When you can demonstrate that you do not require an SME business loan, it is the ideal time to apply. The time to look for funding is not when you need it the most.
However:
Many small business owners wait until they are in a cash flow crisis before beginning their search for funding. A significant number of these applications will be rejected by banks, because banks are in the risk management business, they will not naively lend SME financing to businesses that cannot credibly show that they can return the loan.
So, it is wise to plan and begin submitting loan applications while your business is at its most stable financially.
Where can I apply for financing for SMEs?
Banks
For many of the SMEs, banks will undoubtedly be their first choice when seeking funding. Credit lending is a well-regulated and organized function of banks. They offer almost all kinds of SME finance products. Numerous banks in the area serve SMEs. DBS is one of the overseas banks involved in financing SMEs in Singapore.
Every bank has different standards for credit.
These banks also differ in terms of conditions, financing amounts, and interest rates. It would be wise to do as many comparisons as possible between all bank products. Bank business loans are often the least expensive kind of funding. For many SMEs, obtaining approval can be a difficult and time-consuming procedure, though.
Since SME financing is thought to carry a greater risk and default rate, most banks conduct thorough and rigorous credit assessments. Banks don’t make their approval rates for SME loans publicly available. Bank SME business loans would be the ideal option if your firm has strong financials, a good cash flow, and is ready to wait about a month for the review procedure.
Banking establishments
Financial institutions (FIs) function without a complete banking license, although they nonetheless engage in lending activities to SMEs. A considerable number of financial institutions (FIs) cater to the SME market. While FIs, like banks, also provide unsecured SME loans, the bulk of FIs are specialist lenders that frequently focus on asset-based lending, such as factoring or credit for equipment.
A new rule that increased the sum of unsecured SME credit that finance companies could provide from the previous 10% cap to 25% on their capital funds was announced by MAS. This is anticipated to release an estimated $550 million in potential SME loans from financing companies.
P2P crowdsourcing
One of the newest and most popular fin-tech trends is peer-to-peer crowdfunding. P2P crowdfunding uses an internet platform to facilitate the pool of funds from several investors to provide debt financing to businesses. These platforms connect lenders individual investors and borrowers SMEs and help them arrange finance.
These platforms post possible borrowers on their site to provide business loans. Through these platforms, consumers can evaluate these listings’ basic financial profiles and participate in the funding process. Crowdfunding is a viable option for SMEs that are not qualified for traditional bank loans, as the credit criteria are usually less stringent.
However, to compensate investors for taking a higher capital risk, interest rates for such loans are also higher than bank loans. Most P2P small business loans have a short-term tenure ranging from one month to a year.
Because of their well-known brands and extensive retail banking network, the majority of SMEs bank with the three local banks like DBS. Without question, the local banks control a large portion of the SME finance market in Singapore. These domestic banks maintain their dominance in Asia’s safest bank rankings each year because of their strong branding and solid balance sheets.
