Although one research report said that 81 per cent of applicants for SME loans failed in securing credit, Small and medium enterprises (SME) business-owners can access least 4 different types of loans targeted at SMEs.
One well-known scheme among the SME loans is the SME Micro Loan scheme.
SME Micro Loan is targeted at small companies that are just starting and offers funding of up to $100,000 to help business owners better manage daily operations and cashflow. To make the loan more accessible to new companies set up in three years or less, Enterprise Singapore shares the risk of loan defaults with Participating Financial Institutions in the event of company insolvency.
Enterprise Singapore is a statutory board under the Ministry of Trade and Industry (MTI). It was formed on 1 April 2018 to support Singapore SMEs development, upgrade capabilities, innovate, transform, and internationalise. It also supports the growth of Singapore as a trading and startup hub, and continues to be the national standards and accreditation body.
The scope of the SME Micro Loan is to support daily operations, and automating and upgrading factory and equipment. Applicants can get a loan quantum of up to $100,000, and have a loan repayment period of up to 4 years.
Companies applying for the SME micro loan should be registered and operating in Singapore, have at least 30% local shareholding, and an annual sales of up to S$1 million or have up to 10 employees.
Different financial institutions offer the SME micro loan with different interest rates and it is subject to their assessments of risks involved. But realistically, business owners can expect the interest rate on SME Micro Loan to hover around 6 – 8.75% per annum (effective interest rate). In Singapore, there are 9 financial institutions that are participating in this SME Micro Loan scheme.
In order to get the best interest rate on SME Micro Loan, business owners need to send in an application to every financial institution and view their offer. However, most SMEs often cannot afford the luxury of time to do that, and this is where iCompareLoan’s team can come in to help business owners compare all the financial institutions’ to help you get the best deal.
Lesser known among SME Loans is the Working Capital Loan for small business owners.
The objective of the SME Working Capital Loan is to give business owners greater access to unsecured working capital loans of up to $300,000. Launched in June 2016, the loan acts as an additional financing option by helping eligible companies cope with larger working capital and cash flow needs.
Enterprise Singapore partners Participating Financial Institutions and co-shares 50% of loan default risks in the event of company insolvency, but the loan programme will only be available till 31 May 2019. The best way to pre-assess your eligibility to access this loan before it expires is to speak to a mortgage consultant.
Applicants who are successful with their Working Capital Loan will have up to 5 years to repay their loan. Different financial institutions offer the SME micro loan with different interest rates and it is subject to their assessments of risks involved.
To be eligible for the SME Working Capital Loan companies should be registered and operating in Singapore, have at least 30% local shareholding, with group annual sales of up to S$100 million or group employment size of not more than 200 employees. Annual sales turnover and employment size will be computed on a group basis (i.e. all levels for corporate shareholders holding > 50% of total shareholding of the applicant company and any subsequent corporate parents, and subsidiaries all levels down).
Besides these 2 loans there are other SME Loans and insurances owners of small enterprises can have access to, including alternative venture debt financing for innovative, high-growth companies of up to S$5 million for their business expansion; and financing of up to S$15 million to purchase equipment, machines or selected factory properties.
As a high number of applications for SME Loans are unsuccessful, it is important for passionate business-owners to work with trusted hands, and people who know the industry. Personal loans should not be off the list of considerations if they are really passionate about their business.
by: Hitesh Shah / Contributor iCompareLoan
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