SME Working Capital Loan Singapore
Singapore Government Assisted Financing Scheme For SMEs in Singapore
The SME Working Capital Loan is a Singapore government Aided financing scheme that falls under the Enterprise Financing Scheme. The enhanced scheme after Budget 2020 in Singapore further supports qualified SME firms access further financing until March 2021. SME can access up to S$600 Thousand working capital to grow their SME. Enterprise Singapore associates with participating banks as well as financial institutions taking up to 80% of risk sharing. There are a total of 14 financial institutions partaking in this scheme. Credit criteria & interest rates vary across the banks. Ibusinessloan will be able to provide SME in Singapore with a direct comparison on all banks SME Working Capital Loan rates and as well as their eligibility terms. SME can secure the funding they need under the SME Working Capital Loan to expand and grow their SME.
How Do SME in Singapore Qualify For The SME Loan?
It has become easy to get an SME business loan SME loans can be applied by going online or by visiting any bank. There are also many online websites that make it easy to obtain all the information a borrower needs. Nevertheless, before a borrower tries to get an SME loan, it is vital that an SME determine how much their SME require. Also, it is important to do thorough calculations to understand how much time the SME needs to repay SME loans. This will help the borrower pick out the most suitable product for your business.
After making an online application, the lender will assign a representative to meet the borrower in person, normally a young relationship manager. Throughout the meeting, there will be several bank consent forms to be signed, which gives consent for the loan lender to carry out appropriate credit checks. There will unquestionably be a demand for more documents as well. The needed documents will differ between banks. The relationship manager will gather all the documents and continue to present the case to the credit department for loan evaluation.
After approval of the SME loan, the lender will give the borrower an offer letter that details the conditions of the SME loan offer. It is crucial that the borrower review the offer letter thoroughly so that the borrower is informed of every single clause and condition. If it does not work for the borrower, they can always search for another financier. Nevertheless, if the conditions of the SME loan offer are acceptable, you will be expected to sign on the letter of offer to formally take it. SME Loan disbursements will usually take place about one to two weeks after the acceptance of the loan offer.
SME loans can do marvellous things for an SME. It can assist SME to jump onto any possibility that could possibly propel their SME to new heights, help to get SME through tough times as well as to increase the operations of the SME. Always be sure to carry out the good due diligence of studying what other lenders have to offer so that you can pick the best and most fitting financial product for your SME.
What is a SME Working Capital Loan?
A SME working capital loan is a sort of business loan that is utilised to finance a SME everyday operations. Those loans are not used to buy long-term assets or investments and are, rather, used to provide the working capital that covers a business’s short-term operational needs. Those needs can involve costs such as payroll, rent and debt payments. In this process, working capital loans are really corporate debt borrowings that are used by a SME to finance its everyday operations.
How a SME Working Capital Loan Works
Most times, a SME does not have enough cash on hand or asset liquidity to meet day-to-day operational expenses and, therefore, will secure a working capital loan for this purpose. Businesses that have long seasonality or cyclical sales usually rely on working capital loans to help with periods of reduced business activity. Many SME do not have stable or predictable revenue throughout the year. Manufacturing businesses, for instance, have cyclical sales that match with the needs of retailers.
A majority of retailers sell more product in the fourth quarter, such as during the holiday season as compared to any other time of the year. To supply retailers with the conventional amount of goods, manufacturers usually conduct most of their production activity through the summer months, arranging for inventories to get ready for the fourth-quarter push. Later, when the end of the year kicks in, retailers decrease manufacturing purchases as they concentrate on selling within their inventory, which consequently decreases manufacturing sales.
Manufacturers with this kind of seasonality often need a working capital loan to pay wages and additional operating expenses during the quiet period of the fourth quarter. The loan is normally repaid by the time the company hits its busy season and no longer needs the financing.
Examples of financing include a term loan, a business line of credit or invoice financing, a form of short-term borrowing that is given by a lender to its SME customers based on unpaid invoices. Business credit cards, which enable you to earn rewards, can further provide a way to working capital.
Advantages and Disadvantages of a SME Working Capital Loan?
The pressing benefit of a working capital loan is that it is easy to obtain and lets SME owners efficiently close any gaps in working capital expenditures. The other notable advantage is that it is a form of debt financing and does not expect an equity transaction, meaning that a business owner maintains complete control of their business, even if the financing need is urgent. Some working capital loans are unsecured. If that is the case, a business is not expected to put down any collateral to secure the loan. Though, only SME or business owners with a high credit rating are qualified for an unsecured loan. Businesses with little to no credit must securitise the loan. A collateralised working capital loan that requires asset collateral can be a drawback to the loan process. Nevertheless, there are other possible drawbacks to this kind of working capital loan. Interest rates are usually high to compensate for the lending company for risk. Moreover, working capital loans are usually tied to a SME owner’s personal credit, and each missed payments or defaults will damage his or her credit score.
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