When it comes to running your own business, there are several options you can consider in Singapore to get your business up and running. This is where you want to find sources that can offer you funds so that you can have a stress-free business.

Funding your business options

Singapore is one of the most exciting places in the world to set up your own business or entrepreneurial project. It offers low tax rates and is one of the easiest places in the world to start a business which is why a lot of practitioners come here to start their setups. But you will need to have funds as startup capital and approaching a bank would be your easiest bet. However, getting a bank loan means you start with a commitment which can be quite daunting. You should therefore consider all other options besides taking the easy way out through a bank.

Business Startup Funding Made Simple

There are at least 20 banks and organizations that offer some form of business loan if that is what you are looking for. Depending on the criteria and objective of your loan, there should be something for you in the cards. What you need is to first know what types of small business loans are available.

What are the loans available?

Below are some of the common loans you will come across in Singapore.

  1. Business Loans – The standard loan to help with your working capital. You would be able to borrow between $50,000 and $300,000 depending on your eligibility and could be between 3 to 5 years
  2. SME Micro Loan – provided by the government, it is to help local companies in the SME sector. Eligibility includes annual revenue of less than $1,000,000 or not more than 10 employees up to $100,000.
  3. SME Working Capital Loan – This is a government assisted financing scheme for local SMEs of up to $300,000.
  4. Trade Financing – This loan helps with purchasing of inventories with up to 120 days credit terms through TR or Trust Receipts
  5. Factoring / Receivables Financing – Catered for SMEs working with reliable companies with long credit terms
  6. Property Financing – Used to purchase properties for commercial or industry purposes
  7. Equipment Financing – For buying of equipment or machinery through hire purchase or leasing schemes

Important Information

When you intend to apply for a business loan, the one issue that you would be interested to know would be the interest rate. Different banks will have varying products that come with different interest rates. This could range between 3 to 6% depending on the institution. Besides that, you might need to have certain criteria like:

  1. Minimum annual revenue – usually starts from $300,000
  2. Amount maintained in bank account – Usually about $10,000
  3. Years in operations – Most bank would like this to be 2 years but 1 year might be sufficient
  4. Term or duration – Could range from 3 years and above

What’s in store for new businesses?

Banks and financial institutions are not very keen in offering unsecured financing for new setups. This means that there are very few, it not none who provide startup business loans in Singapore. This is why among the important criteria for taking a business loan is to have at least 1 or 2 years in operation. Without a proven track record, it would be virtually impossible to secure a business loan.

For businesses that have been operational for less than 2 years, the approval chances might not be very positive. However, you can try to send in your application with a sound business plan or a good cash flow projection in the near future.

If you are a new business and looking for some form of funding, getting a business loan from the bank might not be the best game plan. Instead, you should be seeking your injections from other sources like:

  1. Obtaining a personal loan
  2. Investors
  3. registered moneylenders

Debt-Financing Schemes for Businesses

As the name implies, this type of funding helps businesses to start without having to compromise on their earnings. In other words, it is the type of borrowing very similar to banks. When you take out a debt-financing scheme, you are taking a loan fully on your own where you maintain full ownership of the business. However, you must pay your debts on time regardless of whether your business is making money. Among the sources where this is available include:

Banks with business loans to consider

In Singapore, the banking sector is very much dominated by the top 3 banks and if you are an SME operating in the country, you would most likely have an account with either one or all three of them. After all, they would collectively offer the largest banking network and stability for anyone to do business with. They are:

  1. OCBC
  2. DBS Bank
  3. UOB

Take note that besides being the top 3 banks in Singapore, they have been ranked as being the safest banks in Asia as well. the following are among the products offered by these banks.

DBS Business Loan

The DBS Business Loan is an unsecured term loan offered for SMEs and companies in this sector. Its features include:

  1. You can loan up to $500,000
  2. the term loan can be up to 5 years maximum
  3. Very attractive interest rate that starts from 10.88% per annum
  4. there will be no penalty imposed for early repayment.
  5. repayment is based on equal monthly payment counted based on reducing principal

OCBC Business Loan

The OCBC Business Loan is an unsecured business term loan that offers

  1. Loan amount of up to $500,000
  2. A processing fee of 2% is applicable
  3. The loan term can be up to 5 years
  4. Attractive interest rates
  5. 3% penalty imposed for early repayment

UOB Business loan

This is known as the Biz Money Loan and is an unsecured term loan for businesses. Features include:

  1. Loan amount up to $350,000
  2. Repayment period of up to 4 years at 10.88% interest rate
  3. This loan has the highest penalty for early repayment which is at 6.88%

What to be aware of when applying for business loan?

