An SME loan is business financing extended to a small or medium-sized enterprise, usually by a bank or other financial institution. The money is borrowed by the company, not by the owner personally, and is repaid from the business over an agreed tenure.
In Singapore, the term usually refers to financing offered under, or alongside, Enterprise Singapore’s Enterprise Financing Scheme (EFS). Under that scheme the government shares part of the default risk with participating banks, which makes banks more willing to lend to smaller companies. The bank still assesses the application and makes the credit decision.
What counts as an SME in Singapore?
Enterprise Singapore defines an SME as a company with group annual sales of up to S$100m, or with no more than 200 employees. Scheme financing also has its own criteria, for example at least 30% local shareholding held directly or indirectly by Singaporeans or Singapore PRs.
Source: Enterprise Singapore, Enterprise Financing Scheme. Published figures may change.
What types of SME loan are there?
“SME loan” is an umbrella term. The facilities Singapore SMEs most often come across are:
- SME Working Capital Loan — an unsecured facility under EFS for day-to-day operations, of up to S$500,000 per borrower with a repayment period of up to 5 years. See what the SME Working Capital Loan is.
- Business term loan — a lump sum repaid over a fixed tenure, often used alongside a working capital loan. See working capital loan vs business term loan.
- Trade financing — facilities tied to buying or selling goods, such as financing supplier payments or customer invoices. See working capital loan vs invoice financing vs supplier financing.
- Other EFS facilities — the scheme also covers fixed assets, projects and more. Which one fits depends on what the money is actually for.
Is an SME loan different from a business loan?
Not in substance. An SME loan is a business loan for a smaller company. The difference people usually mean is between scheme-backed financing, where Enterprise Singapore shares the risk with the bank and scheme criteria apply, and a bank’s own conventional business financing, which follows only that bank’s criteria.
For many SMEs the scheme-backed route is the practical one, because the risk-sharing widens what a bank is willing to consider. It does not mean the government approves or guarantees your loan. That distinction is explained in what “government-backed” actually means.
What does an SME loan usually require?
Every case is assessed on its own numbers and on the lender’s criteria, so nothing below is a guarantee of eligibility. Typical minimum requirements are:
- A Singapore-based business with legitimate commercial activity
- At least 6 months of active revenue visible in the company’s bank statements
- At least 30% local shareholding, with that local shareholder or director able to come on board as Personal Guarantor
- Directors or shareholders acting as Personal Guarantor generally providing their latest 2 years of personal Notice of Assessment
The full picture, including what banks look at beyond the basics, is in SME loan requirements in Singapore, and the paperwork is in documents needed for an SME loan application.
What does an SME loan cost?
For SME Working Capital Loans, current market pricing is generally around 3–4%+ simple interest per annum as an indicative guide, and higher for certain companies. The actual rate is set by the participating bank and confirmed after approval. For the full picture, including fees, read how much an SME loan costs in Singapore.
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.
