What are Grants & Loans Available for SMEs in Singapore

What Are Grants Loans Available For SMEs In Singapore

Singapore is best known for providing favourable working conditions for small and medium enterprises. Some of the tax credit and incentives available to SMEs include investment allowance, pioneer tax incentives, merge, grants and acquisitions allowance and many more. Recent research indicates that the SMEs employ two-thirds of the total workforce in Singapore.

The government has gone an extra mile to offer grants and loans that are meant to help Singapore companies thrive and overcome common obstacles such lack of enough capital to support their daily operations.

Below is a comprehensive review of grants and loans that you can take advantage of to establish or grow your business in Singapore.

Grants for SMEs in Singapore

Productivity and Innovation Credit (PIC)

Productivity and Innovation Credit is a grant that was created by the Inland Revenue Authority of Singapore. Singaporean businesses who meet the set requirements can enjoy tax deductions, PIC bonuses, and Cash Payouts. It supports development and research, acquisition, registration, intellectual property, approved design projects, automation equipment cost, and training of personnel and approved design projects.

Eligibility: Sole proprietors and Singaporean companies

How PIC works? In this scheme, businesses can get up to 400% tax deductions totalling $400,000. Alternatively, they can opt for 40% cash pay-out of a maximum of $100,000. It is important to note that the PIC scheme expires immediately after the Year of Assessment (YA).

ACE Startups

Government agency, SPRING Singapore, is mandated to manage ACE Startups Scheme for all first-time entrepreneurs who have innovative and implementable business ideas. Concisely, the scheme provides not only mentorship support but also capital grant to the entrepreneurs. To ensure that only qualified persons benefit from this grant, Accredited Mentor Partners (AMPs) is authorized to vet and select all applicants. AMP also provides networking contracts, professional advice, and learning programs to the startups.

Eligibility: First-time entrepreneurs who are Permanent Residents or Singaporeans automatically qualify for this scheme. AMP also considers the uniqueness of the business idea, the feasibility of the business model, potential market value, and the management team.

How the scheme works: Simply put, for every $3, entrepreneurs, or startups that qualify get $7. At the moment, the scheme is capped at $50,000.

Early Stage Venture Funding (ESVF)

Initial Stage Venture Funding is an initiative of Singapore government that is meant to support Enterprise and Innovation. This is the largest equity scheme in the country that co-funds Venture Capital firms and startups in various industries. A majority of the beneficiaries are early-stage technology startups that are currently based in Singapore.

NRF (National Research Foundation) provides $100 million to startups that qualify for this program on a matching basis. It is also important to note that venture capital firms are given an opportunity to buy NRF shares within five years.

Eligibility: Startups in the technology sector

How it Works: Startups that qualify are co-funded by National Research Foundation with up to $10 million with approved Venture Capital firms. Eligible businesses in the technology sector can get a grant of up to $3 million through this scheme.

Financial Sector Technology and Innovations Scheme (FSTI)

Momentary Authority of Singapore created financial Sector Technology and Innovations Scheme with the primary goal been to support innovations. So far, MAS is estimated to have invested more than $225 million in this grant scheme. One of the main purposes of this SMEs grant is to give financial institution the financial capability they need to establish modern innovation labs in the country. The scheme also aims to support the development of technology infrastructure and innovation solutions.

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Eligibility: Singaporean Financial Institutions (FSIs), technology startups, and solution providers working with accredited financial institutions in Singapore.

How it Works: Momentary Authority of Singapore funds 50%-70% of the total calculated qualifying costs. The total funding should not exceed $200,000 and the funding period is capped at 18 months.

ComCare Enterprise Fund

ComCare Enterprise Fund is one of the new grants for startups provided by the government. It was created to provide capital to social entrepreneurs who have credible and implementable business ideas. It is managed by the Ministry of Social and Family Development, and the primary objective is to support social enterprise startups. Startups that have been operating for at least two years can apply for this grant.

