Business organizations, like SMEs, depend on financial institutions, particularly banks for different types of business loans, whether to launch a new company or grow their existing business. Among business loans, a start-up loan is smaller than a standard business loan and is usually referred to as the first business loan.
With such loans, new business owners are helped by banks to meet their additional working capital needs and cover cash-flow management, startup costs for business growth, and operational costs. You can also acquire business loans for other needs like adding inventory and purchasing machinery, property, or equipment.
The costs of incorporating a business, acquiring licenses, marketing materials, insurance, facilities, equipment, and recruiting the required staff are all covered by funding for start-ups. With the startup loan Singapore offers, SMEs can fund the production, marketing and distribution of products and services.
It offers SMEs financial assistance ranging from government grants, subsidies and programmes to micro and venture loans, temporary bridging loans and start-up loans. Among them, SME startup business loans are the most significant and preferred ones.
What Are Startup Business Loans in Singapore?
A new variant of the conventional business loan with a maximum and minimum loan amount of S$500,000 and S$100,000 is a startup business loan in Singapore. For a small and medium-based business, which is a startup, a normal business loan may cost more in terms of a high-interest rate.
To help them get off to a successful start, this type of business loan offers startup enterprises, whether micro, small, or medium ones, a loan of a maximum of S$500,000 and at lower interest rates. Your startup will have enough working capital with this funding to meet its day-to-day operations.
SME start-up loans are particularly beneficial to micro and small business entrepreneurs because they are offered at low-interest rates and with flexible repayment options. Nevertheless, your organisation do not require a long financial history or a long period of being in business to qualify for this loan.
What Makes SMEs Apply for Startup Loans in Singapore?
Most SMEs consider applying for a startup loan for the reasons such as:
1. It helps them increase their cash flow
You should ensure that your company is lucrative enough to meet its expenses like operating expenses, loan payments, salaries, electricity costs, insurance, taxes and rent. Your business may experience a brief period of unpredictable cash flow after meeting its financial obligations.
A small firm can increase cash flow by using the business loan to expand, recruit people, acquire new equipment, pay one-time expenses, reduce operating costs, upgrade workplace amenities, purchase inventory, and more.
You can improve your company’s cash flow during turbulent times by obtaining a business startup loan at competitive interest and a flexible payback schedule. This loan can provide a safety net when you encounter unplanned utility expenditures or logistical issues that could interfere with your normal business operations.
2. It is collateral-free
Typically, banks and other financial organisations offer collateral-free business loans. Small business owners find it very beneficial in the startup stage of operating a business.
3. Develop your business
For any SME business, it is essential to make use of growth opportunities. Nevertheless, cash-strapped businesses find it difficult to do so. Startup business loans assist you in making quick investments that ultimately lead to the growth of your company. An SME microloan gives you enough money to meet your operating costs and get through the competition.
4. Use to buy equipment and inventory
You can grow your small business by making an investment in new machinery or equipment that promises improved performance and longevity. You may be able to get the money you need for new vehicles, additional technical personnel, and cutting-edge equipment with a business startup loan.
You may need to lease commercial property to accommodate more machinery as a part of expanding your business operations, and the present business location does not have much space to fit in additional machines. With a business loan, you can cover the initial expenses.
Know How to Apply for a Loan for a New Business
Apply for a startup business loan
You can request a business loan by submitting a completed loan application through a recognized web portal like ‘MyInfo Business’ or ACRA, which enables the lending bank to access the relevant financial records of your company. Being a statutory board, ACRA or Accounting and Corporate Regulatory Authority have public accountants, corporate service providers, and commercial entities under the regulation of the Singaporean government.
You may also need to provide essential documents such as your company’s most recent bank statements and financial records.
Keep track of your loan application
Submit and monitor your application: Once you have submitted your filled-in loan application and the necessary copies of the documents, you can track and know the status of your startup loan. For instance, DBS Bank’s business banking software, DBS IDEAL makes it simple to keep track of the progress of your business loan application.
Keep your guarantors informed
You need guarantors who have the minimum income the lending bank requires and who are between the ages of 21 and 62. A permanent resident of Singapore should be one of the guarantors. They have to back your application for a loan for a new business.
Review the loan application offer
If your startup loan application is accepted, you will get an offer for a business loan, which you need to review before accepting it.
Receive the notification
The bank will send you a notification as soon as the loan is disbursed.
Requirements for a Start-Up Business Loan
- Your SME company must be Singapore registered and have been in operation for at least six months.
- A Singaporean or resident should own at least 30% of the company’s shares.
- Your company should have not more than 10 employees and an annual turnover not exceeding SGD 1 million.
- You will require guarantors, one of whom must be a citizen or resident of Singapore.
In conclusion, startup business loans help your SME enterprise in Singapore to have easy access to money to cover its ongoing operational costs. When asking for a loan, you must have your business plan ready that outlines how your company will prosper to repay the loan.