SME Bank Loan
SME Bank Loan Assistance Singapore
Loans are very important for businesses especially in emergencies.
It also helps to increase cash flows for new business opportunities investments
Working Capital Loan
Working Capital Loans are actually short term loans to help meet the daily requirement of cash flow to operate the daily business.
There are 2 options for working capital loans
a)Secured Loan: A secured working capital loan is one which is supported by an asset such as house , factory or inventory. They can be fully paid
Assets or assets with existing mortgages or loan. The collateral
required by the bank or financial instituition depends on their
assessment of your ability to repay the loan.
A secured working capital loan sometimes requires personal guarantee from owners or directors. It affects their personal assets like family home, shares or stock to pay back the loan.
b)Unsecured Loans: are usually given if there is low risk or no risk at
all. Normally new businesses need such loan because its risky
and therefore their chances of getting such loans are totally out.
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TYPES & ELIGIBILITY OF A LOAN
We help you understand the type of loan you are eligible for:
A) Overdarft/Line of Credit
An overdraft is a facility that allows you to draw funds beyond the available limit of your bank account.
The maximum amount you can overdraw is your line of credit. The terms and amount depend on the relationship you have with your banker and his/her assessment of your credit worthiness.
Overdrafts are flexible and simple to operate. You pay interest only on the amount you have overdrawn. It is suitable for all businesses and start-ups.
B) Short Term Loan
Short term Loan is different from an overdraft facility . It has a fixed repayment period , usually 12 months and fixed interest rates. A collateral in the form of asset may be required for this loan. Sometimes with good track records and relationship with the bank, the lender may even provide you with the loan without collateral. It is suitable for all businesses and start-ups.
Confirmed Sales Orders or Accounts Receivable
Another way to raise working capital is to get loans based on confirmed sales orders or accounts receivable.
When funds are needed to fulfil a sizeable order of goods, you may apply for a Working Capital Loan based on the value of the contract or order.
However , sometimes you may apply for a Working Capital Loan based on the value of your accounts receivable. Accounts receivable is the amount of money you have billed your customers but have not yet received payment. With established & reputable customers, it is easy for lender to help with your cash flow problems. Such loans are also Suitable for all businesses.
Loans for Buying & Selling Goods
There are special loan facilities for businesses that buy and sell goods, e.g. importers, manufacturers, exporters, etc. Some examples of facilities are Letters of Credit, Inventory Loans and Trust Receipts.
ADVANTAGES & DISADVANTAGES OF WORKING CAPITAL LOANS
ADVANTAGES ARE AS FOLLOWS:-
– Working Capital Loans are quick sources of cash. & can help your business tide over cyclical downturns.
– They can be used to provide cash flow to prevent short-term shocks especially when your key customer is declared bankrupt.
DISADVANTAGES ARE AS FOLLOWS:-
– They only meet short-term cash needs – they are insufficient for long-term plans or projects that require more capital (cash or asset).
– It becomes a pressure to monitor your loans closely and make sure you repay them on time to avoid being blacklisted by credit bureaus and lending institutions.
TYPES OF WORKING CAPITAL LOANS OFFERED BY THE GOVERNMENT
– Internationalisation Finance (IF) Scheme
Is for companies to expand overseas. You can get a loan of up to S$15 million to buy fixed assets and finance your overseas projects or orders.
– Loan Insurance Scheme (LIS)
Secure loans by getting them insured against default. The Government will subsidise part of the insurance premium.
– Micro Loan Programme
It is meant for small businesses & can get loans of up to S$100,000.
For more information on loans, kindly refer to www.business.gov.sg
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