Your venture’s perspective for predictable growth will go hand-in-hand with the capital you have at your disposal and the financial resources you can obtain from conventional banks or, better, from private lenders. Truth is, around 81% of all newly established businesses fail due to issues with cash flow.
You can invest heavily in the quality of your services, in the training of your staff, or in the expansion of your operations. But at the end of the day, all businesses, at the start of their operations, are vulnerable to modifications in the market, and thus, might eventually fail due to events outside of their control.
Do you want to mitigate these risks? To better manage cash flow gaps and gather the required funds in order to further your venture’s expansion and capitalise on time-sensitive business investment opportunities? If so, realistically speaking, you will have three choices at your disposal. 1) You can utilise your personal funds in order to finance the business’s operations. 2) You could utilise the services of a Singaporean bank, which, let’s face it, might reject your application if you are an SME, or 3) you could collaborate with a private lender that can provide you with a business loan in Singapore in line with your company’s current financial forecasts.
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How Can You Use Small Business Loans?
Well, what you do with your newly acquired funds will depend on the characteristics of your business and the ambitiousness of your expansion plans. Are you, for example, the owner of a small SME, and you are currently dealing with a shortage in funds due to seasonal fluctuations in the number of domestic clients? Well, you will not be the only one. A business loan can provide you with the required funds to surpass temporary shortages in cash flow.
Moreover, they can be useful for purchasing equipment or technology that will expand your service’s/products’ ROI. In this sense, you can think of a long-term business loan in Singapore as an investment opportunity. Sure, in the best-case scenario, you will benefit from the funds necessary for the continuation of your business activities, without being forced to consider external financing. But we live in the real world, and chances are that your venture operates with tight profit margins and you simply need a helping hand until you can once again attain long-term profitability.
Why Consider Small Business Loans from Private Lenders?
In many cases, you might not even have much of a choice. Banks in Singapore are notorious for the strict lending conditions applicable to domestic SMEs, and chances are, if you require a business loan, the only ones who will consider your application are private lenders. But that’s not the only reason why you should consider them. Time, in the business world, is of the essence, and a single second of delay in the loan approval process can result in you losing a potentially lucrative business opportunity.
When provided by private lenders, small business loans are characterised by a faster approval process and simpler documentation than is the case with conventional banks. Sure, it will not be instantaneous. After all, SME loans are in a whole different ballpark than personal unsecured loans or payday loans. But, compared to banks, private lenders, even when it comes to business-focused loans, are significantly more flexible with their lending conditions, require less documentation, and are equally safe, as in order to continue their activities, they must strictly follow the lending framework laid out in the Moneylenders Act of 2008.
What Are the Protections for Borrowers?
As previously mentioned, the protections applicable to private borrowers in our country are laid out in the Moneylenders Act. To make a long story short, lenders in our country are limited to a maximum interest rate of 4% per month on the loan principal. This cap applies regardless of the borrower’s annual or monthly income level.
Additionally, there is a maximum 10% administration fee for all commercialised credit packages, and borrowers cannot be charged fees more than the loan principal. So, in other words, private lenders are tied up by the Ministry of Law. That said, in some cases, commercial lending conditions can vary slightly from the services provided to private borrowers. In fact, this is one of the reasons the application review times for small business loans usually take longer than those for personal loans.
What Types of Business-Focused Loans Can You Obtain?
For starters, SMEs in our country can apply for working capital loans, which are a type of financial aid package, designed for businesses, that’s intended to cover day-to-day operational expenses, such as payroll, rent or salaries. Working capital loans are typically short-term and are designed to stabilise the financial situation of companies in serious financial trouble. If you want, you can think of them as the payday loans of the business world.
Small business loans, on the other hand, are what most people are referring to when thinking of business-focused financial aid packages. These types of loans are multi-purpose and can be utilised to cover everything, from the expansion of business operations, to hiring new employees, purchasing equipment or investing in a marketing campaign. While not exactly 1/1, these types of loans are similar in a way to the personal loans provided to private individuals.
Finally, Singapore-based SMEs can, if they want, invest in invoice or equipment financing. Equipment financing is as straightforward as it sounds. You borrow money in order to purchase machinery or technology necessary for the continuation of your business activities. In invoicing financing, on the other hand, you can unlock cash that’s blocked by unpaid customer invoices. There is a surprising variety in our country when it comes to business-specific financial services. However, if flexibility and speed are pivotal to your current situation, it will be best to consider utilising the credit packages offered by a private lender.
