All-Time Favourite Financing Options for SMEs in Singapore

Written by
Zachary Pestana
Last Modified on
June 5, 2024

There are over 180,000 small and medium enterprises (SMEs) in Singapore, employing over 65% of the country’s workforce. SMEs are vital in sustaining the country’s local economy, but are more vulnerable to economic downturn as compared to multinational corporations (MNCs).

Although SMEs are relatively small, and thus quicker to innovate than MNCs, many in the sector struggle to get enough funding. This is due to the competitive market for investor funds. SMEs are less attractive as potential investment opportunities for large investors, because of their volatility and the risks they are slated to have. As such, many SMEs struggle to gain consistent capital for their business needs.

In order to help SMEs stay afloat and competitive, the Singaporean government has put in place funding options, including grants and loans. Many SMEs also seek funding through banks in Singapore. We’re here today to break down the favourite financing types for SMEs in Singapore.

1. SME Working Capital Loan

In light of the COVID-19 pandemic, the Singaporean government has released the SME Working Capital Loan, a government assisted financing loan under the Enterprise Financing Scheme.

This loan allows eligible SMEs to access up to S$1,000,000 to finance their cash flow needs for up to five years. Enterprise Singapore also partnered up with participating financial institutions with up to 90% risk sharing. The interest rate of this loan depends on an SME’s risk assessment and differs from the various participating banks and financial institutions.

Working Capital Loan Eligibility:

  • Be a business entity that is registered and physically present in Singapore
  • At least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership
  • Annual group sales below S$100 million or maximum employment of 200 employees

2. Invoice Financing

So what is invoice financing? Invoice financing is an SME financing type offered by banks in Singapore to help businesses borrow based on invoices that they are owed by their customers. This typically comes with lower interests rates, and is a popular option for SMEs with significant invoice amounts.

Invoice financing allows SMEs to unlock cash flow withheld in unpaid invoices, and serves as a short-term capital injection for firms. Banks and lenders usually cover up to 90% of a business total invoices, but do note that this financing method is a short-term solution.

Possible financial providers to consider include OCBC and Validus Capital.

3. Line of Credit

A business line of credit allows your business to withdraw a certain number of funds up to your credit limit at any time. This method is great for SMEs looking to cover a gap in cash flow.

Applying for a line of credit in Singapore is relatively easy. However, there are still certain eligibility requirements in place when you’re looking to open a line of credit with a traditional bank. This includes your credit score, business revenue, and background.

However, payment service providers such as Aspire have specific products tailored to the needs for startups and SMEs. The Aspire Line of Credit is a business line of credit offering up to S$300,000 for companies looking for financing.

There are no obligations to utilise your credit limit, which means no account or monthly fees incurred on unused funds. Aspire only charges fees on the amount withdrawn and used with fees ranging from:

  • ‍Processing Fee: 1 – 4% on the amount withdrawn
  • ‍Interest Rates: 1 – 3.9% simple monthly interest

In order to apply for the Aspire Line of Credit, you will need:

  • ‍All corporate bank accounts' past six months' bank statements
  • Director and all guarantors' front and back copy of NRIC / Employment Pass, Passport copy
  • Director and all guarantors' CBS report with at least three months' validity

Aspire offers a fast and simple financing solution for SMEs and startups. Secure working capital of up to S$300,000 in less than 48 hours.

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About the author
Zachary Pestana
is a seasoned writer in market trends and business thought leadership. With a writing history at Incorp Global, MOQdigital, and AIESEC Australia, Zachary leverages his broad range of experiences to stimulate industry conversations and engage audiences.
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