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What is a Working Capital Loan?

A working capital loan is a short-term financial solution that helps businesses to cover their immediate expenses. Specifically, this type of financing enables firms to maintain their daily operations and continue production before long-term investments arrive.

Obtaining loans from lenders such as banks or FinTechs has become commonplace in Singapore for SMEs. This is because it offers quick access to the funds that are desperately needed without requiring too much paperwork. This is perfect when cash flow needs an urgent boost!

In coming years, even more, support will be available with tailored solutions, such as those at ThinkSME specifically designed around working capital requirements, being offered alongside traditional sources of finance so that businesses can find options best suited to them.

Working capital loans are short-term loans designed for businesses to bridge financial gaps that can arise due to seasonal or cyclical demand. These types of loans make it possible for organizations to maintain operational expenses, finance tactical positions and take advantage of supplier discounts during low revenue periods. Working capital is defined as a company's liquid assets minus its liabilities. If the current assets exceed the amount owed by the organization, then working capital exists within that business entity. In order for an organization to access its available capital when it is needed the most, typically during moments of reduced activity, it must seek outside sources. Banks and other lending establishments can provide assistance with working capital loans or SME working capital loans, depending on where the business is located.

Generally speaking, there are two main types of working capital loans: secured and unsecured debts, with collateral being required more often than not when obtaining one, though some providers may be able to offer unsecured ones, too, depending on credit ratings, etc. These will have higher interest rates accordingly, but without giving away any ownership stakes.

Benefits of Obtaining an SME Working Capital Loan

Working capital loans allow SMEs access to short-term funds quickly whenever needed without having to face any difficult loan application procedures or collateral requirements.

The lender typically requires financiers/borrowers to provide information before granting approval. This information should include current sales performance and future cash flow projections. This makes it easier for SMEs that do not have ready collateral, such as motor vehicles or property titles, available.

Moreover, there is no asset involved during the repayment of the loan. This results in lower risks than those associated with other loan facilities. As a result, lenders can offer higher borrowing limits, especially if the borrower has a good credit score. However, this may come with slightly higher interest rates depending on the terms agreed upon by both financier and creditor parties included in the contract agreement before acceptance was granted.


Eligibility Requirements and Documents Required for SME Working Capital Loans

In order to qualify for a working capital loan, businesses must usually fulfill certain requirements. The credit score is often taken into consideration when applying. Potential borrowers with higher credit scores are generally more likely to be approved and receive lower interest rates on their loans. The length of time that the business has been in operation can also affect its chances of being accepted by the lender due to a lack of sufficient cash flow history.

Lenders want assurance that they will get repayment on what they lend out. Profitability may also play an important role depending upon the terms associated with each particular request as well as any other external factors involved, such as current market conditions or total industry sectors' performance at large during this period. Other eligibility criteria could include whether your company operated within certain geographic areas or had access to services from predetermined banks/providers.

Additionally, some applications may ask you to show evidence of past payment activity related to suppliers, if necessary, including copies of invoices or statements showing where goods were supplied previously.

You might need to demonstrate an agreement between all shareholders. Everyone should be made aware of the financial commitment they have agreed to and understand what it means. This will help everything run smoothly in the future without risking any negative impacts or problems with repayment.

Generally speaking, applicants should have a good track record in order to add investor confidence to the process. A mild debt level through current operations, a small asset base, and low accounts receivable are beneficial. Proving previous regular sales can further smooth over bumps in a big way. Ultimately, considering best practices will help meet basic expectations and complete difficulties in gaining acceptance when the operational environment is on the rise.

The success of a working capital loan largely depends on the ability to make timely and strategic use of it, to boost efficiency and cash flows. To calculate how much money is needed for such a loan, one needs to account not only for their current assets but also consider future projections and intangibles, such as intellectual property or brand recognition. It's important to research different lenders before making any commitments – fees can range widely between institutions offering similar products.

Additionally, SMEs should take care when calculating operating expenses as they will form an integral part of obtaining approval from lending institutions. Those expenses include salaries paid out over time periods or utility bills that may be billed ahead of usage dates (or even afterwards).

