What is a start-up business loan?
Sometimes called a “first business loan”, a start-up business loan in Singapore is akin to a mini or micro version of a regular business loan. It offers borrowers a smaller loan cap and is considerably easier to obtain as compared to a regular business loan.
To put things into perspective, business owners only need to be in operation for a few months and do not need a strong financial history to take on this particular type of loan.
Keen on getting a start-up business loan in Singapore? We have gathered the five best places where you can obtain such loans below. Find out which one is your best bet.
5 best places to get a start-up business loan in Singapore
1. Government-backed loans
Do you know that small business owners can tap on government-assisted loans to weather economic uncertainties and finance operational cash flow needs?
With the help of government agencies like Enterprise Singapore (ESG), certain banks are now offering government-backed small business loans to help SMEs gain access to cheaper financing. For such loans, the government acts as a partial guarantor and shoulders up to 70% risk-share in a bid to reduce the risk for banks.
Bear in mind that assistance from the Government doesn’t mean you are free from liabilities. You will still be obliged to pay off your loan according to your loan repayment schedule. This means that penalty charges may be levied for late payments and if your business continues to default on payments, legal action may be taken.
Remember, the ones granting you these start-up business loans in Singapore are the banks after all.
2. Traditional banks
Traditional banks like DBS, OCBC, and UOB could be options if you are looking to tap on secure and trusted resources to grow your start-up, upgrade equipment, or support your daily operational cash flow.
In general, traditional banks aim to offer business owners competitive interest rates to help them maximise their savings. Banks offer both secured and unsecured business loans. For the latter, no collateral is required — you will instead need an eligible Singaporean or Singapore Permanent Resident to be your loan guarantor.
However, traditional banks tend to be more conservative in their lending practices. This translates to a longer time needed for approvals and relatively stricter qualifying criteria. Therefore, small business owners are left with few places to obtain the working capital they need.
3. Digital financing platforms/financial services providers
Digital financing platforms provide businesses — especially small businesses — with an array of online financing solutions that allow them to grow and thrive. Unlike banks, digital financing platforms are open to most, if not all, registered businesses. For some of these platforms, funds are raised via investors like venture capitalists or angel investors.
Here are some examples and their benefits:
Aspire doesn’t charge early repayment penalties, so if you can repay your loan early, Aspire may even extend an interest discount to you. This is a huge departure from banks, which tend to apply early repayment fees to both personal and business loans.
With Validus, small business owners can apply for different types of financing according to their needs, from S$100,000 up to a whopping S$1 million. Furthermore, no collateral is needed, even if you’re approved for its maximum loan limit.
Minterest’s Working Capital Loan
This loan from Minterest grants you access to up to S$5,000,000 of cash flow, collateral-free, if you are eligible. This digital investment platform lets you raise debt capital by linking your business to the right investors.
4. Fundraising firms and platforms
Fundraising platforms work in similar ways to big-name crowdfunding websites like Kickstarter and Indiegogo. However, the difference lies in that you’re seeking peer-to-peer (P2P) lending for your small business or start-up instead of a cool product or project.
Here are some examples:
Funding Societies is one of the largest and most well-funded P2P lending platforms in Southeast Asia. From business term loans to invoice financing, SMEs can crowdfund these via Funding Societies. If you have an excellent credit rating, you can expect to secure business loans of up to S$1.5 million.
FundedHere is a true blue Singaporean equity and debt crowdfunding platform that has to abide by MAS regulations. Start-ups that use the platform to fund and grow their young, promising businesses can pick from either equity or loan as their preferred funding option. FundedHere will then match your start-up with the right investors.
However, do take note that they have stringent standards — only 3-5% of the companies assessed eventually get listed on the platform. That also explains why around 66% of campaigns listed on the FundedHere platform have had successful fundraising campaigns!
5. Licensed money lenders
Did you know that licensed money lenders are also a good option for small business owners looking to secure a start-up business loan in Singapore? You can get quotes quickly on different money lenders’ 24-hour online platforms for your loans and compare the differences in a matter of minutes.
Loan approval is quick as well. Your application has the potential to get approved in as quick as a day.
While business loans are generally larger than personal loans, the upper limit depends on your financial status, credit history, and credit utilisation. You will also need to provide documentation such as proof of ownership, your business account balance, and even business plans.
If you repay your loans on time (to avoid incurring late charges and fees), applying for a business loan with a licensed money lender is actually one of the fastest and easiest options in Singapore to get the cash required to fund your operations and help your business grow.
Looking for a start-up business loan in Singapore? At MM Credit, the loan application process is seamless, quick, and easy, with fast loan approval and disbursement. Reach out to us now!