Small and medium-sized enterprises (SMEs) play an important role in contributing and sustaining our societies. In fact, SMEs account for over 98% of all Asian businesses, as they offer close to half the private sector jobs on the continent.
Why Do SMEs Find It Difficult to Secure Small Business Loans?
SMEs have not only become crucial for the success of economies but also play a pivotal role in innovation and job creation, making it essential to have various functioning support measures for these firms. However, they face significant challenges, such as the lack of access to business financing. This issue stems from the lack of credit information, as well as the companies’ perceived riskiness. As a result, SMEs looking to borrow funds are subjected to more collateral requirements, which can be hard to meet when companies do not have sufficient assets. Hence, their business plan or growth could be stunted.
Are There Financing Options for SMEs in Singapore?
Business financing is needed to serve various purposes. It can help SMEs navigate through tough periods, and improve business capabilities as they aim to remain competitive and sustainable. Listed below are the most common financing options for SMEs in Singapore.
1. Traditional Banks
Banks are financial institutions with a physical presence in the markets they operate in. As covered in our previous article, these institutions put their applicants through a very stringent loan assessment process. This is because many SMEs, especially startups, lack the extensive credit or operating history that banks usually prefer. Hence, obtaining any SME loan in Singapore could be challenging for SMEs who do not meet their requirements.
2. Government Financing Schemes
The government offers a range of business grants and financing options under the Enterprise Financing Scheme (EFS) from Enterprise Singapore. At any growth stage, businesses can take up these SME loans to develop new products, expand their operations, and build on their capabilities. One such financing option is the SME Working Capital Loan. Through this, SMEs can gain access to additional funding for the benefit of their business. Moreover, the government incurs a co-risk share of the borrowing amount. This makes lending less risky, and increases the chances of approval. Overall, these business grants support the growth and success of small businesses in Singapore.
3. Sustainable Financing Grants
The Enterprise Sustainability Programme by Enterprise Singapore encourages more businesses to adopt sustainable and socially responsible practices and also appeal to a growing segment of eco-conscious consumers. It has allowed for a large number of investments from sustainability focused investors. In addition, to support the development of sustainable finance in Singapore, the Monetary Authority of Singapore has launched a grant scheme for SMEs to achieve their sustainability goals. This grant functions like a regular loan, and can help businesses achieve their goals by paying off costs.
While there are multiple business financing options available, newer SMEs often struggle to access them due to knowledge gaps such as the lack of financial statements. This makes it difficult for banks and other financial institutions to assess the creditworthiness of newer SMEs. In addition, many of them have weak financial structures, which poses obstacles in their path to obtaining financing.
Where else can SME loan from? Well, private lenders are a good option.
Private Lenders Can Finance SMEs
Traditional banks are generally unwilling to provide financing for SMEs unless there is adequate collateral. Poss Capital is here to bridge the financing gap by providing an alternative source of capital with flexible terms and faster processing time. Business owners can obtain additional financing and just focus on effectively growing the business. We possess an understanding of how various industries work, and are able to focus our resources according to your business needs. Click here to apply today!
Access to Small Business Loans When You Need Them the Most
SMEs are essential in most countries, contributing significantly to economic growth and employment. However, applying for a business loan is often challenging, regardless of the available options. Thus, private lenders are a good option worth considering. Accessing these funds is quick and subject to fewer requirements. Contact us today, and let’s help you get there faster.