Loans for Start-Up Businesses

    Are you planning to set up a new start-up here in Singapore? You may be worried about how you will finance your entire plan. Established businesses and large scale businesses will have many options to fund their expansion plans and other financial requirements. However, start-up businesses tend to struggle to get appropriate loans especially if they have bad credit. Lenders tend to think that it is very risky to provide high amounts of money for start-up business purposes as they even haven’t started running their business. These lenders are of the opinion that small businesses may have unique ideas and strategies. However, they haven’t made any profits yet and hence, most lenders try to avoid funding operations of small businesses.

    Ways to Finance your Start-Up

    So, how can one fund his or her start-up business plan? You can read the following article to get a clearer idea about how to finance a small business. Here are some of the methods you can adopt:

    Hire-Purchase Loans:

    In the hire-purchase system, you can buy goods required for your start-up business by paying in installments. You will have to complete these installment payments within a certain period. In hire-purchase loans, your bank will provide you with money to purchase machinery, equipment, and other products needed for your business.

    Working Capital Loans:

    You can procure a working capital loan which is given for a short term. This loan can be utilised to fund the daily operations of your start-up business. You can use this loan for all activities until you start earning revenues. Most lenders consider start-ups as very risky and hence, they prefer to give working capital loans. Working capital loans can be secured or unsecured in nature.

    Different Types of Working Loans in Singapore

    Short-Term Loans:

    Short-term loans are given for a short period usually for one year or lesser than that. These loans can be utilised for paying bills and for purchasing inventory.

    Factoring Loans:

    Factoring loans are provided according to trade debts. In other words, you sell your account receivables to the factoring agent that is the bank. You do not have to give any collateral to the bank for this form of a loan.


    Overdraft refers to an immediate extension of credit given by a bank. When you choose an overdraft option, your business can overdraw the current account up to a certain amount as agreed with your bank. You will need to pay an interest only on what you have overdrawn.

    Microloans from Micro-Lenders & Non-Profit Lenders:

    You can approach a micro-lender or a non-profit lender to finance your small business plans. Generally, micro-lenders and non-profit lenders are ready to assist small business owners who are struggling with finances. These lenders will give you proper loan amounts that you need for your venture. With this, you can develop good credit history and this will help you to be eligible for other types of loans.


    In the past few years, crowdfunding has become a widespread mode of acquiring funds. There are many online campaigns and apps that allow the public to contribute money to a start-up venture. The contributors are rewarded either through gifts or through equity ownership. Crowdfunding is a great option for financing particularly if you want to experiment in the market.

    Credit Cards:

    You can also utilise credit cards to finance the activities of your small business. However, you need to bear in mind that funding a small business with a credit card can be very expensive. This holds true especially if you have a poor credit score. The reason for this is that banks fix your annual percentage rate depending on your credit score.

    Loans From Friends & Family:

    Have you considered taking a loan from your friends or family? You can meet the needs of your start-up business by taking funds from your friends and family who understand your special plans. You need to build trust in them by explaining your unique ideas and plans for the future. You need to talk to them with enthusiasm to explain that it will not be risky. Friendship or family loans do not require you to pay any collateral. The terms and conditions of the loan will be flexible in nature. You and your friend can make a mutual agreement regarding repayment schedule and loan period.

    Personal Loans:

    Have you ever thought that you can finance your small business with a personal loan? That’s right! Personal loans have both low and high loan amounts. You can choose your loan amount depending on the budget of your business.

    Venture Capital Firms:

    There are many venture capitalists here in Singapore. They financially assist start-ups in setting up their businesses successfully. These venture capital firms are dedicated to creating high-risk business portfolios.

    Angel Investors:

    Angel investors provide funds to both start-ups and entrepreneurs. They generally make one-time investments.

    Guidelines to Procure a Start-up Loan in Singapore

    You can consider the following points before applying for a start-up loan:

    Make a Good Business Plan:

    You need to draft a nice business plan by explaining the outcomes of your plan. This will help you prove that you know what you are talking about. Investors and lenders will be able to trust your ideas.

    Prepare an Estimate of your Revenues:

    When you have projected your future revenues, banks will decide what type of loan should be provided to you.

    Determine your Paid-up Capital:

    If you have a higher paid-up capital, it will be easier for you to secure a bank loan. A higher paid-up capital shows that the shareholders are very serious about the business.

    Repayment Ability:

    Show banks that you have great repayment ability. Banks decide if they should approve your loan depending on your repayment ability.

    Debt-Equity Ratio:

    Before approving your loan application, banks will evaluate your debt-equity ratio. They will make sure that your loan amount is reasonably good when compared to the amount you have invested in your start-up business.


    If your inventory has lesser finished goods, your bank can approve your loan as it denotes that there is no locked-up capital.

    Availability of Security:

    If you present a collateral or a security while applying for a loan, a bank can be more favourable. This is not true in all cases.

    Credibility & Financial Performance of Start-up:

    If the start-up business owner’s credit score, credibility, and goodwill are good, there are more chances of obtaining a bank loan for the start-up’s operations.

    You only need to focus on explaining to your lender that you can work hard and repay your business capital loan promptly. Sometimes, banks can take quite long to approve a loan. Therefore, you can approach your lender a few days before so that they have enough time to verify your loan application thoroughly. Prepare your loan application with care to avoid rejection of your application.

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