Small and medium-sized enterprises (SMEs) make up 99% of Singapore’s businesses and employ over two-thirds of the population. Yet, securing capital can limit SMEs’ growth and sustainability. Singapore’s SMEs can get finance through micro loans, but many business owners don’t know what they are or how they can help. This article discusses Singapore micro loans and how they benefit small enterprises.
What Are Micro Loans?
A microloan is a tiny loan made available to enterprises with a low to moderate annual revenue that have a hard time securing funding from larger institutions like banks. Microloans are more accessible than other types of business loan because they have smaller required loan amounts, sometimes don’t demand collateral, and don’t necessitate a high credit score. Microfinance institutions, NGOs, and government agencies are common sources for micro loans.
Financial institutions like banks and microfinance organisations as well as government-backed programs in Singapore all provide access to microloans. Microloans in Singapore can go up to a maximum of $100,000, and the payback period might last for as long as three years. Microloans are short-term loans designed to assist small and medium-sized businesses (SMEs) with meeting their working capital requirements, making necessary equipment purchases, or funding other similar endeavors.
Benefits of Micro Loans for Small Businesses in Singapore
- Microloans are often less difficult to obtain than conventional business loans because of the smaller minimum loan amounts and the possibility that collateral or a high credit score are not required. Given their accessibility and low interest rates, microloans are a great choice for small and medium-sized enterprises (SMEs) who have trouble securing larger loans.
- Microloans often have a short approval process, with some lenders even giving same-day approval. Small and medium-sized enterprises (SMEs) may find this helpful if they need money fast to deal with unforeseen costs or seize an opportunity.
- Interest Rates May Be Lower: Since microloans are sometimes supplied by non-profits or government agencies, the interest rates may be lower than those for conventional business loans. This has the potential to increase cash flow and lower borrowing costs for small and medium-sized businesses.
- Microloans offer more leeway in terms of payback terms and collateral requirements than larger, more conventional company loans. This can be helpful for small and medium-sized businesses who want more leeway in their financing terms.
- Non-profits and government entities with a focus on helping small enterprises are common sources of microloans. This can be helpful for small and medium-sized enterprises (SMEs) because some of these lenders may also offer consulting services, educational programs, and chances to expand professional contacts.
- Increased Access to Traditional Business Loans: Microloans can help small and medium-sized enterprises (SMEs) establish a credit history, increasing their future loan eligibility for larger, more conventional company loans. This is crucial for firms with no credit history or a short one to get started.
- Several microlenders provide business consultancy services, which can be useful for small and medium-sized enterprises (SMEs) looking to expand and enhance their operations. Services in the areas of finance, advertising, and running the business may be provided.
Types of Micro Loans in Singapore
Singapore micro loans include:
- The government-backed SME Micro Loan helps SMEs with cash flow. Maximum loan amount is $100,000, with a three-year repayment period. The SME Micro Loan requires 30% local shareholding and a sales turnover of less than $10 million.
- The Micro Enterprise Scheme provides working capital loans to micro-enterprises. Maximum loan amount is $100,000, with a three-year repayment period. Micro-enterprises have 10 or fewer employees and a revenue of less than $1 million.
- The SME Working Capital Loan helps SMEs with their working capital needs. Maximum loan amount is $1 million, with a five-year repayment period. The SME Working Capital Loan requires 30% local shareholding and a sales turnover of less than $100 million.
- The Bridging Loan helps SMEs with short-term finance needs. Maximum loan amount is $5 million, with a two-year repayment period. The Bridging Loan requires Firms to have 30% local shareholding and a sales turnover of less than $100 million.
- The Venture Debt Programme provides working funding to early-stage enterprises. Up to $5 million can be borrowed over five years. The Venture Debt Programme accepts startups with at least 30% local shareholding and annual sales volume under $100 million.
How to Apply for a Micro Loan in Singapore
SME applicants for micro loans in Singapore must normally give the following information:
- Business Registration Number, Business Plan, and Financial Statements: SMEs must present business information, including their registration number.
- Loan Amount: SMEs must state their loan needs and how they will use the funds.
- Collateral: Micro lenders may need property or inventory to secure the loan.
- Credit History: SMEs may be compelled to disclose their credit history, including their credit score and current debts.
- Personal Information: SMEs may be needed to disclose personal information regarding business owners, such as income statements and identification cards.
Banks, microfinance institutions, and government agencies provide micro loans to SMEs. Businesses should examine lenders’ interest rates, fees, and payback conditions to find the best fit.
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To sum up, microloans can be an efficient source of funding for small enterprises in Singapore that have trouble obtaining bank loans. Microloans are advantageous in many ways, including being fast to process, having cheap interest rates, and being customisable. Small and medium-sized enterprises (SMEs) have access to a wide range of microloan options from a wide variety of financial institutions (FIs) and the government.
Before to choosing a microlender, Businesses should assess their funding requirements and shop around for the best interest rate, fees, and payback conditions. Due in large part to the availability of microloans, small and medium-sized enterprises (SMEs) in Singapore have been able to expand and thrive.
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