COVID-19 and the consequent measures for the Circuit Breaker are causing revenue streams to dry up and threaten many SMEs. Your business may face difficulties with low earnings since the beginning of the year to continue paying suppliers, employees, rents, or struggles to keep it afloat.

A loan from a company can help. The government has provided two special assistance loan packages, led by Enterprise Singapore, to supply businesses with the finances they must continue to operate. Local banks and financial institutions (FIs) offer a range of installment loans and other credit instruments.

Would you please read about our recommendations on the best SME loans to help your company achieve this in Singapore?

The Singapore government announces the SME Working Capital and the Temporary Bridging Loan under the Solidarity Budget to help cope with the effect of COVID-19.

These two loans are the first thing SMEs seeking relief should look at:

1. a) Enterprise Singapore risk share of 90% (which reduces loans risk and increases the probability of acceptance);
2. b) the option for the first 12 months of the loan to postpone principal repayment; (which helps businesses manage cash flow)

In addition, you can enjoy an annual interest rate of just 5% when you apply under the Temporary Bridging Loan.

You could check out these three SME loans if your business needs only a small loan, say, under S$200,000.

OCBC’s Business First Loan

 With a maximum tenure of 4 years, OCBC’s First Business Loan provides up to S$100,000. This loan does not require any paperwork or collateral, but you must provide at least one Guarantor age 21 and above (Singaporean or PR 21 and annual income of at least S$30,000).

UOB SME Loan

 The UOB SME Loan, which allows to borrow up to S$100,000, is also similar. The maximum period for reimbursement is, however, lower, at 3 years. You have to be at least one year old, 30% local, and more than 50% private equity to qualify. Your company should also not have more than 200 employees and have less than 100 million S$ annual turnovers.

DBS Digital Bank Loan

 In the meantime, you can borrow up to S$200,000 from the DBS Digital Bank loan, with repayment periods of up to 5 years. Therefore, you can opt to pay your interest charges only during your first 12 months of loan as the loan is offered under the resilience budget. Your business in Singapore should be registered and physically active and owned locally at least 30%. This loan is not subject to collateral.

Standard Chartered Business Instalment Loan

The Standard Chartered Business Instalment Loan allows you to borrow free collateral from S$ 70,000 to S$ 300,000 and repay the loan for a period of 1 to 3 years. This loan will vary in its effective interest rate but is currently capped at a maximum of 11%. Your business needs to be registered in Singapore and operate for a period of at least three years at an annual minimum of S$750,000. Singaporeans or PRs must own at least 50% of the company.

UOB BizMoney Loan

 The BizMoney Loan offers slightly more corporate capital with a loan cap of up to S$350,000. The reimbursement period is extended up to five years. At present, the interest on this loan is 10,88% annually, and the fee is 2% for installations (a.k.a processing fee). Note that an annual fee of S$500 is also available. This loan is for registered and operating in Singapore for at least three years, exclusive ownerships, partnerships, and private limited companies, respectively.

Maybank Business Term Loan

 The Maybank Business Term Loan can be suitable if you search for a half a million business loan. The loan is paid out up to 500,000 S$ and is reimbursed for loans of up to five years. To qualify, you must hold your company locally and have a minimum annual turnover of at least S$300000 for at least 30%, established for at least 3 years.

Alternative financing options for SMEs

If you do not qualify for the SME mentioned above loans, there are other ways to secure the finances that you have to expand or maintain your company. You might think:

• Invoice factoring
• Credit lines
• Personal installment loans

Factoring is a tool for corporate financing, which handles outstanding cash bills.

How it works: You sell unpaid invoices to a third party that pays some of the value of your invoices. The company buying your invoices takes charge of collecting the payments for the invoice.

You can collect up to 90% of the value of your invoices in cash by adding invoices. Many financial institutions offer this option (is it also sometimes known as receivables finance). Although this could be an excellent way to get cash quickly, understand that a portion of the revenue you are sacrificing early. In addition, for unpaid or late invoices, you may still be liable.

A credit line is another option for companies looking for capital.

