The Complete Process of an SME Loan Application

Singapore’s economy is driven by small and medium-sized enterprises, which make up about 99% of all enterprises. Thus, SME financing accounts for a significant segment of the business financing market, where working capital is given out to companies through different SME loan products.

Apart from the traditional banks and financial institutions that still provide the majority of business loans in Singapore, financial technology (FinTech) is rising and fast, making its presence known as an alternative source of business financing.

Today, you have the peer-to-peer lending and crowdfunding platforms that make the financing process seamless and much faster. These financial technology companies are beginning to make waves among the small and medium enterprises in Singapore.

With the integration of technology, the banks, and financial institutions have developed and progressed, and their systems and processes have also become quicker and more efficient through automation.

Thus, to qualify for the SME loans, you just need to prepare your application to meet all criteria systematically.

Here is the complete process of an SME loan application:

1.   Stating a proper business plan

Many banks and moneylenders will demand a robust financial plan, which will form an introduction about who you are and what your business is all about. Be ready to state your business’ goals, mission, and how you plan to run it to achieve all the objectives stated.

A great business plan means that the business is likely to succeed according to the mind of the lender.

2.   ​Stating how you intend to spend your finances

Moneylenders usually want to assess how you intend to pay the loan that you borrowed. In case you want to invest the fund in purchasing equipment, you can apply for an equipment loan.

Or if your plan is to keep the business running before your debtors pay you, you may apply for a short-term loan.

When you state what your loan will be used for, it is easier for the moneylender to determine whether the amount applied for will meet all your requirements.

3.   Stating the amount of money you require

Do thorough research lest you underestimate or overestimate the amount of money you require. If you underestimate the amount, it could lead to financial problems in the future.

Overestimating, again, makes the bank or the financial institution question whether you have done methodical research before writing a business plan.

4.   Maintain a good credit score

Though some licensed moneylenders are willing to grant you loans despite having a bad credit score, it is ideal to maintain a good score.

Moreover, all banks nowadays are required to verify whether every applicant is eligible to be given a loan. Thus, make sure to check your personal credit reports and scores. Also, a credit score of at least CC should be maintained.

In Singapore, credit grading ranges between AA – HH, with AA being the best score.

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If your score is low, find ways to raise it before applying for any bank loan.

5.   Assessing all your lending options

When you ensure that your credit score is okay, it is time to research and come up with a list of banks, moneylenders, or financial institutions in Singapore that is viable to provide you the type of loan you require. Go for one that offers loans at low-interest rates and offers the most flexible approval guidelines.

6.   Maintaining proper financial records

If you are applying for a business loan, especially from a bank, it will make things easier when you maintain proper financial statements.

Banks or other financial institutions want to verify your balance sheet, cash flow statements, and income statements to find out whether you have the ability to repay the loan or not.

If you have not been maintaining these records, it is time to start. They could come of help in the future when you apply for a loan.

7.   Planning a presentation and making the appointment

If you want to convince the loan officer at your financial institution to consider your application for a small business loan and give it a second look, then make sure to present it in the best light possible.

It’s vital to set up a presentation of your business plan and application and compose a professional package with a narrative and any essential financial statements, spreadsheets, charts, and graphs.

Furthermore, include an Executive Summary as many loan officers read the Executive Summary first to decide whether they are interested. Take the appointment with your loan officer and ask for enough time to do a short presentation, with visual aids, based on your business plan. While doing that, be concise and organized.

More tips to help you qualify for your SME loan:

• Make sure that the annual turnover of your company is at least S$150,000.
• Maintain at least S$10,000 in your corporate bank account. Take care not to let it fall below that amount.
• Your company should turn a net profit. Or numbers should show improvement over the last two
• Reduce your company’s credit exposure. Pay off outstanding loans and other liabilities.
• Be ready to provide a personal guarantee for business loans as it is mandatory for company Directors in Singapore. To qualify as a guarantor, as a Director, you must have an annual income of at least S$30,000.

Wrapping-Up

As you can see, the process of obtaining an SME loan in Singapore is not that difficult. And with so many financial institutions, banks, and moneylenders out there, you are bound to find one that will be willing to fund you and meet your requirements. Just ensure to have a proper business plan, determine how to intend to spend your money, and make an accurate estimation of the amount you require.

Furthermore, it is essential to keep a good credit score at all times. You can check your credit score by paying a transactional fee of $6.42 at Credit Bureau Singapore.

Avail only what you can repay back in time, but don’t underestimate the amount lest you end up in a financial crisis in the future. Hopefully, the guide will help you to avail your SME business loan and move your business forward.