Personal Finance

How To Find The Best Short Term Business Loan

November 27, 2022

You have a great business idea, and you are ready to take it to the next level. However, before that, you need funds for upfront expenses and to get your business going.

But you need it fast, which is why you are thinking of getting a short-term business loan.

Getting funds from a lender can be a nightmare for most entrepreneurs because of the documents and the strict eligibility criteria required.

Moreover, lenders will review your business model before they offer you a loan. In this article, we will discuss how to find the best short term business loan to start or grow your business.

What To Consider When Looking For A Small Business Loan

Before you settle on a lender, make sure you do your research and choose the best deal. Get to know what each lender is offering and choose one that suits your business.

Don’t settle for the first lender you come across. Here are some of the important considerations you need to make.

Repayment Plan

The repayment plan for a short-term business loan is generally on a daily or weekly basis, and the interest must be repaid within three to 18 months.

Although it is easier to qualify for a short-term loan than a long-term loan, be sure your business can manage the daily or weekly payment before borrowing.

Loan Amount 

A short-term loan usually offers a smaller loan amount but a higher interest rate.

Interest Rate

Before you apply for a business loan, compare the interest rates that various lenders are offering.

Because the repayment period of a short-term loan is shorter than that of a long-term loan, the interest rate on a short-term loan is higher.

Although this should not be the only consideration, you are better off choosing a loan with a lower interest rate. The lower the interest rate, the lower the cost of the loan.

Loan Tenure

The loan tenure determines the monthly repayments and cost of the loan. Longer loan tenures mean you will pay more interest, which raises the cost of the loan.

It is, however, important that you choose a loan tenure that suits your business. A longer tenure reduces the monthly repayments, while a shorter tenure will have a higher monthly payment.

Make sure you choose a loan term that you can manage. Your business should be able to raise the cashflow that you need to repay the loan.

Size And The Age Of Your Business

Bigger businesses have easier access to short-term loans as compared to small businesses.

Before you apply for a loan, review your business and see what type of lender will work for you. Most lenders require your business to have operated for a few years before they can give you loans.

Purpose Of The Loan

The purpose of the loan determines the type of financing you choose. Be clear on the purpose of the loan and you will be able to choose the right business loan.

In doing so, you will be able to find the best short-term loan for your business.

Types Of Short-Term SME Loans

SME loans are used to describe loans offered to small and medium-sized enterprises (SMEs). There are many types of SME loans.

Here are the short-term loan options available for businesses in Singapore.

Business Loan

This refers to an unsecured loan that is given to businesses.  You don’t need any collateral for business loans. Most of these have a loan tenure of up to five years and are offered by most banks and major lenders.

To qualify for a business loan, most lenders require that your business be operating for more than six months. You must also be able to show that your business has the potential to generate enough revenue to repay the loan.

SME Working Capital Loan

An SME Working Capital Loan is offered to small businesses with 200 employees or less. The government, in conjunction with banks, offers up to $1 million to SMEs for a period of up to five years.

To qualify for the loan, the SMEs must be registered and have at least 30% of the shareholding held by Singaporeans.

Start-Up Business Loans

As the name suggests, start-up business loans are given to start-ups to help them run their business.

It’s easier to get a start-up loan as you don’t need a lot of documents. But you must show how your business intends to generate revenue.

Invoice Financing

This involves the use of an invoice as collateral. The lender gives you access to finance based on the financial capability of your customers.

SMEs need to provide information on their past performance and transaction history.

What A Short-Term Business Loan Can Be Used For

At some point, your business will need financing to grow or expand. Most SMEs take loans to achieve the following:

Accelerate Business Growth

Most SMEs require financing to expand or move into new sectors. So short-term loans can help your business expand and diversify.

This will give your business the competitive edge it requires to grow revenue and remain relevant in a dynamic business world.

Take Advantage Of Business Opportunities

Business loans will make it possible for your company to capitalise on new opportunities.

If you have strategic business opportunities you need to take advantage of, consider taking out a business loan. This will ensure your business revenue grows and can withstand competition.

Buy Machinery And Inventory

A business that needs to continuously restock and buy machinery can opt for a short-term business loan.

If your business requires a lot of machinery and inventory, it will need cash to ensure smooth operations. So you can opt for business loans for SMEs.

Sort Out Cashflow Issues

In times of economic hardship, businesses will require cash to pay for their operations. In such times, businesses will use financing to ensure there are no cashflow issues.

Most businesses anticipate difficult economic times and apply for a loan. Working capital loans will keep your business operating even in such hard times.

Improve Your Business Credit Rating

Taking a small business loan and repaying it on time improves the credit rating. This gives lenders confidence to give your business access to larger credit facilities.

Start A New Venture

You can take a start-up loan to venture into a new business. A short-term loan will cover start-up costs such as licenses, machinery, or any other expenses.

You will need to show the lender your business idea is viable and will generate revenue.

Comparing Short-Term SME Loans

Before you take out a short-term SME loan, you need to compare the various options available in the market. Make sure you factor in the following considerations:

Minimum And Maximum Loan You Can Access 

Most lenders offer up to $5,000 in unsecured loans. Depending on what you need, make sure you can get the amount you require to successfully implement or grow your business.

Loan Tenure

The longer the tenure, the more expensive the business loan is going to be in the long run. Choose a shorter tenure and reduce the cost of the loan.

Interest Rates And Fees

As far as possible, choose a loan with a lower interest rate.

Lock-In Period

This is the period during which you can’t refinance your loan. The shorter the period, the better.

Prepayment Fees

Look out for loans with no prepayment fees.

Processing Fees

Choose a loan with the lowest processing fees to save money.

Requirements And Eligibility Criteria

Some lenders are stricter than others. Make sure you have all the documents you need to qualify for a short-term business loan in Singapore.

Where To Get A Short-Term SME Loan

Financing your small business is essential. Here is where you can get short-term small business loans* in Singapore.

Standard Chartered Cash One Loan

Standard Chartered provides loans at an interest rate of 3.48%. Here are other features of the loan.

  • Loan tenure of up to five years
  • Get up to four times your earnings
  • Maximum loan amount of up to $250,000
  • Must have a minimum income of $20,000

OCBC Bank Loan

OCBC Bank offers SME loans to companies with a 30% local shareholding and that are incorporated in Singapore. The main features of this loan are as follows:

  • Receive up to $200,000
  • No prepayment fees
  • Loan tenure of up to one year
  • You can draw the loan multiple times

*Information correct at time of publishing

GS Credit

GS Credit is a top licensed lender in Singapore. We offer business loans at low interest rates. Here are the main features of our business loan.

  • Prompt loan approval
  • Low interest rates
  • Flexible repayments

Find The Best Short Term Business Loan

To know how to find the best short term business loan, you need to assess your business and do your research. This will enable you to get a loan with a favourable rate and loan tenure.

Before you apply for a short-term business loan, make sure your business has enough revenue to pay back the loan. Once you get the money from the lender, use it for the intended purpose.

Business owners who need cash urgently to strike a deal or even stabilise their business should visit GS Credit.

We are one of the top licensed money lenders in Singapore. Visit GS Credit and get the money you need to grow your business.

Get help from our friendly loan officers or get started by applying for a loan now.

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