How it works: This allows the company to draw on a loan line — to a fixed limit. You can use the credit line funds according to your needs, and you only pay interest on the amount you have used. The advantage of credit line lines is their flexibility. Debt restructuring options are also available from the credit line to help you manage your debt.

Don’t overlook personal installment loans, last but not least. They offer an easy and fast way to obtain the funds you need for a dry business or pay your suppliers to remain in the industry. You can usually borrow your monthly salary up to 6-8 times, and you can choose a reimbursement period according to your schedule.

You probably heard the old saying that to make money, you must spend, and this is true. You have to invest in growth expenses such as equipment, advertising, and property if you want your business to grow.

The problem is that besides running your business, managing all these costs can be difficult, and paying for your business needs beforehand is often impossible until your business grows more. This is a circular problem. A circular problem. You can’t grow without investing, but how can you invest in your business while maintaining money for operational costs within your company?

Small business loans can be the solution. Whereas debt can appear scary for small business owners, a loan can help you finance changes in your company that will lead to high investment returns.

There are 5 reasons why your company may need a loan:

1. Expansion

Perhaps the main reason a little company loan is taken into account is investing in expanding your business. If your business is booming, your business will continue to grow and will not reduce your profits.

Naturally, further economic growth costs are numerous, such as advertising, new property, construction renovation, and increasing personnel dimensions. It is doubtful that all of the funds that keep your business in operation will be covered by the cash on hand.

Loans can help you to cover the costs of expanding your business without using your business funds, so you can impress customers as you grow.

2. Inventory

Inventory is one of the greatest and hardest expenses to manage in many industries. The problem is that before your customers can purchase the products you transport, you must invest and offset the cost. You will need to expand and replenish your stock once it is operational to maintain requests and provide your customers with better options. This is even more difficult when a seasonal inventory is required for your business, such as winter coats.

You can keep ahead of trends and client demand without compromising your cash flow by taking a loan to compensate inventory costs.

3. Cash Flow

For a small company, cash flow is always a challenge and can be a problem when dealing with customers who do not pay for services or have an inventory that you cannot sell, which has to be moved into new products. The problems are still worse if you regularly contribute to your inventory, personnel, utilities, and rent or mortgage costs.

Short-term loans provide money to help your business stay on the floor when its profits are low and pay for your regular operating expenses. You can continue to make new customers generate revenue while compensating for other losses by keeping money flowing through your company.

4. Equipment

Every company has facilities that your customers need, like a treadmill, for example, to carry out their work or equipment. Equipment is costly and, over time, wears down and gets out of date.

Unplanned expenditures such as repair or replacement of broken equipment may break your budget, and running without the equipment is not an option sometimes. Damaged or defective equipment can also increase your liability, drive customers away who require reliable service, and cost you more long-term money.

Loans can help you manage equipment costs that enable you to perform your job and provide your clients with a better experience. You can also keep your company updated with new technology that enhances your services and customer interaction.

5. To Improve Terms on a Larger Loan

It may first be intelligent to make a smaller loan, especially when your business has no credit history if you plan on requiring a larger loan in the future for business expansion or upgrading equipment.

The first loan you take out for your business is likely to have less than ideal terms since your credit has not yet been built, and you will hurt large purchases essential to your business at higher interest rates.

One approach to ensuring that a large, necessary loan comes into good shape is a small loan that you can quickly repay before a large one is needed. It may mean that you can make a better deal if you pay off the small loan soon if you need a larger loan in the future.

Consider using a small piece of equipment with your first business loan that makes life easier but does not break the budget. Then you’ll have a strong credit history to help you qualify for better rates when you have to purchase something big.

No small company should accept unnecessary debt, but sometimes a loan is the right decision to keep your company afloat or improve the financial situation. Weigh your credit costs and benefits, but if you can significantly increase your income, it could be time to consider your loan opportunity.

Payment loans are the most popular consumer loans.

