Finding the proper funding can be a never-ending challenge when steering a growing business. Whether you’re scaling operations, investing in tech, or simply managing cash flow, securing capital is essential — but the traditional routes don’t consistently deliver. SME financing in Singapore has long relied on bank loans, government grants, and credit lines, but these aren’t always accessible or flexible enough for your evolving needs.
Fortunately, new models are emerging. This article explores innovative financing alternatives—from crowdfunding to decentralised finance—that could offer greater control, speed, and opportunity as you build a resilient business.
Key Takeaways:
- SMEs in Singapore have diverse financing options beyond traditional bank loans, including government-backed schemes, microloans, and alternative models like crowdfunding and DeFi.
- Each loan type serves different business needs, from short-term working capital to long-term equipment financing and trade facilitation.
- The Productivity Solutions Grant (PSG) offers up to 50% funding support for pre-approved digital tools. However, you must apply before making any purchases.
- Understanding loan eligibility and terms helps you choose the most suitable funding strategy for your business growth.
- Always maintain clear documentation for grant claims and loan applications to improve approval chances and ensure smoother processing.
Who are SMEs in Singapore?
Image Credit: Rikvin
Small and Medium Enterprises (SMEs) are integral to Singapore’s economy, comprising 99% of all enterprises and 71% of the workforce. As of 2021, the total number of enterprises increased from 273,100 in 2019 to 291,600, reflecting their growing prominence.
SMEs are pivotal to Singapore’s economic framework. The Singapore Department of Statistics defines an SME as a company with an annual turnover of less than S$100 million or employing fewer than 200 employees. This classification encompasses a vast majority of businesses in the nation. Their substantial contributions underscore the significance of SMEs in Singapore:
- Economic Contribution: SMEs account for approximately 48% of Singapore’s Gross Domestic Product (GDP), highlighting their integral role in economic growth.
- Employment Generation: These enterprises employ about 70% of the local workforce, providing essential job opportunities and fostering skills development across various sectors.
Beyond these metrics, SMEs are instrumental in fostering innovation and entrepreneurship. Their adaptability and responsiveness to market changes make them vital players in sustaining Singapore’s competitive edge in the global economy.
Business Structures for SMEs in Singapore
SMEs must select the appropriate business structure, as it influences legal obligations, tax liabilities, and operational flexibility. The primary business structures available are:
| Business Structure | Legal Status | Liability | Taxation | Suitable For |
| Sole Proprietorship | Not a separate entity | Unlimited personal | Personal income | Small-scale businesses |
| Partnership | Not a separate entity | Shared among partners | Personal income | Collaborative ventures |
| Limited Liability Partnership | Separate legal entity | Limited to investment | Personal income | Professional services firms |
| Private Limited Company | Separate legal entity | Limited to shares | Corporate tax | Businesses aiming for growth |
Selecting the appropriate business structure is a foundational decision that impacts an SME’s legal standing, financial obligations, and growth potential. It’s advisable to consult with legal and financial professionals to determine the most suitable structure for your specific business needs.
What are the Available Business Loans for SMEs in Singapore?
When securing capital for your SME, understanding the variety of loan options available is crucial. Each type of loan offers unique benefits and considerations, depending on your business’s needs, growth stage, and financial health.
Term Loans
Term loans are one of the most straightforward options for SMEs seeking more significant funding. Term loans, offered by banks and financial institutions, are typically repaid over a fixed period, ranging from one to five years. They provide the flexibility to use funds for various business needs, from capital expansion to equipment purchases.
The major benefit is predictability—monthly repayments are fixed, helping with cash flow management. However, approval can be stringent, requiring a solid credit history and sufficient collateral.
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SME Working Capital Loan
Through institutions like Enterprise Singapore, Singapore’s government offers working capital loans through institutions like Enterprise Singapore to ease short-term financial pressures. These loans can cover daily operational expenses such as payroll, inventory, and overhead. While these loans are generally easier to qualify for than traditional loans, they are designed for immediate business needs, meaning repayment terms are shorter.
