A Useful Guide To Startup Business Loans In Singapore

Singapore is one of the most preferred places to do business for its thriving economy, strong trade, developed infrastructure, open business policies, good investment climate, and skilled workforce. Besides, the multiplicity of financing options for startups is the other significant aspect that draws entrepreneurs from all over the world. This article will help you learn about the business loans Singapore offers through government and private sources of funding.

1. Government schemes or grants

The Singapore government helps startups with several attractive funding schemes and grants to grow their business in the early stages. Here are some popular cash grants, as well as equity financing schemes for startups.

1. Startup SG

As part of its conscious efforts to encourage the growth of innovative startups, the Singapore government has created Startup SG, an umbrella brand having all the startup-related schemes for startups in Singapore combined. The Standards, Productivity, and Innovation Board (SPRING) offers these funding schemes.

The objective of Startup SG is to give Singapore-based startups access to financial sources and mentoring programs, assisting in converting innovative business ideas into successful companies. Startups in Singapore that meet the requirements can apply for cash grants, business loans, and equity financing through Startup SG Equity, Startup SG Tech, and Startup SG Founder.

2. Startup Business Loans

The starter company loan, sometimes known as a “first business loan,” is a scaled-down version of the standard business loan with a maximum of up to SGD 100,000.

For a typical startup, a regular company loan may be quite pricey. This distinctive line of Singapore business loans provides small or startup enterprises with loan amounts of at least S $100 000 at reduced interest rates to help them get off the ground. Your startup can now have enough working capital for its daily operations.

Unlike conventional business loans, startup-oriented loans are extremely beneficial to microbusiness owners who just need a small amount of funding without any hefty interest rates and lengthy payment terms.

Since you only need to have been in business for a few months and do not require a long financial history, it is much simpler to obtain this business loan. Here is a list of startup business loan options in Singapore.

1. SME Working Capital Loan

You can find several banks and financial institutions offering this government-assisted funding scheme. DBS Bank is one of them, offering a working capital loan of up to SGD 500,000, repayable in 5 years. SMEs that meet the eligibility requirements can use this loan to expand their business operations or improve their cash flow.

2. Venture Debt Financing

It is a non-convertible, secured loan offered by institutions like DBS to support a startup business. Venture debt financing is a strategic tool that complements equity financing to:

• Minimize equity dilution: Your startup business can grow rapidly without diluting its ownership stake by having a venture loan.
• Protect your company from high-interest rates: Venture debt serves as a hedge against high-interest rates, which helps reduce the cost of financing.
• Accelerate growth: You can use the business loan to help you finance capital expenditures and business acquisitions.

For instance, the venture debt financing by DBS to startups is known for:

• Improving equity returns
• Minimal dilution of equity
• Providing easy access to the DBS international network
• Offering cash runway extension
• Working with experienced venture professionals

To become eligible for this startup business loan, your company should have a workable business model, equity funding of at least SGD 3 million from institutional investors, and a DBS partner venture capitalist’s strong support.

3. Digital Business Loans

SMEs can access business credit from private banks like DBS up to SGD 2 million, repayable in a 5-year period. The digital platform offers easy application, documentation, and sanctioning of loans in a few hours. Working with the resilience budget of the government, you can avail of the loan paying just the interest in the first year.

How Does a Startup Business Loan Help SMEs?

With a startup loan, you can:

1. Invest in better facilities, equipment, and vehicles

You can improve your small business by having new machinery or equipment that ensures better durability and performance. A startup business loan can help you with essential funding for advanced machinery, extra staff, and vehicles.

A startup loan can also assist you with the initial costs of leasing a business property if your operations require you to have additional equipment that will not fit in your current facility.

2. Improve cash flow

You need to ensure that you make enough profits to meet expenses related to utilities, maintenance, salaries and wages, and loan installments. You may experience a short period of unsteady cash flow after paying off your dues and reaching break-even on your profits.

You can stabilize your company’s cash flow when this happens by using a startup loan with a low-interest rate. You can also use this startup loan as a safety net if you encounter unexpected utility costs or logistical snags that can affect your daily operations.

SMEs today have easy access to capital to satisfy their immediate liquidity needs through startup business loans in Singapore. To use this facility, review your bank account, have your working capital loan application ready in advance, make sure you promptly repay your personal credit facilities and keep your choices open when applying for the loan.