SME Working Capital Loan in Singapore: The Key to Success

What Is A SME Working Capital Loan?

A SME working capital loan can finance the day-to-day operations of a business. It also boosts current assets such as accounts receivable, wages, and inventory. By creating a positive cash flow, these working capital loans can even help in investing in future capital.

Essentially, SME working capital loans are a short term business financing option that can be used to keep business operations ongoing, maintain profits or even promote business growth. Read on to find out more key takeaways on SME working capital loan in Singapore for small businesses.

How Much Working Capital Loan Can You Get in Singapore?

The amount of working capital loan your business can get in Singapore depends on several factors, including:

• Business size and financial health: Larger, more established businesses may be eligible for higher loan amounts.
• Loan type: Government-backed loans such as the Enterprise Financing Scheme often have higher loan limits compared to commercial bank loans.
• Collateral: Securing a larger loan amount is possible if your business can provide collateral.

Generally, you can expect to borrow:

• Up to S$500,000 under government-backed loan schemes such as the EFS-SME Working Capital Loan.
• Up to S$300,000 for commercial bank loans.

Why Is Working Capital Important For Business Success?

If it helps negate current expenditure, taking on additional debt could be beneficial for business growth in spite of the extra expenses arising from the interest rate charged. This is especially so if your net working capital is lower due to seasonal changes or low periods of operation. SME working capital loan allow your business to cover cash flow gaps in the event that you owe more than you receive. These small business loans provide you with additional time and resources as you actively source for permanent solutions to increase profits

What Are The Pros and Cons Of An SME Working Capital Loan?

SME working capital loans can be a valuable tool for businesses to manage cash flow and support business growth. However, like any financial product, they have both disadvantages and advantages.

When Is Working Capital Loan A Good Idea?

1. Starting A New Business

When starting a new business, the saying “you need to spend money to make money” holds true. Businesses beginning with a negative working capital are especially in need of extra support. Business growth and increase in profit can take time to materialise, so SME working capital loan can help maintain operations while you get your new business off the ground. SME working capital loan can also act as a landing pad when business is slow.

Furthermore, newly established businesses carry a higher risk of failure and often face difficulties when trying to get a business loan from traditional banks due to the strict requirements. New businesses can bridge the financing gap with alternative lenders such as Poss Capital. Our requirements are much more flexible, allowing you to borrow with ease.

2. Seasonal Businesses

Seasonal cash flow is typical in many types of businesses. While most businesses have fixed assets throughout the year, seasonal ones see frequent changes in working capital cash flow. They require a steady capital to keep operations running and maintain current assets during the slower seasons. Poss Capital offers access to fast, flexible loans with your choice of tenure with Quik, coupled with zero early repayment fees enabling you to pay only for what you use. Use our handy loan calculator to check out how much your SME working capital loan will cost after taking into account the business loan interest rates.

3. Maintenance Of Regular Operations

Maintenance of day-to-day operations, which is important for businesses to maintain a good current ratio, can be funded by a SME working capital loan. Calculate working capital through an operations balance sheet to assess if these working capital loans can allow your business more current assets than liabilities to cover its debts.

What Are The Eligibility Requirements To Get A SME Working Capital Loan?

Here is a list of general eligibility requirements to secure a SME working capital loan:

Registered Business On ACRA

All businesses must be registered with the Accounting and Corporate Regulatory Authority (ACRA). Most financial institutions require your business profile information from ACRA. The document from ACRA will state your business information, directors, shareholders and the SME’s paid-up capital. This helps lenders understand your business profile better.

Operating History

Banks generally require an operating history of at least a year for your business. This can help bolster the lender’s confidence in your repayment ability. 

For businesses who are younger than 1 year but have been in operation for at least 6 months, you can consider private financial institutions such as Poss Capital or Validus.

Citizenship of SME Director

Business should have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singaporean PR(s).

Other Business Loan Alternatives

Lines Of Credit

Lines of credit conveniently provide an immediate cash flow that can help prevent a financial crisis. However, it can be challenging to obtain if you do not have a high credit score or credit history. This is difficult for newly established businesses. Lines of credit also take weeks to be approved – time most businesses do not have.

Invoice Financing

When businesses sell goods or services to customers, they usually do so on credit. The business issues the buyer an invoice as an official notice for future payment, and they do not have to pay immediately. These invoices are typically issued by businesses engaged in a B2B model rather than in a B2C with retail customers.

Through invoice financing, or receivables financing, businesses can then borrow against these outstanding invoices. They use their invoices as collateral for a loan from private lenders, who will then collect the full amount from their customers when they are due.

Meanwhile, your business can take on larger and more lucrative contracts without becoming too stretched. Invoicing financing provides immediate access to the cash from the invoices issued to the big corporations after jobs have been completed, rather than waiting months to receive payment. As businesses across the globe face further uncertainty, invoicing financing is a viable option to help with increasing working capital and promoting business growth.

Crowdfunding

Crowdfunding has become a popular way to obtain working capital without having to go through the process of applying for lines of credit or loans, such as the UOB Business Loan or DBS Business Loan. Crowdfunding involves companies raising money through a large number of individuals who support their venture, typically via the Internet. Though the idea of not needing to repay any interest rate on a loan is tempting, reaching a crowdfunding goal is a long process, and there is no guarantee of ever attaining your target amount.

Why Get Working Capital Loan in Singapore with Poss Capital?

Poss Capital offers flexible working capital loans with a faster turnaround time and higher approval rate. We are also able to offer loans to younger SMEs with at least 6 months operating history to help you expand your business in the growth business stages.

Seize Growth Opportunities Without Stress

Fuel your business journey with the right SME working capital loan for small businesses. Whether you’re launching a dream venture or navigating seasonal ebbs and flows, Poss’s working capital loans in Singapore offer a flexible lifeline for SMEs. Calculate your needs in seconds and get Quik with Poss today! Still have questions? Our team is always happy to help.