A Complete Guide to SME Working Capital Loan in Singapore


Finance solutions from legal moneylenders in Singapore have always served as a cushion for many companies, organizations and individuals to avoid bankruptcy. Reality wise, surviving your day by day business operations, not to mention daily living expenses, is quite difficult in a demanding economy such as ours. Firstly, there is the presence of an already saturated competition. Whether you are starting up a business or working on owning your new home, there is always competition that will raise the bar of demands higher than one can simply afford. Another thing is that, when you start to enter an industry or plan to buy a property, you’ll be faced with a lot of challenges and financial difficulties. Inflation, price hikes, emergencies, among other things will keep you barely floating in the scheme. Thus, the need for financial assistance is inevitable.

There are as many types of financial solutions being offered by moneylenders in the market as the needs of the people. Financial solutions, after all, are designed to answer most of the financial difficulties an individual typically encounters. For this article, we will focus on the SME working capital loan, what is it, the benefits of getting one, the things to consider before applying for one, and where should you get such a loan. First, let’s define SME.

Small and Medium Enterprises Defined

Different countries have different ways of defining SME. In plain terminology, SME refers to what is considered a small to medium enterprise in a given country. Thus, it is the businesses that do not qualify as huge corporations or those who can fluidly compete in the global market. However, since there are various financial capabilities present in every country, the technical meaning of SME varies. For instance, since April 2011, Singapore has changed its definition of SME so that these enterprises belonging to such a category will enjoy the same perks being offered to those that belong in the SME category.

To better understand this concept, here’s the present versus the previous definition. As per the Ministry of Trade and Industry, an SME is defined as a company with annual sales of less than S$100 million and fewer than 200 employees. This would replace the present definition of an SME as a company with a fixed asset investment of less than S$15 million and fewer than 200 workers. When medium-sized enterprises that earn S$50 million or more a year is not considered as SME before although they fit the qualification in terms of the number of employees, that entails that the loans being offered to help the SME owners will not be granted to them. Thus, the changes in the definition allow more companies to benefit from SME loans in Singapore.

Characteristics of SME

Most SMEs in Singapore are local goods distributors or manufacturers. They have relatively low capital requirements and do not typically earn as much as large corporations do. However, SME is considered the future of the microeconomy. It is because the gross domestic income of a country is being raised by SMEs. Thus, the government and other private financial institutions are helping SME owners to survive the market and prosper in their chosen trade.


What is SME Loan?

There are various bodies that are helping small and medium enterprises in their journey towards market stability. One of which is the government. The Singapore government provides many programmes and policies to help SME owners in their businesses. Other ones are the private sectors such as the banks, financial institutions, and SG moneylenders. In a way, one can say that the most popular form of help to the SME sector is through SME loans.

SME loans are specialized loans that enable SME owners to get financial assistance through a legal and transparent process. More often than not, SME loans have low-interest rates compared to other business loans and are payable for longer periods.

It is also important to note that SME loans are meant to support a small or medium business. Thus, the loaned money must be used to get through the financial difficulty of the business and not for any individual’s interest.

In a way, SME loans are a good strategy to teach startup entrepreneurs how to handle finances. One of the most common forms of SME loans is the SME working capital loan.


What is an SME working capital loan?

An SME working capital loan is a loan used to fund a small business’s day-to-day operations. These SME loans are used to provide working capital to fulfil a company’s short-term operating demands rather than to purchase long-term assets or investments.

As the name suggests, this loan is meant to be used solely for working capital. Thus, it must not be used to buy corporate vehicles or invest in a profitable scheme. Understandably, SME owners will fall short in many finances involving business operations. As a startup company, there will be problems like a shortage of capital funds, low income, or shortage in the funds for salaries. This is what SME working capital loan is trying to address. Payroll, commercial space rental fees, and debt payments are examples of such expenses. Working capital loans are essentially corporate debt borrowings that a company uses to fund its day-to-day operations.


Where should you get an SME working capital loan?

The Singapore market is tough for starting business owners. It demands you to brave yourself and develop the skills necessary to compete in a long term business. Business skills such as risk-taking, being responsible, keeping a positive outlook, and the ability to operate under pressure should be honed to make it through the saturated market. For an SME owner that has just started his career in entrepreneurship, finding a reliable financial partner is very crucial. If you find yourself considering an SME working capital loan to support your business, there is nothing to be ashamed of. It is inevitable and something that you should experience to improve. However, finding the best moneylender during such a tough time is essential to your success. You must look for a financing institution that will lift you instead of pulling you down.

Apply Loan SG is an established financial institution that offers many effective and affordable financial solutions to meet the capabilities of SME owners. Should you wish to know more about our solutions? Visit us today!