There is this myth that small business loans are long-term loans, which means they’ll burden you for an extended period. This is very far from the truth.
The truth to the question of how long is a small business loan term is small business loans have various loan terms depending on the money lender.
Some money lenders will give you a short-term loan of fewer than six months. While others will give you a long-term allowing you to pay your loan for several years.
If your worry is how long is a small business loan term, relax. Here we shall explain everything about that and much more like:
- What these small SME business loans are
- What are the business loan options in Singapore
- Personal loan vs business loan
- How and where to apply
What Are Small SME Business Loans?
Small SME business loans are financing options given to small or medium-sized businesses. These loans can either be for short-term business capital needs or long-term fixed asset buying and have loan terms that vary with each financing loan option.
When taking small business loans, you should consider a few factors like:
Size of Your Business
In Singapore, the size of your company is essential to qualify for an SME business loan. Some money lenders check the total number of employers you have to consider how much loan to offer you.
The size of your company can also show the money capability of your business over a certain period. With this, you can determine the sum of money you can borrow without bringing your business down.
What is your reason behind the loan? Are you taking a loan to purchase equipment or an inventory to improve the quality of your services to customers? Or is it for fulfilling a goal you’ve set for your business?
You should take a loan; you’ll easily pay the monthly interest. Also, it’s best to repay your loan within a short period. It generally helps you reduce the total interest and total loan.
Always consider the loan amount you’re taking. Avoid taking more than your business needs. This will save you alot from pointless debts or extreme ones.
What Are The Business Loan Options In Singapore?
Several business loans in Singapore are offered for any business needs, while others are for specific business needs. Also, some loans can be set up for different kinds of businesses. Here are the various options:
The regular business loan is the unsecured one, which means you don’t have to offer any collateral. With this loan, you need to choose the repayment period as five years.
Major banks like DBS, UOB, and OCBC offer this business loan to any local company. Though there are specific requirements like the duration of your business and how much money the business makes.
SME Working Capital Loan
It’s a specific type of business loan given to local businesses with at least 200 employees. Also, the business should be Singapore-registered with at least local ownership of 30%.
It’s sponsored by the Singapore government and banks to offer at least $1 million to each borrower. Being government-sponsored means that the government co-shares around a 50% risk.
It helps small businesses get working capital with a repayment period of one to five years.
Startup Business Loan
This loan option is also known as a first business loan. It is a mini type of typical business loan that gives a smaller capital of about $100,000.
It’s an easy-to-get loan as long as your business has been functioning for several years. Also, you don’t need a strong financial history to get it.
Commercial Property Loan
This is the loan you need if you need to buy an office or a shop. You should consider the Green commercial property loan if you also need to renovate or refurbish your commercial property to be more energy efficient.
To qualify for this loan, you must have your commercial space in a platinum building or BCA green mark gold.
Equipment And Machinery Loans
They’re fixed-term asset loans given to small businesses to buy new or used assets. You can use the assets for upgrading or automation.
The loan option is under the Enterprise Financing Scheme (EFS), where the government sponsors equipment and machinery loans and shares 50% of the risk.
Also, SMEs can have a lower financing rate if the machinery is a sustainable contribution to a greener environment.
How Long Is A Small Business Loan Term?
The loan term of a small business depends on the business loan you choose. Small business loan terms can be short-term or long-term.
SME business loan with short-term usually requires you to pay interest for three to 18 months. This means your repayment plan will be daily or weekly.
Short-term loans are easy to qualify for when compared to long-term loans. However, ensure your business can keep up with daily or weekly repayments before you apply for one.
SME business loan with a long term means you have several years to repay your loan. The loan term will depend on your lender’s judgment.
How And Where To Apply
Ensure you’re taking a manageable loan, which your business can comfortably afford to pay the installments. Here are simple steps to apply for a loan in Singapore for your small business.
- Visit your lender’s loans page
- Click on the apply for a loan button to take you to the loan page
- Fill in your full name according to your Identification card
- State the amount of money you require
- Fill in your monthly income as it appears on your payslip
- State the type of loan you require
- Then fill in any additional information you wish, and click submit
Your money lender will process your loan application and contact you for an appointment arrangement.
Places You Can Apply For A Business Loan
You can get a business loan from a bank or a licensed money lender. These two places will help you understand more how long is a small business loan term.
1. A Bank
Singapore banks offer different loan packages to businesses, even if they’re SMEs. These loans have an approval process longer than money lenders.
A bank requires a business to have a business history of atleast two to three years of operation and 30% ownership by locals. If your business qualifies for this criteria, you get a loan for up to five years.
Here is an illustration of business loans offered by banks:
|Bank||Loan Type||Interest Rate|
|DBS Bank||Business term loan||7-11%|
|OCBC Bank||Business revolving short-term business loan||8.88-13.88%|
|Citibank||Unsecured business loan||6.25-15%|
|Standard Chartered Bank||Installment business loan||11%|
2. Licensed Money Lenders
Banks can have strict conditions and terms for small businesses to meet.
If you’re in such a situation, approach a licensed money lender such as U Credit for a loan in Singapore.
Borrowing from a licensed money lender is also safe because of the regulations from the ministry of law. So you’re sure they’ll offer you a loan according to the guidelines.
Personal Loan Vs Business Loan
Let’s compare these two loans so you can understand business loans better from personal loans while still understanding how long is a small business loan term.
|Personal Loan||Business Loan|
|Loan Amount||Up to $20 million||Up to 4× your monthly income|
|Loan Tenure||Up to five years||Up to seven years|
|Documents Required||Bank account statements of the last six months, services and goods tax statements of the past 12 months, banking facility forms given by your bank and EFS application form.||Your personal income records|
|Age Requirement For The Business||A minimum of six months, and others require a minimum of two years.||None|
|Processing Loan Period||Two weeks or more than||Within several days|
Get An SME Business Loan For Your Company’s Growth
Running a business is not always straightforward; needs come up now and then, and sometimes you don’t have extra finances to cater for them.
This is where an SME business loan saves the day and avoids bringing your business down. An SME can cater for:
- Start-up costs
- An emergency – for example, rescuing your business from economic inflation
- To buy inventory. For instance, if you require inventory finances during holidays, you can take a loan and take care of it
- For cashflow purposes. A business loan is great when you’re looking to maintain your business cashflow
- Begin a new project. For example, if you decide to start a restaurant, you can take a loan to employ workers to promote sales
Contact U Credit today for quick, easy, and flexible business loans for your business. We provide loans with low-interest rates and flexible repayments, and our application process is secured for your safety.
Frequently Asked Questions
Do You Pay Tax on a Business Loan?
It’s unlikely because a business loan is hard to categorize as income. However, you can get an exception when you negotiate with your money lender to cut down your debt.
How Soon Do You Have to Start Paying Back a Small Business Loan?
In most cases, you start paying for your business loan immediately. Immediately though, it depends on the basis you agreed on paying your loans. For example, for monthly payments, your repayment cycle will start after 30 days of taking the loan.
Do You Have to Pay Back a Business Loan if the Business Fails?
Yes, because you signed a personal guarantee, you’re responsible for repaying your loan, even when your business fails and cannot pay for the loan.