Eligibility: All Social enterprise startups that major in training and hiring Singaporeans who have special needs

How it works: ComCare Enterprise funds 80% of the total capital expenditure and operating costs of up to $300,000 during the first two years.

Capability Development Grant

Capability Development Grant is a unique scheme by the government meant to offer the much-needed financial support to SMEs. The primary objective is to build capabilities in specific areas of business such as the cost of certification, training, cost of purchasing equipment, and consultancy.

SPRING Singapore manages this grant and SMEs that have plans to develop new products under CDG program can apply. If approved, the SMEs can get funding of up to 70% of the total cost of designing the new products, developing, and manufacturing process.

Eligibility: SMEs that is already incorporated and operating in Singapore

How it works: As mentioned earlier, qualified startups can get up to 70% of the total cost of designing and developing the new product. The maximum eligible startups can reach $30,000.

Technology Enterprise Commercialization Scheme (TECS)

Technology Enterprise Commercialization Scheme is a grant offered by Singapore government to help SMEs bring their technology-based business ideas into reality. That is, the scheme focuses on assisting entrepreneurs to scale up their business past the seed stage and then get funding from other third parties to achieve their set growth rate and revenue. TECS is one of the common two-tier startup funding grants in Singapore.

Commercial merits and technicality of the idea are two of the primary factors that are used to determine which proposals qualify. Since its inception, TECS has proven to be immensely important to SMEs that already have strong technology intellectual property and business model.

Eligibility: Companies/businesses that are registered in the country and have been operating for less than five years, IP based and offering technological solutions that commercially viable.

How it works: Proof of value at $500,000 and Proof of Concept at $250,000

Loans for SMEs in Singapore

  • Accounts Receivable Loan

Accounts Receivable Loan is a working capital loan that is taken out depending on an SME account receivables such as cash or invoices owned by clients to the company. Two of the primary factors that are used to determine the loan limit include the age of the receivables and the total amount owed. In most cases, the financial institution usually gives SMEs an accounts receivable loan that is equivalent or less than the receivables value.

One of the benefits of this loan is that it improves cash flow by resolving the problem of cash trapped in unpaid invoices and debts.

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  • Merchant Cash Advance Loan

Merchant Cash Advance Loan is very similar to the Accounts Receivable Loan as it entails exchanging future assets for immediate cash. The main difference between the two loans is the asset that is traded in. For merchant cash advance loan, the future credit card sales are used to get the loan. The newly acquired upfront working capital can be used to support daily expenses such payment of wages and purchase of raw materials.

Daily deductions that are a specific percentage of the total amount loaned are used to repay the loan. For example, the startup can agree with the merchant to deduct 20% of the daily credit card sales until the loan is repaid in full. It is also important to note that this kind of loan is only available to businesses that allow customers to make credit card payments.

  • Trade Credit Loan

Trade Credit loan allows Singapore SMEs to delay payment for services and goods. The financial institution or bank pays the suppliers upfront thereby giving the businesses an opportunity to use the goods for sales and manufacturing purposes. This kind of financing has proven to be very helpful for companies that are only to pay after cash inflow from product sales.

If the business is unable to repay the trade credit loan on time, the Singapore lender or financial institution apply Trust Receipt concept.

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What is Trust Receipt? Simply put, this is an arrangement that allows the SME to repay the loan on an instalment basis.

  • Business Term Loan

Business Term loan is one of the easiest to understand working capital loan option available to businesses in Singapore. The loan is repaid in a straightforward, structured way that is agreed upon by both the business and loan provider. Concisely, the credit is offered with a fixed repayment period that is usually 1-5 years.

The interest rate on this kind of SME loan for Singapore business can be either variable or fixed – it all depends with the financial institution’s terms and conditions.

  • Overdraft/Line of Credit Loan

A line of credit loan or bank overdraft is considered one of the most flexible ways small and medium enterprises in Singapore can get financial support from an individual lender or the bank. One of the highlights of this financial option is that it allows the business to benefit from cash supply within the limit set by loan providers for working capital. Overdraft loan also gives business a certain degree of repayment flexibility as they can repay the loan at any point without incurring an early repayment penalty.