Typically, these loans come with lower interest rates and faster approval processes, making them an excellent option for quick liquidity. However, they may not be suitable for long-term capital projects.
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Trade Financing
Trade financing might be ideal if your SME deals with importing or exporting goods. This loan type helps businesses cover the costs of international trade, such as purchasing raw materials or paying suppliers. In Singapore, various banks and financial institutions offer trade financing solutions tailored to SMEs, including trade credit, factoring, and export financing.
The primary advantage of trade financing is that it helps maintain smooth cash flow while you await client payment. However, international trade can have added risks, such as fluctuating exchange rates or political instability, which SMEs must consider before opting for trade finance.
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Equipment Loan
Equipment loans are an essential financing tool for SMEs in industries requiring costly machinery or technology. These loans allow you to acquire the necessary equipment without draining your working capital. Often, the equipment acts as collateral, making it easier to secure the loan.
While the loan terms may vary depending on the lender and the type of equipment, they are generally a good option for businesses looking to expand their capabilities. The downside is that they are restricted to specific assets, limiting flexibility in how the funds can be used.
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Microloans
Microloans are small, short-term loans typically offered by non-bank lenders. These loans are especially suitable for start-ups or SMEs with limited credit history. While the amounts tend to be lower than traditional loans, microloans provide quick access to capital, usually with minimal paperwork. Interest rates are often higher than those of larger loans, so using these funds judiciously is essential to avoid excessive costs.
Still, microloans are an option for businesses looking for quick, small-scale financial support.
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Temporary Bridging Loan Programme
The Temporary Bridging Loan (TBL) is a government-backed loan introduced during the COVID-19 pandemic to provide financial relief to businesses affected by the crisis. These loans were designed to help SMEs maintain liquidity and support business continuity during economic uncertainty.
While the scheme was initially introduced as a temporary measure, it has been extended several times to help SMEs overcome the financial challenges posed by the pandemic. The TBL helps provide quick access to funding with minimal bureaucracy and favourable terms, ensuring businesses can continue operations.
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Startup Business Loan
Startup Business Loans offers a tailored financial solution for new and emerging businesses to help you get off the ground. These loans are typically smaller in scale compared to traditional loans and are designed specifically for companies with limited operational history.
For startups, these loans help fill the gap when venture capital or angel investors are not an option. They allow you to cover essential expenses without surrendering equity in your business, providing flexibility as you navigate the early stages of growth.
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Government Initiatives Supporting SMEs in Singapore
Image Credit: IMDA.gov
The Singaporean government has implemented various initiatives to bolster SMEs, recognising their pivotal role in the nation’s economy. Key programmes include:
Productivity Solutions Grant (PSG)
Enterprise Singapore’s PSG supports SMEs in adopting IT solutions, equipment, and consultancy services to enhance business processes and productivity. The PSG enables SMEs to implement strategies such as advanced digital marketing and operational optimisation by funding pre-scoped solutions from approved vendors.
Enhanced Training Support for SMEs (ETSS)
To address the need for continuous workforce development, the ETSS offers SMEs up to 90% course fee subsidies for employer-sponsored training under selected SkillsFuture Singapore (SSG) supported courses. This initiative ensures that SMEs can upskill their employees without incurring prohibitive costs, thereby maintaining competitiveness in a rapidly evolving market.
SMEs Go Digital Programme
The Infocomm Media Development Authority (IMDA) spearheads the SMEs Go Digital programme. It aims to assist SMEs in adopting digital technologies to strengthen their capabilities and seize growth opportunities in the digital economy. This structured approach helps SMEs navigate digital transformation effectively, ensuring they remain relevant and competitive.
Enterprise Sustainability Programme
Recognising the growing importance of sustainability, Enterprise Singapore has launched the Enterprise Sustainability Programme to support companies, especially SMEs, in building capabilities and capturing new opportunities around sustainability.
With a budget of up to S$180 million, the programme is expected to benefit at least 6,000 enterprises over four years. It will support training workshops, capability and product development projects, and key enablers such as certification and financing.