The loans of these kinds are given in a single lump sum by a lender, then paid in monthly payments over time. Mortgages, student loans, car loans, and personal loans are the most popular consumer installment loan products. Generally, lenders use the credit score and the income debt-to-income ratio of consumers to determine their qualified interest rate and loan amounts.

The credits can be secured as installment loans or not guaranteed. Collateral for secured loans will allow the lender to seize the asset secured to the borrower if the loan is not repaid. Unsecured lending is not collateral secured, and if a borrower default is found, it is more difficult for lenders to recoup their losses. More loans and specific purchase loans such as mortgages and auto loans are generally secured.

Mortgages

 Hypothecs are used to finance domestic purchases by consumers. Benefits are designed to ensure that household buying is accessible by spreading the price over many years, as most homes cost far more than the average person does in a year. The 30-year fixed-rate mortgage is the most popular home loan. In a 30-year process called amortization, this loan is paid in a fixed monthly installment. There are also offered mortgages with durations of 15 to 20 years but are considerably less frequent—since they spend much more monthly than the 30-year variation.

Depending on which agency you sponsor, the mortgage programs also differ. The three main types of mortgages are conventional, supported by Fannie Mae and Freddie Mac; FHA loans for low-income or low-credit persons backed by Federal Housing Authority; and VA loans funded by Veterans Affairs veterans. FHA lending is suitable for people who want to lower down payments, while conventional borrowing is more affordable for those who pay down over 20%.

Student Loans

 Most student borrowers opt for student loans with fixed rates and payments only a few months after graduation. The two major types of student borrowing are subsidized borrowing and non-subsidized borrowing. The supported version is intended for students with the most significant financial needs since, while the student is still in school, the government pays interest on the loan.

The average student borrower can obtain federal non-subsidized loans regardless of financial circumstances. Bachelor students still relying on their parent(s) may borrow up to a total of S$31,000 in their career with a S$23,000 limit on non-subsidized credit. For all borrowers, federal loans have the same rate of interest.

Become students opt for loans from private firms because of the caps on federal loans. The interest rate for personal loans is often somewhat lower than for federal loans, although the rates depend on each individual’s financial situation. According to the current market interest rate, private lenders’ student loans can also be borrowed with a varying interest rate, meaning an increase or decrease in interest payments. Personal loan limits vary from creditor to creditor.

Personal Loans

 The most versatile kind of loan on the consumer lending market is a personal loan. Suppose for a specific purpose, mortgages, automobile loans, and student loans must be used. In that case, personal loans may be lent to debt consolidation, daily expenses, holidays, or credit construction, among other things. According to their uses, personal loans are subject to different terms and conditions, although term periods are usually less than 10 years, and the maximum amount is typically limited to S$100,000.

An existing credit card indebtedness is commonly used for consolidating a personal loan. When the balance is not paid, the interest on the credit card can quickly accumulate, making personal loans a more affordable way to pay off the debt. Personal loans, depending on the lender, can be secured or unsecured. Collateral loans are not secured, as lenders are riskier to make loans at higher interest rates.

Auto Loans

 Automotive loans can be used to buy new or used vehicles. The duration of a car loan is typically between 24 months and 60 months, but longer loans of 72 or 84 months become more common.

Most lenders limit the term to 48 or 60 months for older auto purchases because used automobiles are riskier to finance. This is because, as opposed to home value, the car’s value usually decreases over time. Then, if the financed car is also used as collateral, lenders must ensure that its losses are covered sufficiently if the borrower fails.

Due to the rapidly decreasing value of cars, it is best for auto loans to pay shorter terms and larger down payments. It’s easy to find borrowers “upside-down” in an older used car—that they owe more of their loan than their car is worth currently. It’s important not to spend money on a repayment schedule too long and assess how quickly your vehicle depreciates. To avoid this situation. The impact of default can be severe as many creditors demand that the loan be reimbursed even after default and forfeiture of assets.

In Singapore, you can receive a personal loan technically without the standard income test. This means that you can use other documents to prove your ability to take the loan on board and repay quickly if you don’t have definitive proof of income, like payslips or the CPF contribution statement.