The only caveat is that the overdraft is subject to an annual review by the financial institution. The business is required to return the difference in amount after the yearly review to the bank immediately. Failing to do so can affect the credit record and score of the company negatively.

Let us go a step further and look at five reasons why SMEs in Singapore need working capital loans and financial support from the government through grants and schemes.

Cash Flow Challenges

SMEs especially young start-ups experience cash flow challenges. Being able to generate enough steady income to support all your operations may not possible. A working capital loan will come in handy and help meet you businesses daily, weekly, or monthly financial needs. It will bridge the fiscal gap between accounts payable and accounts receivables.

Freedom to Explore New Business Opportunities

Timing is crucial when making critical business decisions especially those that could help your business scale up. Without enough capital, you will not be able to explore new business opportunities. Working capital loan and grants can help you out by giving you the finances that you need to take full advantage of these new opportunities and expand your business to its full potential.

In some instances, the value of the loan could be less than the cost of missing an opportunity that could have helped grow your business. For example, the Capability Development Loan will give you enough capital to design, develop, and manufacture new products.

Sales Fluctuation

Large peaks and dips in demand for your products and services have a significant impact on your business. Some of the common factors that cause the fluctuations include seasons, trends, change in the local and global economy, technological advancement, and population.

Having enough capital will help you to respond to changes in the market effectively and cushion your business from going down.

Emergency Fund

As an entrepreneur running an SME in Singapore, having a financial reserve to help your business tide over unexpected changes in the market is essential. Unforeseen occurrences can come knocking on your door no matter how accurate your business projections or plans may be. Access to a loan or grant will help salvage your business from this kind of situations without excessively altering your financial plans.

Debt Restructuring

It can become strenuous to monitor multiple repayment terms if you take loans from different financial institutions at various stages. Why take multiple loans when you can apply for one working loan that meets all your financial needs. The credit will also minimize the risk of defaulting on any existing debts.

No-Fail Budgeting Tips for Singapore Small Businesses After Getting a Grant or Loan

In 2020, it was estimated that 50% of small businesses did not operate with an official budget. Proper management of finances will stabilize your business and make it less likely to fail. Although many Singapore small businesses find it hard to manage their finances, a small business is successful due to the skills you apply to make your products or provide services. 

Without enough experience in managing business finances, you will feel burdened and slip into bad financial habits that will harm your business.

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Getting a grant or a loan is good for the business as you can use the funds to expand your business and get more profits. However, how you manage those funds will determine how successful your small business will be in the future. Here are some no-fail budgeting tips for Singapore small businesses after getting a grant or loan.

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1. Involving The Employees

Just because you are the CEO of your business does not mean that you must shoulder all the pressure. Budgeting for a loan or grant should involve every employee in the company so that they are all aware of the budget principles and add their perspectives and ideas they deem fit.

Maple Holistics Marketing Manager Nate Masterson discusses the importance of proper budgeting and involving employees. He implies that a proper budget plays a crucial role in the success of a business, and there are numerous variables for the budgeting responsibility to place the entire burden on a single person’s shoulder.

In his statement, Nate says that ideal budgets must go through intense scrutiny by different employees who possess diverse skills to manage a small business budget effectively. If you rely on a coordinated team, you will approach the loan or grant from various perspectives to do what is needed and plan accordingly.

Additionally, it would help if you informed your employees about any change that you make which will affect them directly or indirectly or the company. This will make them understand what you expect of them moving forward. 

Update your employees on the business’s short-term and long-term goals and how they can help reach them as it will help keep them working toward a similar end.

2. Creating A Budget and Updating It Regularly

When you receive a loan or a grant, it’s essential to create a budget to help you project every cost and keep them well balanced with your revenues. Every year you must look at what you have been spending and tweak the budget accordingly.

