In the comprehensive SME financing Singapore guide, you will see practical information on how to ensure an SME loan easily.
You can compare over 20+ banks & financial institutions SME business loan products and view all your eligible funding options immediately!
Use our free loan assessment tool to review your business indicative loan eligibility and see all available financing options instantly.
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From the chart showing total loans to businesses extended by banks in Singapore, the data seems to show an uptick in business loans throughout 2018 to the 1st quarter of 2019.
From the chart showing total loans to businesses extended by banks in Singapore, the data seems to show an uptick in business loans throughout 2018 to the 1st quarter of 2019.
Though, Singapore’s economic figures got a beating in the 2nd quarter of 2019 on the backdrop of the US-China trade conflict. As a reliant trade economy, Singapore’s GDP narrowed by 3.4% in the 2nd quarter of 2019 from the previous quarter, the biggest decline since 2012.
If the macroeconomy continues to slow, banks might taper lending to businesses. SMEs will normally experience the credit crunch first, due to perceived higher credit risk profile.
When Should I Apply For SME Financing?
There is an old saying:
“A bank is a place that will lend you money if you can prove that you don’t need it.”
That saying is correct. The most suitable time to apply for SME financing is when you can prove that you don’t require it. The most critical time to seek funding is when you need it the most.
Sadly.
Numerous SME owners will only start sourcing for financing when they face a cash flow crisis.
Many of these applications will regrettably be rejected. Banks are in this business of managing risk and will not indiscriminately offer SME financing to companies with no clear proof of repayment ability.
Hence, it is always a great practice to plan ahead and start initiating your loan applications when your business is in its best financial shape.
Where can I apply for SME financing here in Singapore?
Bank
Banks will most surely be the first port of call for most SMEs when it comes to financing.
Banks have well-structured and organized credit lending functions. They give almost all forms of SME financing tools.
There are numerous banks with SME presence locally:
Aside from the 3 local banks OCBC, DBS, UOB and, many foreign banks active in SME financing in Singapore include:
RHB, Standard Chartered Bank, Citibank, HSBC, Maybank, and many others.
All banks have different credit criteria.
Interest rates, financing quantum & terms vary across these banks as well. It would be reasonable to compare all bank products as broadly as possible.
Business loans from banks are the most affordable the cheapest financing option. However, securing approval is tough and can be a long strenuous process for numerous SMEs.
Due to the observed higher risk and default rate in SME lending, most banks’ credit assessment is stringent and robust.
Banks do not broadcast their SME loan application approval rates. From a 2015 study led by Visa and Deloitte, it was found that 40% of SMEs do not have any banking assistance.
If your business has sound financials, healthy cash flow, and planned to wait few weeks to a month on the assessment process, business loans from banks would be the best choice.
Credit image: https://ibusinessloan.sg/
Types of SME financing facilities
SME Financing Interest Rate
An unsecured business term loan interest rate ranges between 8% to 12% p.a. effective rate.
Government financing schemes bear interest of about 7% to 9% p.a. effective rate.
A secured loans for equipment and machinery loans interest ranges between 2% to 7% p.a. flat rate.
A Revolving facilities such as trade financing and factoring interest is between 6% to 9% p.a. effective rate.
Property financing is the most affordable form of financing with interest between 2% to 4% p.a. effective rate.
Interest rates vary between different banks. Usually, interest is determined by the credit profile of the borrower, the loan quantum, and whether the loan is collateralized.
Most Singapore business loan interest rates are determined via a monthly reducing rest basis, and principal loan amortized over loan tenure on monthly rest.
For more detailed guidance on deriving an effective interest rate, do check out our business loan interest rate page.
Criteria to qualify for SME financing
Not all banks will solely base their credit assessment on this credit bureau score, but you should target an overall score between AA – DD and avoid GG – HH scores.
To develop your credit score, ensure prompt payments on all your personal credit facilities. Making a full payment on your credit cards rather than rolling over balances will also improve scoring.
Documents & information required for SME financing application
How to optimize approval of SME financing applications
These are the actions you can take to improve the chances of approval.
What you should do next?
Now you have a clear understanding of the business loan landscape and assessment process, and it would be easier when you next apply for funding.
If you want to compare all bank’s loan products, try our SME financing comparison tool and see your loan options instantly!
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About FR Capital
FR Capital is a Singapore consultancy firm that helps SMEs to secure business loans from banks and financial institutions. We concentrate on SME finance, and through our expertise and network, we help clients secure funding with low-interest rates efficiently and hassle-free.