For example, you can still use your employment letter to support your loan request if you have just started a new job and have not yet received the payslip or contributed to the CPF.

There might also be other situations in which you cannot get a leaflet. 

Due to your work or administration’s nature, they may be inevitable.

For example, without issuing a payslip, some older companies can pay their employer’s cash.

Here are some cases where you might not have a payslip:

• Self-employed, including a taxi or private-hire driver
• A freelancer
• A contract worker
• Your salary is paid in cash

If you fall into these employment categories, either an employment contract or a letter of offer will suffice. We will talk about other documents that can be used below.

Submit Alternative Documents as Proof of Income

 To ensure the loan is reimbursable, licensed money lenders still need proof of revenue. Therefore, many Singaporean licensed financial lenders, including Crawford, accept other documents such as income tax returns.

Income Tax Statements

 You can still obtain a personal loan in Singapore using your income tax returns without definitive proof of income.

Taxable revenue sources include employment revenue, businesses, investments, and rental payments.

You can also provide evidence of revenue from non-taxable sources, as well as tax income statements, to increase your chances of loan approval, such as:

• In Singapore, Alimony is not taxable. So you can include proof for your maintenance in your loan application if you receive regular payments from your previous spouse. Note that at any point in the application process, some creditors could ask you for court documents.
• Foreign-sourced income. You will not have to pay tax if you do not receive this income through a partnership in Singapore. If you are a freelancer with foreign customers, you may use this income proof to apply for your loan.

Notice of Assessment (NOA)

 Your appraisal notice is your bill for taxes. It contains all the information about your income as a charge and your total taxes.

As a person, after submitting your income tax, you will get your NOA.

So, how can you apply for your NOA:

• Log in with your SingPass details to myTax Portal IRAS.
• Make a renewal with the Revenue House Taxpayer and Business Centre.

So what’s the difference between income tax declarations and the NOA?

After paying all your taxes, NOA is the tax bill you get. This means that you do not have other sources of income that cannot be taxed and that can increase your revenue.

You may make no CPF contributions if you only recently were employed. You may not have even received your first paycheck. In this case, some lenders of licensed money will only accept your letter of employment or confirmation.

Situational in which an employment contract is used as evidence includes revenue:

• First-time employees
• foreigners in Singapore who only began to work
• People getting back to the workforce after some time

You should make sure your contract of employment is as follows: 

• Features the company’s letterhead
• Includes your commencement date of employment
• Includes your full name and identification number
• Includes your salary information
• Is dated correctly
• It is signed by you and your employer
• Has the company stamp

Keep Your Credit Score Healthy

 Another way you can get a personal loan in Singapore as proof of income is to maintain a healthy loan score. This must, of course, be combined with other documents that we have shared above. You will not get the credit you need, a healthy credit score alone. However, this can contribute to your odds.

This is because you show your credit value whether you are a loanable customer or not. If your credit rating is high, banks and licensed lenders will more likely approve your loan.

The following affect your credit score: usage pattern, recent credit, crime data, credit history, credit availability, and the inquiry activity.

Bad loans range from 1,000 to 1,723 in Singapore. Those with credit values are most likely to default on their loans within the range. That also means that they have little chance of receiving a personal loan.

Including factors causing poor credit rates:

• A very short or non-existent credit history
• unable to pay your previous loans or bills in good time
• Owing to a great deal of money that you’re unable to repay
• There are many available loan options.
• Multiple applications for loans in a short time.

Find out more here about what your credit score might have brought down.

Therefore, it’s now time to correct if your credit score is not so good due to previous financial slips.

Here is how you can improve your credit value:

• Build your credit history by applying for a standard credit card. This tactic helps you create your credit history and demonstrate to creditors that you can pay on time. 
• Check your credit report frequently. System errors may show repayment problems or credit problems, even if your finances are careful. Thus, before applying for a loan, it is best to correct these errors. 
• Try not to miss or delay any payments. Please get in touch with a credit consulting agency for help if there is difficulty managing your expenses.
• Don’t over-utilize your credit card because it demonstrates a lack of capacity for responsible management of your finances.
• Don’t take too much credit than what you can repay. Loan default is a red flag because you can do it again once. Set priorities and only borrow within your resources.
• Reduce your active loans by consolidating them. Consider options such as an equity change that will help you improve the management of your refunds, such as a lower interest rate on your credit card bills and a debt consolidation plan.

