What is SME Micro Loan?
Enterprise Singapore is a government related agency that provides grants and SME financing schemes to small medium enterprises (SMEs) in an effort to spur growth and development amongst small businesses in Singapore. While Enterprise Singapore does not lend out any money, they serve to bear 50% of all loan default risks.
The SME Micro Loan scheme, which is a small business loan program in Singapore, is targeted at businesses that are relatively younger and smaller. If conditions are met, an SME may take up to $100,000, which is payable over a 4 year tenure.
For businesses that have been in operations for less than 3 years, Enterprise Singapore stands in as a guarantor for up to 50% of the credit risk. This would open up the micro loan to emerging businesses that are usually seen to have high default risk. Emerging businesses make up 90% of all local enterprises.
To qualify, businesses must be registered and operating in Singapore. They must have a minimum of 30% local shareholding. Annual sales should be less than S$1 million or employed less than 10 workers. Group annual sales must be less than S$100 million or group employment size must not be more than 200.
Maximum Loan Amount
At the very least, companies should meet the following criteria:
- Registered and operating in Singapore
- At least 30% local shareholding
- Annual turnover not more than S$1 million
- Not more than 10 employees
Why Should I Get SME Micro Loan?
One of the safeguards of the SME Micro Loan is that the applicant entity has to be at least 6 months old and in active operations. If you happen to be starting up a business, or are in urgent need of funds to commence a project or purchase an equipment, it is likely that the thought of obtaining the funds is still the only thing that you can focus on.
While there may be many other alternative sources of funding, this small SME loan is still the most sought after. It was structured to be a helping hand to SMEs that were going through a dry season, and therefore, was specifically tailored to be generous, long term, and very affordable.
The SME Micro Loan is the most popular and cost effective financing for small businesses. This should also mean that the number of applications for the Enterprise Singapore SME loans must be overwhelming, which could make the application process a little longer.
Either ways, before jumping into a loan commitment, ensure that you have already seen and understood all the other available products, so as to choose the right product for your business.
How To Qualify For SME Micro Loan?
While the conditions and requirements to qualify for the small business loan varies from bank to bank, there are a few general guidelines to follow.
Typically, banks determine if a business is eligible based on a few criteria — revenue, cash flow, age of company, existing credit exposure.
- Revenue – Turnover of company to be at least S$200,000 and above.
- Cash flow – Daily average balance of at least S$10,000 maintained in corporate bank account over last 4 – 6 months.
- Age of company – Registered and operating for at least 6 months
- Existing credit exposure – Amount of outstanding business loans
Most banks maintain a list of industries that they avoid lending to, which is subject to change, depending on the economic outlook of the particular industry. As long as your business does not fall into any of the industries on the list, your company is eligible to apply for the loan, albeit still subject to the credit approval of the banks.
Generally, most financial institutions and banks consider applicant companies to be qualified for the SME loan if they have been operating for at least 6 months, have a revenue of at least S$300,000, maintain strong cash flow, and do not have too many existing business loans. It also helps significantly if the director of the business has a healthy credit history.