Most businesses have a large number of expenses and it is often difficult to predict when the customers will pay them the amount due. In some cases, the customer’s payment is delayed by a few days or weeks, due to which it is difficult to pay expenses. In other cases, funds are required for purchasing equipment. In all these cases, the business owner will usually prefer to take a business loan to get the funds required. In Singapore, banks and money lenders offer business loans. Hence the business owner should know how to compare business loans available to choose the right lender.
Purpose
One of the most important considerations while taking a business loan is the purpose for which the loan is being taken. Many businesses are taking a loan to improve their liquidity, cash flow and require working capital. In these cases, they can contact banks since the Singapore government is collaborating with banks to offer working capital loans of up to S$ one million to pay their expenses. There are also loans available at favorable terms for businesses that can help increase employment, and for startups that wish to purchase the equipment required.
Amount
Another factor that should be considered while applying for the business loan is the amount required and offered by the lender. The business should only take a loan for the amount it actually requires since it will pay high interest on the loan amount. Many lenders, especially banks, will only give loans above a particular amount since the processing charges and effort are high for a low-value loan. Also, the banks may not give large loans to new businesses, especially startups if they do not provide collateral since the startup may not be able to repay the loan.
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Interest Rate
The interest rates for the business loan will vary greatly depending on the lender. The government agencies working with banks will often offer business loans at below-market rates if the business is planning to use it for generating employment, research, or similar purposes. However, the business will have to meet the eligibility criteria and provide suitable documents to get the concessional interest rates. In some cases, the bank may reject the business loan application since it is very risky, in which case, the business may have to approach money lenders who may charge a higher interest rate.
Lender Profile
Businesses can get a business loan from different lenders like banks or money lenders. Since the process of applying for a business loan is time-consuming, the business should be aware of the major differences between the lenders. The banks will usually charge a lower interest rate and often get subsidies from the Singapore government. However, the time for processing a business loan application is longer, and they may not offer loans to high-risk businesses. Moneylenders will usually charge a higher interest rate from the borrower, but they can process the loan application quickly and may offer loans to all businesses, however risky they may be.