Are you planning the fixtures and fittings for your start-up? Or would you like to modernize your existing production facilities for your existing company? With a business term loan for the self-employed and entrepreneurs, you can turn your financing projects into reality. We have put together below for you what you should take into account.
What is a business term loan in Singapore?
In the jungle of corporate loans, it can be difficult to identify the differences between the individual loan types. There is also the inconsistent use of terminology and the use of technical terms. When looking for a suitable business term loan in singapore for your investment project, you will stumble across various terms: from the credit line to working capital loan, investment loan, current account loan to commercial loan. We bring light into the dark for you!
A company loan (also called a business term loan or commercial loan) is a liquidity procurement for a time and is granted to the company by a creditor, the service owner, in return for payment. This is a very broad definition that bundles all types of credit, including guarantee credits and loans.
A business term loan is defined as a money loan according to the Ministry of Law in Singapore. It stipulates that the moneylender undertakes to provide the borrower with a certain sum of money in return for interest and school repayment. The loan is thus allocated to the lending business. The term credit is therefore the more comprehensive term and is a generic term for the fact that external financiers provide you with liquid funds.
In practice, the respective use of the terms “credit” and “loan” often depends on the term and capital requirement. In other words: A loan has a shorter contract period of 1 to 5 years and is already granted for smaller loan amounts. A loan is generally considered to be long-term financing from 5 years with increased financing requirements, often in the six-digit range or more. The distinction is made more strongly with private customers than in the area of corporate loans.
What are the benefits of business term loan financing for your company?
Are you planning to invest in your company, but you do not have enough equity available? Or are all of your resources tied up in the company? Loan financing is often chosen by companies as a type of financing for various reasons. Because with a business term loan in Singapore you can take out the necessary outside capital to finance planned acquisitions for your company. A business loan or commercial loan for the self-employed gives you the opportunity to drive the growth of your company.
Funding is usually earmarked. This means that the purchase of business inventory is included in the balance sheet as current or fixed assets and increases the total capital of your company. The resulting liabilities are recorded in the balance sheet under the item “Debt capital”. You can also deduct the interest charges for tax purposes and write off business purchases over their entire useful life.
Your advantages of the business term loan in a nutshell:
Increased company liquidity
Financing of current or fixed assets despite insufficient own funds
Positive effect on company key figures (e.g. return on equity)
Assertion of interest charges for tax purposes
No right of co-determination by investors
Calculation basis
However, the investor will make his financial support subject to certain conditions. In order to keep its own risk as low as possible, a bank is bound by internal regulations and in-house minimum requirements, for example when granting loans.
Loan disbursement is therefore secured by:
Include your property or assets as collateral and possibly also transfer them to the lender
Be able to show guarantees
Disclose your economic situation
Business term loan yes or no: How to find your loan solution!
Whichever project you want to implement, you have the option of realizing your business financing with a business loan. Do you know the amount of the costs? Have you set a goal for how long you would like the financing to run? Very well! With this information you can determine your loan solution:
The working capital loan is usually used to finance current assets, for example, the purchase and sale of goods. To do this, your company’s current account credit is drawn upon, or, to put it simply: the company’s disposition. Because with it you can bridge short-term payment bottlenecks and maintain your speed of reaction. But: If you use this solution permanently, you should possibly consider an investment loan. The interest charges for using the overdraft facility are much higher, often in the double-digit range, and are therefore only recommended for short-term financing.
The investment loan is designed for the medium to long term and has a fixed term with a fixed repayment agreement. The amount of the loan is also defined in advance. Maximum limits depend on the respective moneylender, but a single large loan may not exceed 25 percent of the liable equity. In most cases, the interest rates are fixed for the duration of the contract. Then you benefit from the security and a fixed calculation base.
What contract content should you pay attention to with a business term loan?
You are certainly aware that the contract design takes into account the investment amount, duration, and conditions individually for your company and your capital requirements. But: All other parts of the contract can also differ with the individual investors. So it is advisable to look very carefully. Here are the factors to look out for:
Extraordinary repayment:
The option of full loan redemption via a one-off amount or an annual special repayment can be contractually agreed upon.
Amortization-free framework:
With an installment loan for self-employed persons and entrepreneurs, you often have the option of agreeing to a repayment-free period of up to 2 years and thus defer the repayment of the liability until profit is generated.
Interest rate:
Whether the interest rate is fixed or variable affects your interest payments. Variable interest rates can be adjusted to current market conditions at any time during the term of the contract.
Due date of the installments:
The regular payments of your business term loan can accrue monthly, quarterly, or annually, for example.
Repayment plan:
The repayment schedule sets out the repayment agreement for your business loan. The repayment of your liability is made up of the interest charge and the installment for paying off the loan amount. However, the exact composition can vary with regard to the repayment rate.
Annuity principle:
The repayment rate is constant over the entire duration of the term. However, since you reduce your remaining debt with every payment made, the interest burden also decreases over time. However, the rate remains unchanged and the proportion of your repayment installment increases continuously.
Installment or repayment credit/loan:
Here, the actual installment to be paid to repay your liabilities is continuously reduced. Because with your regular payment you reduce the outstanding balance. This reduces the interest burden that is calculated for the respective remaining debt. The contribution to the repayment is constant over the entire term.
State funding with OT Credit
Have you ever thought about applying for a business term loan in Singapore? In Singapore, you have many options for receiving financial and immaterial aid. You just have to know the contact points. The OT Credit, for example, offers a large funding pot. In plain language, you get special conditions for your external financing here. But who is eligible for funding?
OT Credit supports your business start-up, for example, with a company loan, with or without existing equity. For this purpose, OT Credit grants low-cost business start-up loans of up to S$500,000 per project – and also assumes a proportion of the credit default risk. This makes it easier for you to conclude a loan agreement with your money lender. Various economic situations of the applicant are taken into account via the ERP start-up loan, for example, equity share and pursuit of the activity in part-time or full-time employment. The aim is to enable the broadest possible number of people to get a start-up loan. You can find more information about the promotional loan on the OT Credit homepage.
The funding offers are not aimed exclusively at start-ups but are also available for freelancers and company successors, as well as corporate loans for young entrepreneurs. You can now check individually for your financing project with our free financing calculator whether you have the option of a company loan and which other forms of financing are still possible.
