30 April 2024

How to Get Small Business Loans in Singapore (with Risk Sharing)

Small to medium enterprises (SMEs) often experience challenges when starting out, with capital being an especially large concern. Balancing the need to maintain operational costs, fund expansions, and ensure their cash flow stability can be daunting to business owners.

In light of this, obtaining a small business loan can be of major benefit to SMEs, offering them a path to further growth and development. In this article, we break down the steps to securing these loans, and explain how they lower financial risk and aid your business.

When Can a Business Loan help you?

SMEs often require substantial capital when starting out, with many pivotal moments when large amounts of funds may be required, such as at the point of setting up or for growth and expansion.

• Starting Up: During its initial stages, an SME might require substantial capital to cover setup costs, such as leasing spaces, purchasing equipment, or procuring inventory. At this juncture, many businesses may not have access to immediate cash flow, and a business loan for a young enterprise can provide the necessary funds to cover these substantial upfront costs; thereby allowing the business to take its first steps without depleting its reserves.
   
• Continuous Growth: Moving past the start-up stage, SMEs also require constant growth and business expansion. This could entail opening new locations, expanding product lines, or upscaling operations. Securing a loan, and thus extra capital, can provide valuable resources needed to carry out these plans.
   
• Emergencies: Unforeseen circumstances or economic downturns can place an unexpected financial burden on SMEs. Having access to a loan during these periods can serve as a buffer, aiding them in recovering from rough patches and covering unanticipated operational costs. In general, having the capability to take these loans can safeguard an SME's long-term viability.

Risk Sharing: How Do SMEs Benefit?

Securing this small business loan can be a pivotal step for business owners hoping to scale up or enhance their operations. However, financial institutions may sometimes be reluctant to lend to SMEs due to the risk involved. Through risk sharing, however, RHB is able to offer more to applicants and provide benefits to both parties.

Risk Sharing is a concept where a third party, often a government entity, agrees to absorb a certain percentage of the loss in the event that a borrower completely defaults on a loan. While the borrower is still responsible for repaying the full amount, this initiative protects the financial institution in the event that the borrower files for bankruptcy and is unable to repay the full loan amount. The percentage amount ranges from 50%, and may go up to 70% between Enterprise Singapore and the financial institution, subject to Enterprise Singapore’s eligibility criteria and final decision.  

• Lower Financial Burden: Where risk share systems are present, financial institutions are more comfortable with offering loans to businesses, as there is a government guarantor safeguarding the loans.  
   
• Enhanced Access to Capital: Small businesses, especially young enterprises and those in niche markets, might find it challenging to secure financing through traditional means due to perceived high risks or lack of a proven financial track record. Risk sharing agreements can increase these businesses' access to capital, as financial institutions are more willing to provide loans when the risk is not fully borne by them alone.
   
• Improved Loan Terms: As risk sharing lowers the risk to the lender, they are able to offer more favourable terms, such as increased loan amounts, reduced interest rates, and more flexible repayment methods. This makes it particularly appealing to small businesses, who would benefit greatly from these concessions.
   
• Encouragement for Business Growth: With the financial safety net that risk sharing provides, businesses are able to pursue growth options, such as expanding operations, entering new markets, or investing in development. Having access to these loans encourages businesses to grow and expand, resulting in increased success rates for SMEs and young enterprises.

Ultimately, the goal of securing a small business loan could be crucial in propelling your business forward. Using these loans as a tool for growth could set your business on the path to success.

How Do I Get A Small Business Loan?

In order to be eligible for a SME Working Capital Loan from RHB, a business must meet the following conditions:

• Singapore Registered Business: The enterprise must be a Singapore registered entity with substantial functions based in Singapore.
   
• ≥30% Singaporean-owned: The enterprise must have at least 30% local equity held directly or indirectly by a Singaporean and/or PR.
   
• Considered an SME: The enterprise must have a group revenue of up to $100 million, or a maximum of 200 employees. 

Small Business Loan Application Process With RHB

Securing a SME Working Capital Loan from RHB is made simple with the Enterprise Singapore Incentive Management (ESIMS) portal. There are two ways to apply:

• You can reach out to us directly, and our dedicated relationship managers can apply for an Enterprise Financing Scheme - SME Working Capital Loan (EFS-WCL) on behalf of your business.
   
• Businesses may apply directly for the EFS-WCL on the ESIMS portal using their CorpPass. By selecting "RHB", the application will be automatically forwarded to us. A relationship manager will then contact you for the necessary documents for submission.
   

All applications for risk sharing SME business loans partnered with Enterprise Singapore will need to be done via the ESIMS portal. You can find more information on these loans here.

RHB - Small Business Loan Provider

RHB offers a suite of financing solutions to support small businesses on their journey towards growth and financial stability. Through RHB’s SME Working Capital loan, backed by Enterprise Singapore, entrepreneurs can access financing of up to $500,000*, with a flexible tenure of up to five years*. This empowers businesses to expand without the immediate pressure of short-term repayments.

In addition to loans, RHB provides businesses with other financial solutions. Enjoy higher interest rates with BizPower Quad+ Current Account, SGD Fixed Deposit Account and Foreign Currency Fixed Deposit Account. Manage your daily business transactions with easier control of your finances via RHB REFLEX.

Business owners looking to leverage these benefits can contact us today to discover the range of financing solutions we can offer.

*Figures mentioned are accurate at the time of publishing.