Cash woes? A personal loan to the rescue!

    Loans for Start-Up Businesses

    One of the most commonly stated reasons for the failure of unsuccessful startups is the lack of sufficient capital. This might not be something you want to hear if you are working on starting your own business. But it is imperative that you know what pitfalls to avoid. Working capital helps to sustain business activities, especially in the beginning. As an entrepreneur, you need to know the importance of having a sound financial strategy before you start your company.There are multiple loan options available to startups in Singapore, giving you the necessary injection of cash to finance your business.


    Home Equity Loans

    If you either partially or fully own a private property in Singapore, you may be eligible for a term loan or a low-rate home equity loan. This can be used to fund your startup.

    • The borrowing amount depends on the current market value of your property and outstanding home loan amount.
    • There is the risk of losing your home if you’re unable to pay back the loan in time.

    Raising Equity Funds

    Selling equity in your startup is a good way of bringing in some cash in exchange for partial ownership.

    • You need to prove to potential investors that you have a strong business plan, prudent financial projections, capable management team, optimum growth potential, and clear exit strategies in place.
    • Investors have to be paid dividends on the shares held by them in your business.
    • Dividend rates are often lower than bank loan rates but depend on the profitability of your business.
    • If profits are high, the dividend payout will be higher.
    • If there are no profits, you are not obliged to pay your investors any dividend.
    • Equity funding does not require creditworthiness or collateral.

    Funds From Angel Investors

    Angel investors are either individuals or angel networks that invest in promising startups in exchange for a share in the business.

    • They also contribute their skills and expertise.
    • Some may continue as sleeping partners while others continue playing active roles in the business.
    • They are usually businessmen with years of experience.
    • They often prefer investing in business ideas and startups that have high growth potential.
    • Individual investors usually offer sums between S$25,000 and S$100,000.
    • Angel groups offer larger sums between S$250,000 and S$750,000.

    Private Funding

    Many private financial institutions like banks, investment companies, etc. offer loans to help finance startups.

    • They are not involved in running your business. You have complete autonomy of your company.
    • A rate of return in the form of interest (between 7-12%) is charged on the funds provided.
    • They may not be the ideal choice for small startups since the interest rates are high. Choose this option only if you have no other choice.

    Venture Capitalist Funding

    Venture Capital funding involves getting funds from professional investors who themselves look to invest their clients’ monies in highly profitable businesses.

    • The investors are involved in your business, offering their expertise in operational matters.
    • You get advice on how to increase profitability.
    • Investments are given for a period of 2 to 5 years.
    • Investors seek very high returns of up to 25%, making them largely unsuitable for small startups. But if you are certain of providing these returns, this may be a viable option.
    • This funding is primarily targeted towards startups in high growth sectors such as nanotechnology, IT, and biotechnology.

    Loans From Family and Friends

    This is probably the easiest and most convenient way of financing your business.

    • Most common method of funding.
    • These loans bear cheaper interest rates and are flexible in terms of repayment.
    • They are usually based on verbal agreements, so it would be wise to have a written agreement in place.


    This type of funding for startups has grown in popularity over the years in Singapore.

    • Funding platforms match startups that need finances with potential investors.
    • Loans could get approved in less than three days.
    • Borrowing power depends on your credit rating.

    Government Backed Loans

    The government of Singapore has started a number of loan schemes that offer to fund startups along various stages of their growth.

    • SME Micro Loans of up to S$100,000 to cover daily operational expenses and upgrade equipment.
    • SME Venture Loans up to S$5 million for working capital, project financing, asset purchasing, etc.
    • SME Equipment and Factory Loans of up to S$15 million to help purchase premises and upgrade factory equipment.
    • SME Working Capital Loan up to S$300,000.
    • All these loans have varying time periods, interest rates, and eligibility criteria that your business must fulfil in order to get the funding.

    Whatever your source of funding, the money borrowed has to eventually be repaid. Investors always look for the credibility of the business and repayment assurances before they release the funds.

    Guidelines to Get a Loan for Your Startup

    • Prepare a strong business plan: Having a good business plan proves to investors that you are sure of your idea and the game plan you have in mind. It helps build trust with investors.
    • Make revenue projections: Revenue projections show the profitability that the business expects to get over a particular time period. Make sure that these projections are prudent and realistic, and not exaggerated.
    • Debt-equity ratio: This shows how much debt your business is already under. Banks generally offer funding based on this assessment.
    • Make the management framework: Even if you are newly starting a business, it is good to structure the management and show that you are recruiting competent personnel to ensure the growth of the startup.
    • Security and collateral: You may find it easier to get a loan from a bank if you have sufficient security. This, however, may not apply to other sources of funding.
    • Prove repayment ability: This is the main concern for most investors. If you can convince them that you will be able to repay them in time, you should have no trouble getting the finances you need.

    Startups need finances to stay in the game. With a whole lot of funding options available, it comes down to sizing up your business and estimating your financial needs. Banks usually take a week or so to process your loan. Apply a few days in advance so you can get the necessary funds in time.

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