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Here at Air Force Small Business Programs we create a culture that looks to small businesses first for innovative, agile, and affordable solutions to meet our war-fighter needs. To maximize small business opportunities within the Air Force acquisitions, thereby (a) promoting efficiencies and innovation, (b) fostering competition, and (c) expanding the defense industrial base.

Applying for a business loan seems like an issue for many individuals in Singapore, especially with those within the borrowing limit. The system is even more rigorous when it comes to business loans as the economy is always working towards the betterment of the financial system, and a failed business is always bad for it.

With the ever-changing position of Singapore in the global economy, doing business is tough in the country. With the high land cost filters tanks into high operating costs for all companies operating in Singapore and with high operating costs comes low realized business profits.

Nowadays, banks and licensed money lenders from Filife are focused mainly on the market economy. This means that it requires a more extended period for them to adjust based on market prices giving rise to a disparity between loan approvals and the market economy.

For business owners, the rule is simple: whenever you see a golden opportunity where banks are more inclined to help you, and they have been approving loans here and there, you must take advantage of it.

The System of Business Loans In Singapore

The system of business loans in Singapore is a unique one with a unique set of characteristics.

First, it applies to both SME bosses and individuals. The minimum income requirement is at $120,000 and above.

Second, it requires that the directors are guarantors of the debt. The truth of the matter is that there are a lot of business owners may look very proper and act as if they have a lot of resources, but they often have a lot of financial troubles.

The reality is that in business, whether people admit it or not, people are in a lot of pickles. Customers are paying a little later than expected; suppliers are caught in the middle, and businesses are busy chasing companies for payment.

The primary way to address this problem is the requirement that directors would become guarantors to loans. The directors should always be liable to all kinds of loan that the company would take.

The Reality: Business Loans Are Hard To Get

The reality of the current state of Singapore’s business loan system is grim. SME Business loans are getting harder to approve. The requirements set for SMEs is quite stringent and rigorous.

  • The paperwork imposed requires a lot of submissions.
  • The process itself takes about one week to 1 month.
  • The SMEs need to provide proof that they have made a profit in many instances before their loans get approved.

Another reality is the fact that business loans are not enough to sustain a business, especially if it is not making as much profit as it would want to.

There are a lot of businesses who would want to get approved for the maximum amount of money the banks, financial institutions, and licensed money lenders offer, but that is no longer applicable to many.

When the economy is in a tank, and most businesses are suffering from unrealized profits, financial institutions are less likely to approve individuals and companies for the maximum value of the loan. Hence, there is a huge funding gap that most companies are unable to fulfill.

Another reality that businesses are facing is the fact that banks often need a minimum loan amount to make the loan application worthwhile.

In 2018, most banks required businesses to take out a minimum loan of $60,000 to $80,000. This is to address the reality that it costs almost the same to administer a $60,000 loan versus a $20,000 loan, and the bank covers some of the costs while they would get only a small amount in return since the loan value is small.

Hence, while most of the businesses in Singapore may qualify for $20,000 loan, they get rejected because the internal policy of the bank requires them to lend a minimum of $60,000.

Another reality faced by the financial system is the fact that to qualify for a loan, the individual must have a minimum income of S$120,000. For those with income below that threshold, a borrowing limit has been set by the MAS. The borrowing limit is already at the final phase for 2019.

Are There Alternatives For Business Loans?

Yes, given the impact that the stringent requirements of business loans have, there are a few alternatives that have been created for those who want to focus more on their business, such as:

  • Spring Micro Loans;
  • Spring Working Capital Loans;
  • Personal Loans; and
  • Collateral Loans.

What lesson could businesses learn from the stricter loan applications?

Due to the stringent requirements, it becomes harder and harder for individuals and businesses to obtain the loan they need. Businesses may want to checkout Smart Loan when they need cash. SmartLoan.sg showcases some of the most reputable licensed moneylenders in Singapore.

Fortunately, this specific brand of strictness is second nature to Singapore, and its citizens have learned to accept it as a reality of their life and living. The end goal is to create a sound financial policy for a more stable financial system. It may be a little more burdensome than what most would expect, but it is for the whole society.