Some businesses need more help than others. It is typical for a small and mid-size enterprise (SME) to apply for a loan in their first year of operations. However, with several options available, it can be challenging to select one that best suits your business. By finding out more about the different types of loans, you get a better understanding of which one will benefit your business the most.
Unsecured Business Loan
Don’t let the name scare you off; an unsecured business loan is one of the most common funding solutions in Singapore. This type of loan is financed by banks that have government approval. With an unsecured business loan, you simply need to present the bank your credit rating, financial history, and cash flow forecast. If you meet their requirements, you will be approved for the loan. The drawbacks of this option are its higher interest rates and longer approval times; there is also a possibility that your loan application will be rejected.
Working Capital Loan
A working capital loan is often chosen by SMEs that need help in financing their daily operations. This type of loan is aimed toward short-term needs, such as rent, payroll, and debt. Applying for this funding solution gives you access to up to $1 million for your business. However, its repayment is set at a maximum of five years from the date of the loan’s approval.
Equipment financing is similar to a lease or hire purchase. It was developed to gives SMEs a funding solution that specifically addresses their urgent need for equipment and machinery. This also means that any asset you purchase using this loan becomes your collateral. The lender has the authority to repossess any of your equipment or machinery should you fail to meet payment deadlines.
The location of your business plays a part in its success. Property financing is a good option if you want to set up shop in a pricier neighborhood. It will require you to pledge a property you already own as collateral for the loan. If this isn’t possible for you, some banks provide financial assistance that specifically addresses SMEs’ need for property acquisition.
The Singaporean government developed a financial scheme that helps SMEs obtain financial support. Currently, ten financial institutions offer this funding solution. These government-aided loans can be used to start a business or as working capital. With an SME microloan, you can get up to $100,000 to help your business grow. The interest rate for your loan will depend on your chosen financier’s terms and conditions. Compare the different plans before settling on one to select one that will be convenient for your business.
Secure funding for your business venture by studying the different loans available to you. Once you’ve familiarized yourself with them, you can determine what type of loan will best help you meet your short and long-term business goals. With the right financial aid, you can effectively scale your business to success.