What Is A Business Term Loan?


If you are a small business owner in Singapore, you may be wondering how to go about applying for a business loan. Or maybe you are wondering what is business term loan.

There are a lot of options out there for getting a business loan in Singapore, and it can be hard to know where to start.

Read on to learn what is business term loan and how you can apply for a business loan in Singapore.

Business Loan Options In Singapore

There are many types of business loans, but they can be broken down into two general categories: those that provide funding for your cashflow, and others that have more specific purposes like machinery/equipment or property lending.

General Business Loan

In general terms, business loan providers in Singapore will offer you either a term loan or a line of credit.

A term business loan offers you a lump sum that you will need to repay over an agreed-upon period of time, typically one to five years. This type of loan is best suited for businesses with large, one-time expenses such as equipment purchases or renovations.

On the other hand, lines of credit give you access to a pool of cash that you can draw from as needed and make interest-only payments until you need to repay the full amount borrowed.

This type of loan is better for businesses with ongoing or fluctuating cashflow needs such as inventory financing.

Many banks like DBS offer business loans with competitive interest rates and terms. There are also other private financial institutions that you can approach for a business loan.

SME Working Capital Loan

If you have a business with less than 200 employees, it comes under the term small and medium-sized enterprises (SMEs). SMEs can get a business loan from the Singapore government under the SME Working Capital Loan scheme.

The SME Working Capital Loan offers up to $1 million per business with a repayment term of one to five years.

The government works with banks to offer this financing scheme to help SMEs that are Singapore registered and with at least 30% of the shares owned by Singapore citizens.

Startup Loan

The Startup Loan scheme is a business loan for those who are looking to start a business in Singapore.

This government-assisted scheme offers up to $100,000, like a smaller version of a normal business loan.

The advantage of this startup loan is that you do not need strong collateral or financial background to apply for this loan.

Business Loans Vs Personal Loans

Business bank loan differs in various ways from personal loans, from the application process to the interest rates.

So if you are planning to apply for a business loan, it is important to understand how business loans differ from personal loans.

Loan Amount

Depending on your business needs, you can usually borrow a larger amount with a business loan than with a personal loan.

The maximum amount you can usually borrow for a business loan is $20 million while the maximum amount for personal loans is usually four times your monthly salary.

Loan Tenure

The tenure for business loans is usually less than five years depending on the bank, while personal loans usually have a tenure of one to seven years.

However, some banks and private licensed money lenders offer a business loan with a longer tenure of up to 10 years.

Approval Time

It usually takes about two weeks or more for a business loan to be approved, while personal loans can be processed within a few days.

However, the approval time for business loans also depends on the amount you are borrowing and the complexity of your business.

For example, if you are applying for a $1 million loan, it may take longer for the bank to approve your loan as they will need to assess your financials and business plans more carefully.

Years Of Operation

For you to apply for a business loan, your business must have been in operation for at least two years. For some business start loans like startup loans, a minimum of six months of operation is required.

On the other hand, there is no minimum operating period required for personal loans.

Eligibility Criteria

In order to apply for a business bank loan, you must fulfill certain criteria. These include:

  • Your business must be registered and based in Singapore
  • Must be operating for at least two years (six months for certain types of loans)
  • Employee count should come within the limits set by specific financial institutions you are applying to
  • Annual turnover should not exceed $1 million
  • 30% of the shares of the business must be owned by a Singapore PR or a Singaporean

While these are the most common eligibility criteria for most banks in Singapore for small business loans, they may vary depending on the type of loan and the bank you choose.

If you are looking to get a business loan Singapore licensed money lenders offer, then choosing one from Katong Credit can be a great option.

Here are a few document requirements for applying for small business loans in Katong Credit:

  • Residential proof like the tenancy agreement
  • Current Accounting and Corporate Regulatory Authority print out
  • Identity proof for the applicant as well as shareholders
  • Bank account statements for the business
  • Proof of assets

How To Apply

It is quite easy to apply for a business loan in Singapore. You can either visit the bank branch or apply online.

The first step is to compare different banks and their products before choosing one that best suits your needs. It is important to compare the interest rates, fees, and terms of different banks before deciding on one.

You can then shortlist a few banks and approach them for quotes. Most banks will require you to submit financial documents such as your latest income tax returns, audited financial statements, bank statements, and other documents.

The bank will then assess your application and decide whether to approve it or not. If your application is successful, the money will be disbursed to your account within a few days.

If you are getting small business loans from licensed money lenders in Singapore, you can easily do it online. This is because most licensed money lenders have an online presence and you can apply for a loan on their website.

The application process is quite simple and straightforward. You just need to fill in an online form with your personal and financial details. The lender will then assess your application and get back to you within a few hours.

If your application is approved, the money will be disbursed to your account very quickly.

Whatever financial institution you choose, it is important to keep your documentation and other necessary proofs ready before getting into the process.

Fees And Terms

The financial institution you apply for usually charges a fee that is a percentage of the loan amount.

Most banks put 2% of the approved loan amount as a fee amount. This fee is the cost incurred, in addition to the effective interest rate offered.

The fee may vary between each bank and also with licensed money lenders. So you must enquire about the same before you choose to apply for a loan from any particular financial institution.

The terms of repayment also vary with each bank and moneylending agency. However, most small business loans in Singapore require guarantors to support the loan.

A guarantor is someone who agrees to make the loan repayments if the borrower is unable to do so. The guarantor can be a family member, friend, or business partner of the borrower.

Why Your Business Loan Application May Be Rejected

There are a few reasons why your business loan application may be rejected by banks and other financial institutions. You may be turned down if:

  • You have a poor credit history
  • Your business is not profitable
  • You do not have enough collateral to pledge against the loan amount
  • Your business does not have a good track record
  • You are not able to provide the required documents

Banks usually have strict eligibility criteria for approving small business loans. So it is important that you meet all the requirements before you apply for a loan.

Choose The Right Business Term Loan

If you are not able to get a business loan from a bank, you can approach licensed money lenders in Singapore. These moneylending agencies have different eligibility criteria and they may be able to approve your loan even if banks have rejected your application.

While a business loan can be a great way to improve cash flow or finance business expansion, it’s important to remember that it is a loan and needs to be repaid. So make sure you borrow only what you need and can afford to repay.

With many small business loans available in Singapore, you must compare different options before choosing one that best suits your needs. It is also important to read the terms and conditions carefully before taking a loan from any financial institution.

If you are looking for a safe and easy place to get a business loan Singapore offers, then Katong Credit is a great choice.

Contact us now to get a quote for your business needs or apply for a loan now.

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