You will notice that the interest rates between the 3 banks are quite similar which means you will be required to make your allocations for payback accordingly. However, you must know that the amount (maximum) is never guaranteed. While a bank might offer up to $500,000 of the maximum allowed, you might not get that figure. Hence, you need to be careful before applying. You must consider the early repayment penalty because if your business succeeds, you might want to clear the loan in a time earlier than scheduled.

Another major factor that you must consider is how long your company needs to be operational before you are eligible to apply for this loan. Most banks will need you to be at least 2 years old. It would be most ideal to speak to the bank staff if your business is less than 2 years and what should you do in order to improve your approval chances.

Government Offered Funds

The government of Singapore offers several options for business funding as part of its initiative to grow this sector. When you are a startup company, you can apply for these grants and schemes as long as you meet the conditions. They are as follow:

  1. Business incubator schemes
  2. Government-aided equity financing schemes
  3. Cash grants
  4. Debt financing schemes

Startup SG

Startup SG is a program by SPRING or otherwise known as the Standards, Productivity and Innovation Board Spring. This is a program that resulted from the consolidation of the previous schemed offered by SPRING. The idea behind Startup SG is to offer companies a range of resources to help them get started. Besides providing the access to funding sources, there are other initiatives like mentorship programs and such.

Business Incubation Schemes

This type of business funding comes not entirely in monetary form but in other ways like guidance and mentorship. Such schemes are common for startups where a physical space is provided to help the business start and to grow its ideas. On top of that, they get to enjoy share services and some form of financial aid to kickstart their projects. Among the initiatives offered in this include:

  1. NRF Technology Incubation Scheme
  2. Incubator Development Program
  3. Incubator for Disruptive Enterprises and Start-ups (IDEAS) Fund
  4. Fast-Track Environmental and Water Technologies Incubator Scheme (Fast-Tech)

Equity Financing Schemes

This refers to the type of business funding where investors pump capital into the business for a share in the company, usually for ownership. Startups will like this type of investment especially in the early states. Among the common equity financing for businesses are:

Startup SG Equity

This is an investment fund initiative which is offered by SPRING Seeds Capital together with SGInnovate. The government will co-invest with 11 investment partners from the private sector into new businesses that need a lot of capital. On top of that, it involves businesses that might not be commercially viable in the short term. In fact, the government will offer up to 70% of the funding for startups involved in improving existing technologies. This will be about SGD250,000. After that, a SGD1 will be invested for ever coinciding SGD1 by private investors up to SGD2,000,000.
Meanwhile, the government will invest 70% into ‘deep tech’ startups which starts at around SGD500,000 and the SGD1:SGD1 investment up to SGD4,000,000. How to be eligible for this? To apply for this, you company:

  1. must be Singapore-based
  2. have your core operations in Singapore
  3. must be a private limited company not more than 5 years
  4. have at least SGD50,000 paid-up capital
  5. and others

Business Angels Scheme

Known in short as BAS, it is organized by SPRING SEEDS Capital as well. The government agency will co-invest in startups that are involved in growth-oriented and innovative Singaporean firms. It provides pre-approved business angels with dollar-to-dollar matches up to SGD1,500,000.

Early-Stage Venture Funding Scheme

The Early-Stage Venture Funding Scheme or EVFS comes under the purview of the National Research Foundation (NRF). The NRF will invest SGD1 for every SGD1 invested by third-party investors in this co-funding scheme. Technology start-ups who qualify can approach the firms for funding of up to SGD3,000,000.

Cash Grants

Business grants across Singapore are offered by both government agencies and private firms. There are several grants involved and offered which come with their own requirements. How it works is that grants usually cover only a percentage of what the business need. Among the grants that are available are as follow:

ACE Start-Ups Scheme

ACE is one scheme that does not take any equity for offering the grant. It is operated by ACE or Action Community for Entrepreneurship. The entrepreneur will receive SGD7 for every SGD3 raised of up to SGD50,000.

Technology Enterprise Commercialization Scheme

Known as the TECS, it is a grant under the purview of the IDA or Infocomm Development Authority and SPRING Singapore. This grant helps to fund new technology startups.

iSTART: ACE Scheme

This tands for Accelerate & Catalyse Entrepreneurship where it is a grant scheme that helps to accelerate technology commercialization and to help go-to-market activities for startups using technologies that are already established.