Equipment Financing Singapore (2020)
In many industries like construction, engineering or lumbering, business cannot operate without the necessary equipment. Whether your business sells a product or provides a service, you will need to have the proper equipment to keep the business in operation.
Over time, equipment will need to be fixed, maintained or replaced, which can cost a lot of money and put a strain on your company’s cash flow, especially for specialized equipment that serve a niche industry.
However, with equipment financing, you will be able to get the equipment that your business needs and protect your company’s cash flow at the same time.
What is Equipment Financing?
Equipment financing is a business financing product that provides a business with capital to purchase equipment. In Singapore, most lending institutions will provide you with up to 90% of the equipment’s purchase price or valuation.
The equipment will serve as collateral for the equipment loan. This means that if you fail to repay the loan, the lending institution reserves the right to seize the purchased equipment, where it will liquidated to repay the balance of the outstanding loan amount plus any additional costs. Essentially, equipment loans are business loans with collateral.
An equipment loan is usually a fast and convenient way of securing financing for most types of equipment. Equipment loan interest rates also tend to be lower than a business term loan because it is a secured loan.
- Loan Amount: Up to 90% of equipment value
- Repayment Period: 1 – 5 years
- Interest Rate: 1.8 – 2.8% per annum
- Fast access capital
- Low interest rate
- High chance of approval as equipment serves as collateral
- A lot of paperwork
- Equipment could become obsolete by the time loan is repaid
- Lending institutions can be stringent about the type of equipment they are willing to finance
How to Qualify for Equipment Loan?
Most businesses can qualify for equipment financing in Singapore.
The real question is HOW MUCH can you qualify for? That will be largely dependent on the type of equipment you want to purchase, cash flow of your business, current financial commitments, your company’s financial history and your personal credit rating.
If your personal credit rating is less than ideal, there is still a good chance of approval as an equipment loan is a secured loan. On top of that, you could also offer to include an additional guarantor to the loan.
The truth is that most lending institutions are mainly concerned with the equipment that is securing the loan and your company’s cash flow. If the equipment that you want to purchase is essential to the business, value-retaining and resalable, most financial institutions will be willing to work with you.
How to Apply?
An equipment loan is relatively easy to apply for, depending on the financial institution that you are working with. Most financial institutions will request for the standard documents that will reflect the financial health of your business, existing credit exposure and your personal credit rating.
On on of that, you will also need to provide all the information about the equipment that you want to purchase and a quotation from the equipment vendor that reflects the equipment cost.
Required Documents for Application
Documents to prepare:
- Bank statements over the last 6 months
- Financial statements over the last 2 years
- National Registration Identity Card or Passport
- Income tax documents
- Credit Bureau Report
- Equipment quotation from vendor
How Does it Work?
An equipment loan is extended to a business that needs to purchase equipment such as a crane, computers or any other machinery, but does not have sufficient cash flow to secure the purchase.
In most cases, an institutional lender or bank will extend an SME loan of up to 90% of the equipment value or purchase price (up to 100% in some cases) to front the cost purchasing the equipment. Your company will then repay the equipment loan, with interest, on a monthly basis over a period of up to 5 years.
Largely dependent on the financial health of your company, your personal credit rating, existing financial commitments of your business and cash flow projections, there are many banks and institutional lenders in Singapore that offer a wide variety of financing products for equipment.
What is equipment financing?
Equipment financing is the use of a term loan to purchase an equipment, where the equipment will be collateral.
How does equipment financing work?
You will first need to have a purchase quotation of the equipment you want. If approved, an equipment loan will be disbursed directly to the seller of the equipment. Banks will usually lend up to 80% of the quotation value.
What are equipment loan interest rates?
Interest rates can vary from about 1.8% to 2.8% percent annually, depending on the lending institution that you are working with.