With structured planning, you will make a huge difference in business growth. Proper budgeting will enable you to focus the resources in yielding profits, decreasing costs, and increasing ROI. Dynamic plans will make the business development process much easier and less time-consuming. 

One of the most effective ways for a business to control its cash flow and allow itself to invest in new opportunities at the right time is through budgeting.

3. Target Your Sales and Profits

Once you receive a loan, develop a target for your sales revenues. According to SCORE, small businesses should estimate the type of realistic profit they expect to see in the following year. If your company has been operational for some time, get its most recent financial statements and use them as a basis for developing the sales and profit targets.

You will start with sales and profits since the information will guide all your estimates for the costs, expenditures, and capital expenses. During this process, outline any factor that can affect your sales numbers, such as high inflation rates, but this should not worry you since the figure will never be exactly right.

4. List All Planned Purchases

It would be best never to forget to predict the major purchases you will make in the future, especially after acquiring a loan. This should include huge purchases that may affect the profits or the amount of loan money you will spend, for instance, new equipment purchases or buying real estate.

Budgeting the loan money effectively will ensure you have sufficient cash set aside for huge purchases.

5. Set Aside an Emergency Fund

If your small business had no emergency fund before getting the loan, you should probably set some emergency funds aside after you get one. An emergency loan will help you deal with any cost that you did not expect.

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Small businesses in Singapore get affected by different factors, including catastrophic natural disasters or cybersecurity attacks. A cybersecurity attack is detrimental to a small business as it compromises the website and exposes business data and customer information. In fact, it is known that 43% of all cyber-attacks occur to small businesses.

With an emergency fund, you can help your business get back into action right after such disasters. Based on FEMA findings, 90% of companies that fail to reopen in five days after a catastrophe fails within one year. Therefore, you can see how important it is for your business to have an emergency finding from the loan you get.

6. Concentrate On ROI

All investments you make in your small business should factor in the returns you will get. One essential metric for a small business at all stages is the ROI. During times when there is a high likelihood of things going wrong, ROI plays a considerable role.

For instance, sometimes, you may want to experiment with new marketing forms for your small businesses, including social media, print, etc. Such tactics can help gain new clients and build your brand.

After getting a loan, consider all the investments in your business and determine what will bring a better ROI that month or year. Some forms of marketing can have better ROI than others. Research proves that one of the marketing strategies with the best ROI is email marketing.

Email marketing focuses on essential things such as existing customer retention and making them loyal customers, which helps in boosting profits better than only acquiring new clients.

7. Seek CPAs Advise

Receiving a loan can be overwhelming as you try to wonder how to allocate resources for each project in your small business. However, a Certified Public Accountant can offer you the best advice on the best course of action for your loan. They will advise you which investments are best for the loan and which ones are not.

Every business is unique and has unique needs. Therefore, what one company needs to succeed can be different from what another one needs. A CPA expert will analyse your business needs and offer helpful insights to help your small business grow.

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8. Understanding Your Priorities

Every business has its priorities. Some things are important and need immediate action, while others can wait. When you get a loan, budgeting should be your top priority. You should budget and set priorities together with your employees in a meeting at least once a month.

9. Set Business Goals

Making a lot of money does not necessarily take a lot of money; however, it does take a small portion. This is especially true if you want to experience rapid growth after you examine your goals and objectives.

Since you have the financing for your business, you must set goals to track your success. Determine what you plan on saving that year and any other questions that may arise as part of your future plans. Once everything is in place, track progress and ensure you are accountable for anything that happens.

10. Develop A Budgeting Team

One of the main reasons you need a budgeting team is because they can help you implement your budget effectively. The team will help you manage the loan by preparing balance sheets, financial statements, cash-flow reports and keep your daily records.

Financial teams also conduct internal audits and controls to check if the business is utilizing the loan properly. Moreover, the team will ensure that the company aligns with all regulations and is in the best financial health. The team will make budgeting for the loan much easier for you and the business.