Don’t spend heaps of loan applications within a short time frame Because it signals that you are hungry for credit to financial institutions. Apply once your first application is not accepted only for the second time.

Bad credit can make it harder for mainstream lenders such as banks to obtain a business loan. Fortunately, it is possible to remedy – and improve your credit score – your bad credit to facilitate financing for the future.

Why your business might have bad credit

Bad lending means that your business’s credit score is low enough for lenders to be at risk of lending you money.

Your loan score (also known as your credit rating) is a number that shows how worthy your company is, based on your credit history.

The higher the score, the higher the chance that a business loan will be approved. You could also benefit from improved rates, higher credit limits, and a broader range.

Reasons for bad credit

If you have, for instance, a lender could consider your business as bad credit:

• Credit repayments have been missed or are late.
• failed to meet the terms of a credit agreement
• you’ve gone over your credit limit
• had CCJs (county court judgments) issued against you
• declared bankruptcy or insolvency
• a previous company was liquidated (wound up)

It may also be challenging to secure a loan for your business if your senior managers:

• Have an individual voluntary (IVA) or debt management plan personal record,
• Other failed companies were associated with

What happens when you apply for credit?

If a loan, credit card, mortgage, or vehicle finance is used for any loan by your company, the lender requests your credit report from a credit benchmark agency (CRA).

CRAs are organizations that hold and apply for loans over time to maintain information.

Lenders use this information to determine if the credit is to be granted and, if so, in what terms and conditions.

Experian, TransUnion, and Equifax are the three major CRAs in the UK. You collect and report on your company’s credit history, which they update every month and last for six years.

They examine your company’s public data to determine whether it has a healthy amount of money in its net worth.

The CRA has digits used to give your business a credit score (for instance, 0–999 or 0–700). They are usually grouped into excellent, good, fair, inferior categories.

How to find your credit score?

Check with all three credit reference agencies before you apply for credit.

You must know your business credit value is lacking. If you apply for a loan and are turned down, you might be disappointed. You could not do this:

• put money into your company
• whether or not there is a short-term cash flow problem
• obtain credit with a new supplier

You usually have to check your credit value for free, although, as explained below, you may have to pay to access the complete report.

• My Business Profile from Experian offers a free three-month trial, after which you must pay S$46.62 (plus VAT) per month to access your entire business credit report and credit score.
• Equifax provides a free 30-day trial, after which you must pay S$14.83 per month to access your complete credit report.
• Other services exist, such as checkmyfile, which claims to be the UK’s only multi-agency credit report provider. Its report includes data from all three SG credit reference agencies and is free for the first 30 days, then S$27.97 per month.

Loans for businesses with bad credit

You can fight to take the money from conventional loaners, like banks, if your business has a wrong credit value. If a loan is given to you, it can give you fewer fees and charge you more.

You may instead have to look for a bad loan from a company. Many lenders are now providing these loans, particularly for companies with good turnover or valuable assets.

The terms and the eligibility criteria for these loans vary. Please also remember that the interest and fees may be considerably higher than a standard loan. That said, if your business (or you personally) has a bad credit score, they may be a helpful option.

How to get a bad credit business loan?

If you decide to take out a bad loan, identify the best options and determine how much you have to pay back.

You can adequately compare borrowing costs when you know the annual percentage rate (APR) of each lousy credit company loan you are offered. All costs, charges, and interest factors.

Before requesting a bad credit loan, you must seek advice from your accountant. It can give you a complete idea of the loan cost and its impact on your cash flow.

Borrowers need a guarantee for some lousy credit business loans. Others don’t, but typically they’re costlier. A good turnover or precious business assets can facilitate the obtaining of a bad loan.