Invest in Singapore Small medium size companies

Singapore small business loans improves returns

September 20th, 2009
Posted by chief under Singapore small business loans with No Comments
Singapore Small Business loans: Leverage improves returns and capture business opportunities
Much has been touched on the issue of good debts and bad debts. In terms of personal debts, most personal financial advisers would generally advocate that consumption debts like credit cards and hire purchases are bad debts.
This is for obvious reasons since banks typically charge the highest interest rates to credit cards and personal loans ranging from 12% - 24% p.a.
Debts Incurred for higher potential gains can be good
Debts incurred for loans like education loans however are considered good debt since there’s a good chance that the expected increase in income in future can cover the interest charged.
Business loans, if used prudently can also be a good debt for a company. Let’s take a very simple illustration on how a small business can take advantage of a business loan to generate higher growth.
Example: IMPORTING AND CAPTURING DEMAND
Company A imports product X for $1 and sells it off for $2. Business is growing and it receives 10 orders for product X. However, it has only sufficient capital to fulfill 5 orders. Company A would then take a $5 loan from the Bank, which charges 10% interest for every dollar lend. Company A would still pocket a 90 cents profit per product after accounting for the interest charged by the bank.
USING THE BANK’S MONEY
This is just a simplified example on how companies leverage on financing loans to meet growth and demand, a popular concept also known as using OPM (other people’s money). The bottom line is: As long as the business can generate higher revenue/mark up than the interest charged by the bank, then a business loan would be considered a good debt.
If you can get a bank loan for your business for a viable business model, that would be best. At least you will not have to mortgage your home to get your housing loans to fund your business.
INTEREST EXPENSE CAN BE TAX DEDUCTIBLE
Apart from fuelling revenue, business loans could also be used as a vehicle for tax reduction. The current corporate tax rate in Singapore is at 18% on chargeable income. The market rate for unsecured business loans is around 5%-10%.

So it does make accounting sense for companies to take on a small amount of debt and charge it to the Profil and Loss as finance and interest expenses to shelter their chargeable income/profits. This of course has to be done legally and with the expertise of a qualified accountant/management consultancy, to avoid trouble with IRAS.
Most companies have debt in order to improve returns. Too much debt is not healthy of a company, but so is too little debt. Debt leverage gives the company higher returns and faster growth.
You can also talk to a Standard Chartered Banker about these loans.

scb.ben@propertyBUYER.com.sg

Tel: 6100 - 0608
SMS: 9782 - 8606

loans@propertyBUYER.com.sg

Invest in Singapore SME: SME Loans

Small medium enterprise SME loans - Small Business Loans

A small and medium enterprise businesses needs capital to survive. Many SME will scrimp for funds during the down turn to survive and struggle to find funds during the boom cycle to expand. Worst still, during boom times, the cost of funds are much more expensive, this further limits the growth potential of small and medium enterprise.

How do banks determine whether to lend your company the money?

Banks want to lend money to winners or perceived winners. This is because they want to know that they will get their money back.

Banks will put the SME through a lot of tests and requirements to make sure that these SME will survive and that the bank’s funds are safe.

Why do banks insist on the company putting up so much collateral?

I have so much collateral and the bank still ask for this and that proof. This is really annoying. I have more that enough assets to pay off the loan, why does the bank keep harassing me to pay up on time?

The bank is not an asset trader. The bank have no wish to seize your assets or collateral. The bank’s core business is making a spread on the money they lend out. The collateral is used as a backing or guarantee for the money which they lend out. Only in the worst situation will the bank want to sell your collateral or take control of your collateral.

Banks may even want to see your business plan

Some banks may even want to see your business plans. This is because it is not wise for banks to lend to businesses that will fail as this will only cause a credit bubble. This credit bubble will artificially keep an otherwise dead company alive on life support, only to die later when credit is exhausted. Let’s put it bluntly, a company needs to have a good business plan and good execution to survive.

So how does can my Singapore Small Medium size (SME) company qualify for a business loan?

Therefore there are some ground rules which banks set for SMEs in Singapore.

The Basic criteria to qualify for SME Loans are: -

• Registered in Singapore for at least 3 years
• >50% shareholdings held by Singaporeans
• Business run by same director/owner for at least 2 years


Standard Chartered Loan → Spring Singapore Bridging - Micro Loan

Unsecured term loan
Loan amount possible is between $50K - $600K
Loan tenor 1-4 years
Interest rate (effective) 5%-9%, (flat) 2.25%-5%
No processing fee for loan >$100K, else $500 processing fee
No early redemption/partial repayment penalty

Documents required For Application:

• Directors' ID copies
• Last 6 months operating bank account statements
• Last financial year Management A/C (Balance Sheet & P&L) *for loan >100K
• Last 3 years audited/management A/C *for loan >300K

You can contact a Standard Chartered Banker directly at

scb.ben@propertyBUYER.com.sg