Corporate Income Tax (CIT) Rebate
To alleviate financial burdens, the government has introduced a CIT Rebate, granting companies a rebate of 25% of tax payable, capped at S$15,000 per company, for the Year of Assessment 2020. This measure aims to support SMEs in managing operational costs and sustaining business activities.
Cash Grant for SME Tenants
In response to challenges such as the COVID-19 pandemic, the government provided a cash grant to offset rental costs for eligible SME tenants. This grant aimed to alleviate financial pressures by covering approximately 0.8 months of rent for qualifying commercial properties and 0.64 months for industrial or office properties.
Checklist for PSG Grant Application in Singapore
If you plan to invest in pre-approved digital tools, such as CRM systems, HR software, or digital marketing solutions, the PSG can subsidise up to 50% of your qualifying costs. Here’s how to apply:
Step 1: Confirm Eligibility
Ensure that your business meets the following criteria:
- Registered and operating in Singapore
- At least 30% local shareholding
- Annual sales turnover of less than S$100 million OR fewer than 200 employees
- The solution must be used in Singapore
Step 2: Choose a Pre-Approved Solution
Visit the GoBusiness Gov Assist site for pre-approved digital marketing, accounting, HR, and cybersecurity solutions. Ensure your chosen solution fits your business needs and is listed on the site.
Step 3: Get a Quotation
Contact the pre-approved vendor to request a formal quotation. The quotation must include pricing, scope, and any additional fees. It is mandatory for your application.
Step 4: Submit Your Application
Head to the Business Grants Portal, log in using your CorpPass, and:
- Select the PSG Grant.
- Complete the online form.
- Upload the vendor quotation and supporting documents (e.g., your company’s ACRA profile and solution brochures).
Step 5: Wait for Approval
Applications typically take 4–6 weeks to process. You’ll receive an email notification once your grant is approved or if more information is required.
Step 6: Purchase Only After Approval
Do not pay or sign any contracts until you get formal approval. Any purchases made before approval are not claimable under the grant.
Step 7: Deploy and Use the Solution
Once approved, you can proceed with the purchase and implementation. Keep clear records of the deployment — screenshots and usage reports will be needed later.
Step 8: Submit Your Claim
After deployment, return to the Business Grants Portal to upload:
- The invoice and receipt.
- Bank statement showing payment.
- Photos/screenshots of the solution in use.
- User acceptance form.
Step 9: Receive Reimbursement
Once verified, your business will receive the reimbursement (usually via GIRO) within 4–6 weeks.
Help in Getting SME Financing in Singapore
Securing the proper funding can make all the difference in scaling, digitising, and competing more effectively in today’s fast-moving business landscape. With so many financing models available—from traditional loans to innovative funding options—it’s crucial to align your business goals with the right type of support.
MediaOne can guide you through the process if you’re considering digital marketing solutions but unsure how to fund them. As a PSG pre-approved vendor, we help SMEs like yours access up to 50% funding support for digital marketing services. Let MediaOne simplify SME financing in Singapore—speak to us today.
Frequently Asked Questions
Can I get an SME loan if my business is less than 6 months old?
Most lenders in Singapore require a minimum operational history of 6 months to a year. However, some banks like OCBC offer startup-friendly options such as the Business First Loan, which may consider businesses with shorter track records.
What are the common reasons SME loan applications are rejected?
Applications may be declined due to insufficient business history, low annual revenue, poor credit scores, or a lack of necessary documentation. However, ensuring accurate records and a solid business plan can improve approval chances.
Can I use a personal loan to fund my SME in Singapore?
Yes, especially for new businesses without an established credit history. Personal loans can provide initial capital but often have higher interest rates and lower borrowing limits than business loans.
What is venture debt financing, and is it available in Singapore?
Venture debt is financing for startups that have raised equity but need additional funds without further diluting ownership. It’s available in Singapore and is typically offered by specialised lenders or venture capital firms.
How does invoice financing help SMEs with cash flow?
Invoice financing allows SMEs to borrow against their outstanding invoices, providing immediate cash flow to cover expenses while waiting for customer payments. This can be particularly useful for managing short-term liquidity needs.
