Financial Institution Comparison Guide: Applying for a Business Loan

Singapore’s economic growth thrives on a multitude of SMEs. These businesses are the lifeblood of our economy, driving a significant portion of our GDP and employing a vast majority of the workforce. However, with such a vibrant SME landscape, competition can be fierce.  Many SMEs are constantly seeking opportunities for growth, but navigating the world of business loans can be daunting.Whether you’re looking to expand your business, kickstart a new venture or simply sustain your operations, understanding the various types of business loans and their specific requirements is crucial.

Fortunately, we’ve curated a comprehensive guide that’s specially designed to walk you through the different types of business loans designed specifically for small and medium-sized enterprises (SMEs), provide a detailed comparison of offerings from leading Singapore banks, and break down the application process step by step. By demystifying these elements, we aim to equip you with the knowledge needed to navigate the financial landscape effectively and secure the right financing for your business needs.

Types of Business Loans

Many assume that all business loans in Singapore work the same way, but that’s far from the truth. The term “business loan” refers to a wide array of financial products, each tailored to different business needs. It’s a broad term that covers a lot of ground, so figuring out the exact type of SME business loan that aligns with your unique requirements is key.

Here are three of the most common types of business loans in the market and how each one is designed to serve specific business situations:

1. Business Term Loan

A business term loan is the standard option for businesses looking to finance their expansion, purchase equipment, or manage seasonal fluctuations in cash flow. These loans are typically offered with fixed terms and predictable repayment schedules.

2. Startup Business Loan

Tailored for new enterprises in Singapore, startup business loans provide the crucial initial capital needed to cover startup expenses and support operations until the business becomes self-sustaining.  If you’re wondering which loan is best for starting a business, consider these loans as they often feature lower initials with flexibility to accommodate the varying income streams of startups.

3. Working Capital Loan

Working capital loans are designed to cover the daily operational costs of a business, such as payroll, rent, and inventory. They’re especially useful for companies with seasonal sales fluctuations or a gap between paying suppliers and receiving customer payments. These loans provide crucial liquidity, allowing businesses to maintain smooth operations without tapping into long-term funds.

4. Commercial Property Loan

Designed for purchasing or refinancing commercial properties, commercial property loans are essential for businesses looking to invest in their physical presence through owning real estate. It’s typically a secured loan with the property serving as collateral.

Requirements to Apply for a SME Business Loan

Ownership of Local Shareholding

The business must have a significant percentage of shares held by local stakeholders, demonstrating a commitment to the Singapore market.

Annual Sales or Annual Income

Lenders will review your business’s annual revenues or income to assess its financial health and repayment capacity.

Employment Size

The size of your workforce can influence loan eligibility, with different criteria depending on whether you are considered a small or medium-sized enterprise.

Operating Duration

Most banks and financial institutions require a minimum operating period to ensure that the business has a track record of stability and profitability.

DBS vs. OCBC vs. UOB vs. Validus Capital

Now, let’s examine the SME working capital loans offered by three reputable banks in Singapore—DBS, OCBC, and UOB—as well as Validus Capital. Explore their unique offerings and discover how each aligns with your business financing needs.

How to Apply for SME Business Loan

When applying for an SME business loan, it’s crucial to:

• Check the total cost of borrowing: Compare the effective interest rates and any attached fees to find the most cost-effective option.
• Check eligibility: Make sure your business meets all the lender-specific requirements to avoid any last-minute surprises.
• Gather necessary documents: Prepare all required documentation, such as the latest financial statements and bank statements, business plans, and proof of ownership, to streamline the application process.

Discover the Perfect SME Business Loan for You at Validus Capital

Finding the right business loan that aligns with your SME’s goals and needs can be challenging. Each option comes with its own set of benefits and constraints. If you find this process overwhelming or if you need more personalised guidance, don’t hesitate to reach out to us.

At Validus, our commitment to SMEs goes beyond conventional financial services. As a provider of alternative SME financing solutions helping more SMEs access funds easily and quickly, we’re your strategic growth partner dedicated to fueling the trajectory of your business. Our suite of financial services is meticulously designed to provide SMEs with the robust support they require to not just survive but thrive in today’s dynamic business landscape. From simplifying the process of obtaining working capital loans to innovating how you manage your business expenses, we’re here to ensure that your financial journey is marked by efficiency, transparency, and empowerment.