Poss Capital, Your Partner for Flexible Business Financing

SME Business Loans: How To Overcome Financial Struggles

Small and medium-sized enterprises (SME) play an important role in contributing and sustaining our societies. In fact, SMEs account for over 98% of all Asian businesses and they offer approximately 50% of 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, SME applying for business loans, be it general corporate loans, merger and acquisition loans or specific bank loans such as the DBS Temporary Bridging Loan, are subjected to more collateral requirements. This can be hard to meet when companies do not have sufficient assets. Hence, their business plan or growth could be stunted.

SME business loan and temporary bridging loan in singapore

How Can A SME Finance Their Business?

Business financing can help SMEs navigate 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 prefer. Hence, obtaining any small business loans or working capital loan in Singapore can be challenging for SMEs who do not meet this requirement.

2. Government Financing Schemes

Government-assisted business loans for SMEs are available under the Enterprise Financing Scheme (EFS) by Enterprise Singapore. At any growth stage, businesses can take up these government-assisted SME loan financing schemes to develop new products, expand their operations, or build on their capabilities.

One such financing option is the SME Working Capital Loan. SMEs can greatly benefit from gaining access to this additional funding. Moreover, the government incurs a co-risk share of the borrowing amount. This makes the business loan less risky to the lender, and increases the chances of its 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. 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.

You can also read more here about the best SME grants available and utilise them for your business.

SME working capital loan and small business loans in singapore

While there are multiple business financing options available, younger SMEs and startups often struggle to access them due to knowledge gaps. 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 apply for business loan? Well, private lenders are a good option.

Finance Your SME with Private Lenders

A private lender provides small business loans or working capital loans to SMEs in Singapore. Unlike with an equity investor like angel investors or venture capital, a private business loan does not require giving a portion of your company’s equity in order to obtain financing. Private lenders also do not operate under the same regulatory framework that banks are required to do so. This means that private lenders can be more flexible in their lending practices and can offer business loans to SMEs who may not meet the requirements of traditional banks.

Private business financing may be the solution for a range of business opportunities, including:

  • purchasing a commercial property
  • paying out a business debt
  • securing working capital
  • construction project financing
  • equipment financing
  • inventory purchases
  • marketing and advertising
  • business acquisitions

Every business case is different, and you will be in the best position to decide if a private lending option is the solution for you. The benefits of securing working capital via a private lender include:

  1. Reduced lending criteria: Private lenders are more willing to look beyond a typical credit score, provided the borrower’s ability to repay the loan is effectively proven.
  2. Business diversity: Unlike banks, private lenders are not necessarily restricted by business categories and are more likely to accommodate unconventional projects.
  3. Speed: Private lenders can often approve and disburse business loans within a matter of days, making them a viable option for businesses on tight timeframes.
  4. Flexibility: Private lenders can tailor their lending products to suit your business needs, offering customised loan terms and repayment schedules. This is helpful for businesses that require financing for short-term projects or to cover unexpected expenses.

Access To Small Business Loans When You Need Them The Most

At Poss Capital, we believe every entrepreneur and business owner deserves a chance to thrive. Although our business loan interest rates might be slightly different, the benefits outweigh the numbers. Think of flexible repayments, fast approvals, and personalised solutions tailored to your business needs. Let us be your springboard to growth, not a financial hurdle. Contact us today and unlock your growth potential.

Leave a Comment

Your email address will not be published. Required fields are marked *