5, 2026
