How Long Is A Small Business Loan Term In Singapore?

March 1, 2023

Small business loans are a popular financing option for entrepreneurs in Singapore. They provide the necessary funds for businesses to grow, expand, and meet their financial obligations. 

One crucial aspect to consider when applying for a small business loan is the loan term. 

In this article, we will discuss the typical loan terms available for small businesses in Singapore, including how long is a small business loan term.

We will also tell you what to consider when taking out an SME loan, as well as how and where to apply for SME loans in Singapore.

What Are Small SME Business Loans?

Small SME (small and medium-sized enterprise) business loans are financial products specifically designed for small business owners. They provide working capital or funds for business expansion or equipment purchase. 

The terms and conditions, as well as the interest rate and loan term, will vary from lender to lender, and the borrower’s creditworthiness and financial history.

What To Consider When Taking Out An SME Loan

When taking out an SME business loan in Singapore, there are several important factors to consider:

1. Purpose of the loan: Clearly define the purpose of the loan and how the funds will be used. This will help you determine the type of loan and the lender that is best suited for your needs.
2. Repayment terms: Consider the loan repayment terms, including the interest rate, loan term, and any fees associated with the loan. Make sure you can comfortably afford the repayment schedule.
3. Creditworthiness: Your creditworthiness will be a major factor in determining your loan terms and interest rate. Make sure your credit score is in good standing and that you have a strong business plan.
4. Flexibility: Consider how flexible the lender is in terms of loan terms, repayment schedules, and other conditions.
5. Compare offers: Before you decide on a loan, compare offers from different lenders to see which one offers the best business loan terms and interest rates. 
6. Understand the risks: Understand the risks of taking out a loan and the potential impact on your business. Seek professional advice if you have any doubts.

How Long Is A Small Business Loan Term?

The loan term for small business loans in Singapore can vary depending on the lender and the type of loan. 

In general, small business loans can have terms that range from a few months to several years. Some common loan terms for small business loans include

• Short-term loans: These loans have a term of less than one year and are typically used for working capital or short-term business needs.

• Intermediate-term loans: These loans have a term of 1-3 years and are often used for equipment purchases, expansion projects, or to bridge cashflow gaps.

• Long-term loans: These loans have a term of more than 3 years and are typically used for major investments such as real estate or long-term business expansion.

It’s important to note that the loan term is one of the factors that affect the loan’s interest rate. Longer loan terms might attract higher interest. 

Some lenders may also have minimum and maximum loan terms that they offer. It’s best to check with the lender and compare the offers before deciding which loan to take.

More on this topic: 

How To Find The Best Short Term Business Loan

What Is A Business Term Loan?

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What Are The Business Loan Options In Singapore? 

There are several business loan options available in Singapore for SMEs. Some of the most common options include

1. Invoice financing: This is a type of loan that allows small businesses to borrow money against their unpaid invoices. It can be a quick way to access working capital and improve cashflow. The loan term for invoice financing is usually 30 to 120 days when the invoice is paid.
2. Start-up business loans: This loan is designed to help small businesses that are just starting up usually between six months to two years. The maximum loan amount is $100,000 and is usually used for business capital needs. The loan term is usually one to four years.
3. Working capital loan: This loan is effective for businesses that need working capital for their businesses. Until 31 Mar 2023, businesses can now borrow up to $500,000 instead of the previous capped loan amount of $300,000. The loan term can be up to five years.
4. Business credit cards/line of credit: This type of loan is excellent for young SMEs who needed to settle small recurring or unanticipated costs. This helps businesses manage their cashflow and expenses in a flexible way. The loan term can range from six months to five years.
5. Equity financing: for businesses that cannot get a loan from a bank or other financial institution for any reason, this option allows them to sell their company shares to investors to raise funds for the business.
6. Commercial property loan: If you’re looking to buy a new commercial property for your business such as an office space or building, you can use this loan type. If your property is in a BCA Green Mark Gold (Plus) or Platinum building, you can go for the Green Commercial property loan instead. These loans have a tenure of up to 30 years,
7. Standard business loans: These are loans offered by banks and financial institutions to help businesses. They are usually unsecured, and loan terms can range from one to five years.

How And Where To Apply

Where To Apply For SME Loans In Singapore

There are several options for applying for SME loans in Singapore. Some of the most common places to apply for a loan include:

Banks

Most commercial banks in Singapore offer small business loans, and some of them have specialised departments for SME loans. It’s important to compare the terms, interest rates, and fees of different banks before making a decision. 

They usually require that the business is at least three years old since its incorporation and that 30% of its shares are owned by Singaporeans.

Below are the interest rate and loan terms offered by some banks.

Licensed Money Lenders

If you’re unable to meet bank requirements, borrowing from a licensed money lender like GS Credit is a good way to access SME financing in Singapore.

Since money lenders are regulated by the Ministry of Law and are not loan sharks, you can borrow without fear of harassment.

When borrowing from a money lender, ensure the money lender is licensed, and listed in the list of licensed money lenders in Singapore.

Requirements to Apply For An SME Loan

The requirements for applying for an SME loan in Singapore can vary depending on the lender and the type of loan. However, some common requirements include:

• Business registration: Most lenders will require proof of your business registration, such as a business registration certificate or business license.

• Financial statements: Lenders will typically require financial statements such as income statements, balance sheets, and cashflow statements, to assess your business’s financial health and creditworthiness.

• Business plan: A detailed business plan outlining your business’s objectives, strategies, and projected financial performance may be required by some lenders.

• Number of employees: Some lenders will require the number of your employers to decide the amount of loan you can be given.

• Duration of business: This is another important requirement. Most lenders will only advance loans for businesses that have been incorporated for at least six months. Other lenders such as banks, may require the duration to be at least two years depending on the loan type.

How To Apply For SME Loan

Applying for an SME loan in Singapore typically involves the following steps:

• Gather Required Documents

Before you apply for a loan, gather all the required documents such as your business registration certificate, financial statements, business plan, and proof of collateral (if required).

• Choose A Lender

Research different lenders whether banks or licensed money lenders, and compare their loan terms, interest rates, and fees. Choose a lender that best suits your business needs.

• Complete The Loan Application

Fill out the loan application form including loan amount and tenure, and submit it along with the required documents to the lender.

• Provide Additional Information

Some lenders may require additional information such as projected cashflow statements or financial projections.

• Sign The Loan Agreement

Once the lender has approved your loan, you will need to sign a loan agreement outlining the terms and conditions of the loan.

• Get The Funds

After signing the loan agreement, the lender will disburse the loan funds to a bank account of your choosing.

It’s important to carefully read and understand the terms and conditions of the loan before signing the loan agreement. 

Keep in mind that the whole process can take several weeks to complete if you’re borrowing from a bank, and only a few hours to days if you’re borrowing from a money lender.

Get Easy-To-Apply Business Loans To Better Your Business Today

So now you know more about how long is a small business loan term. 

If you’re looking for a business loan for your SME business, our easy-to-apply loans at GS Credit are just what you need. 

How much you can borrow will vary depending on a couple of factors. However, if your documents are in order, your approved loan amount can be disbursed in as little as 60 minutes. 

To learn more about our business loans, contact us today to speak to a business loan expert, or apply online today.