An unexpected positive side-effect of the Covid-inspired economic downturn is the reinvigoration of the lending landscape in Singapore. Eager to circumvent a catastrophic domino effect of failing businesses, the government has stepped in with SME assistance schemes. Whether it is a government or private loan Singapore residents need, there is no time like the present to apply.
This article looks at some of the best short-term loans options for business owners. Some of these instant loans in Singapore may be used to fund an existing business, others are only applicable to new start-ups, while some may be used for both purposes.
Government schemes
Government business loans are a highly sought-after resource and the market for them is extremely competitive. You will have to exhibit great promise in terms of business viability using detailed paperwork to clinch any of them.
However, two government schemes were introduced specifically to address the downturn triggered by the coronavirus lockdowns. They are the SME Working Capital Loan and Temporary Bridging Loan, and are comparatively easier to qualify for.
- SME Working Capital Loan
The maximum amount loaned through the SME WCL for any business is $1 million, and it must be paid back within 5 years. To qualify, your business must employ less than 200 people and at least 30% of the company must be owned by Singaporeans. The interest rate will be gauged according to your finances and the health of the business.
- Temporary Bridging Loan
The maximum amount loaned through the TBL for each business is $5 million, and it must be paid back within 5 years. To qualify, your business can be of any size but at least 30% of it must be owned by Singaporeans. The interest rate will be gauged according to your finances and the health of the business. However, the annual rate of interest on the loan is capped at 5%.
Both the SME Working Capital Loan and the Temporary Bridging Loan are available through leading banks and financial institutions. Because they are backed by Enterprise Singapore for 90% of the value of these short term loans, those lenders face significantly less risk themselves and are much more likely to approve an application.
Moreover, while they are both instant loans Singapore entrepreneurs can receive, repayments can be deferred by up to 12 months. This is a very convenient feature if you have just set up your business and/or are struggling with cash flow.
Private moneylenders
Singapore has a vibrant licensed moneylender industry which is strictly regulated by the government. They offer a variety of loans across the board and many lenders have numerous short term loans designed specifically for businesses. Among the common ones are:
- General business loan
This is the most versatile of the bunch and allows you to use the loan principal for any purpose in an existing or new business concern. The lender will usually only ask you very generic questions as to the exact purpose.
- Private car hire (Grab, Gojek, or taxi) loan
The private car hire industry is booming and this loan is ideal for anyone who wants to break into the market. It can cover a range of training, certification, vehicle hire or purchase, repairs and maintenance, and miscellaneous costs such as insurance.
The specific details of a private loan in Singapore, including the maximum principal, the term of the loan, the interest rate, and fees and penalties can vary greatly. They are dependent largely on the borrower’s credit history, work history, and financial records.
Choosing an instant loan in Singapore
If you intend to apply for a business loan in Singapore, weigh the pros and cons of both categories carefully before you decide to apply for either one.
The main advantage of a government loan for your business is the massive cap on the principal loan amount (up to $5 million). Pair that with a yearlong deferral of payments and a cap on annual interest of 5% and it is easy to understand their popularity. The downside is their strict assessment process and intense competition.
By contrast, the chief appeal of a private loan in Singapore is the lenient eligibility criteria which make for high approval rates. However, the maximum principal loan amount is much smaller than that of either of the government-backed loans.