An SME loan is a business loan for a small or medium-sized company, so the two are not different products in themselves. The difference that matters in Singapore is between scheme-backed SME financing, where Enterprise Singapore shares the default risk with the participating bank, and a bank’s own conventional business financing, where only the bank’s criteria apply.
Scheme-backed SME financing
Under the Enterprise Financing Scheme, Enterprise Singapore absorbs a share of the loss if a borrower defaults. That makes participating banks more willing to lend to smaller businesses that might otherwise sit outside their appetite.
- Scheme criteria apply on top of the bank’s own, for example at least 30% local shareholding and the SME size definition
- The best-known facility, the SME Working Capital Loan, is unsecured, up to S$500,000 per borrower, with a repayment period of up to 5 years
- Directors or shareholders may still be asked to give a Personal Guarantee
- The bank still assesses the case and makes the credit decision
Source: Enterprise Singapore, Enterprise Financing Scheme. Published figures may change.
Conventional business financing
A bank can also lend to a business on its own terms, outside a government scheme. A business term loan, for instance, is a lump sum repaid over a fixed tenure. The criteria, amount and pricing follow the bank’s own credit policy.
Depending on the company’s profile and requirement, a business term loan or other facility may be considered alongside a Working Capital Loan, which is one way a business may raise more than a single facility allows. See how much your business can borrow.
Which one should you apply for?
It depends on what the money is for, how much you need and how your company’s profile fits each bank’s criteria. Many SMEs use scheme-backed working capital financing for day-to-day needs, and combine it with other facilities where appropriate. The comparison is laid out in working capital loan vs business term loan.
Whichever route fits, approval is never guaranteed: every case is assessed on its financial position, revenue, liabilities, credit profile, ownership structure and the lender’s criteria.
Is a government-backed loan approved by the government?
No. Scheme financing is government-backed, not government-approved. No government agency approves your application; a bank does. See what “government-backed” actually means.
Speak to us about your financing requirement
At Cornerstone Capital Services, the initial assessment is free. Send us your company name, approximate amount required and purpose of funding, and we will tell you whether there is a financing case worth pursuing and which routes may be suitable.
Speak to us or read How It Works.