11. Reward Progress

As you set hard goals for the budget and try to save money in the process, you should also have some fun and allow yourself to enjoy the process. Once you have achieved a milestone or made progress, your only goal should not be saving. 

It is important to reward yourself and the team that made it possible. Appreciating your teams work is critical for the success of your small business. Therefore, be realistic while preparing and pursuing budgeting goals.

12. Allow Flexibility

A budget may require some changes during the process of allocating resources. Some factors such as economic change and unmet goals will determine whether you should make a change to your budget. 

Therefore, be flexible and prepare yourself to shift with time. Effective budgeting requires diligent preparation and flexible implementation. Don’t be fixed on following one route.

13. Use The Right Budgeting Tools

You will find numerous tools in the market to help you budget—research on the best and most effective ones. You can read books and articles on budgeting to make yourself resourceful. 

Another option you can use is hiring a client to help you with loan management. There are plenty of tools, either free or paid, that small businesses can utilize. Therefore, consider which one will work best for your business.

You can also invest in accounting software to help you track your income and expenses. Applications such as QuickBooks and Xero are excellent for small businesses to utilize in creating their profit and loss statements.

14. Define And Understand Your Risks

As a business owner, you must understand that all business ventures have risks involved. Whether you are financing a project using a loan or savings, the risks are the same. Therefore, you must consider your short-term and long-term risks to plan your business financial future accurately.

To understand the risks your business may face, you can start by listing the business’s guaranteed income and expenses every month. This will help you figure out how liquid your business really is. If the company is making money, you will be in a better position to set aside some of the profits for savings or utilise them to enhance the business through expansion and new hires.

15. Avoid Neglecting Documentation

Budgeting requires a lot of documentation, especially business-related receipts. Use them to track your invoices. Ensure that you document every cost and income in the budget sheet. Paper trails are essential in helping business owners manage loan funds effectively. 

The paper trail can either be physical or digital, and it will help you simplify your taxes, payroll and other similar processes.

16. Take An Accounting Class

All the money management tips we have mentioned above can be very helpful in managing and budgeting your loan money. However, a business owner needs to understand the basics of business accounting. You can find accounting classes in the local colleges, which will help with fiscal management classes.

The classes will provide you with a better understanding of how cash flows in and out of your small business. You will understand the most basic concepts and be in a better position to make sound financial decisions.

17. Separate Business from Personal

Sometimes you may feel like using the business loan for personal reasons. However, it’s essential to keep both accounts separate. Don’t budget the business loan money for personal needs. 

Set a personal budget different from a business budget. Doing this will help protect your credit rating and help safeguard your business from any isolated financial problem and vice versa.

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It is a pretty exciting time for small business owners in Singapore. There are numerous opportunities for growth everywhere, and you can make the best out of these opportunities. Nonetheless, to take advantage of these opportunities will need you to develop a solid foundation. 

This means that you must have an excellent and responsible budget for your loan or grant. Budgeting is a critical aspect for all Singapore businesses, especially for small business owners. No matter how intimidating the budgeting process may seem, especially when starting out, it’s crucial to put everything together to ensure your business makes a profit.

Closing Remarks

Singapore is no doubt one of the best countries to set up a business. Be sure to take advantage of the numerous incentives offered by the government as well as loan options to establish the business fully in the country.


DISCLAIMER: please refer to the appropriate institution for the prevailing grants or loans available as details and availability may have changed since the time of writing.


About the Author

Tom Koh

Tom is the CEO and Principal Consultant of MediaOne, a leading digital marketing agency. He has consulted for MNCs like Canon, Maybank, Capitaland, SingTel, ST Engineering, WWF, Cambridge University, as well as Government organisations like Enterprise Singapore, Ministry of Law, National Galleries, NTUC, e2i, SingHealth. His articles are published and referenced in CNA, Straits Times, MoneyFM, Financial Times, Yahoo! Finance, Hubspot, Zendesk, CIO Advisor.


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