Other key pieces are items expected during specific times, such as holiday sales. These cannot normally occur outside of those windows, which means advanced forecasting becomes essential. Production must meet demand at the exact moment; otherwise, there is no point in doing all this in the first place!

A working capital loan is a type of business finance designed to provide businesses with the funds needed for their daily operations. This approach enables them to take advantage of short-term opportunities and manage immediate cash flow fluctuations without relying on long-term investments or expensive assets. ThinkSME offers funding through this financial solution that can be used for covering payroll, expanding inventory, or investing in marketing activities.

Our experienced team understands the complexities involved in obtaining such loans and provides tailored solutions focused on managing your business's current financial needs efficiently and effectively. With our support, you have an alternative way to ensure financing when traditional means might not work, allowing you to stay flexible and seize every available opportunity quickly!

What are the Assessment Criteria and What do Banks and Financial Institutions Look Out for?

We've made referenced to the documents required from banks and FI to illustrate what are some of the pointers which lenders typically look at to assess borrower's eligibility:

1. Latest 6 months bank statement

  • Latest 6 months cashflow of the company

  • Turnover of latest 6 months

  • Average balance and month end balance of the bank statements

  • Abnormal cash inflow/outflow transactions

2. Latest 2 years financials

  • Annualised revenue of the past 2 years with reference to latest 6 months revenue

  • Profit or loss recorded for latest year financial

  • Gross profit margin

  • Net profit margin

  • Networth of the company

  • Director's / shareholder's owing

  • Receivables / payables

  • Any one-off financial item

*this is optional as certain lenders do not require financial as supporting document

3. Photocopy of NRIC for director(s)/guarantor(s)

  • Min. 30-50% local shareholder(s) / directorship

  • Appointment date of director(s) / shareholder(s)

  • Industry experience of director(s) / shareholder(s)

  • Know-your-customer (KYC) and Anti-Money Laundering (AML) searches

  • Any other adverse findings for director(s) / guarantor(s) - e.g. litigations, bankruptcy, previous poor repayment records etc.

4. Latest 2 years Notice of Assessment for director(s)/guarantor(s)

  • Min. declared income of $30,000 for director(s)/guarantor(s)

*this is optional as certain lenders do not require this as supporting document

5. Updated credit bureau report of all personal guarantors (

  • Personal repayment conduct for existing credit facilities (credit card, car loan, housing loan etc.)

  • Any on-going/prior bankruptcy suit/litigation

*do not require if director(s)/guarantor(s) is very sure they have good repayment conduct for all their credit facilities

6. Latest 4 Quarters GST statements (if available)

  • Annualised revenue in reference to latest 6 months bank statements' revenue

*this is optional as certain lenders do not require this as supporting document and if company is non-GST registered

7. Latest debtors ageing list (if available)

  • Aging of latest debtor's list

  • Any collection issues from the existing debtor's list

*This is an important document if the company is applying for trade/revolving credit facility.

Participating Financial Institutions:



CIMB Bank Berhad

6438 7888

DBS Bank Ltd

1800 222 2200

ETHOZ Capital Ltd

6654 7799

FS Capital Pte Ltd

6221 0958

The Hongkong and Shanghai Banking Corporation

1800 216 9008 / 6216 9008

Hong Leong Finance Ltd

1800 3388 338

IFS Capital Ltd

6270 7711

Maybank Singapore Ltd

1800 777 0022

ORIX Leasing Singapore Ltd

6339 3622

Oversea-Chinese Banking Corporation Ltd (OCBC Bank)

6538 1111

Resona Merchant Bank Asia Ltd

6224 7155 / 6228 6124

RHB Bank Berhad

1800 323 0100

Sing Investments & Finance Ltd

6305 0300

Singapura Finance Ltd

6880 0688

Standard Chartered Bank

1800 747 7000

United Overseas Bank Ltd

1800 2266 121


As every business is different, the financial profile and documents may vary according to your industry, business operations and lender's criteria. As our core team is formed by ex-bankers with more than 3 decades of banking and financial background, we fully understand the complexities involved in obtaining business loans and provides bespoke solutions for every business. With our support, you can rest assured that you can obtain the best approval results for your business in the shortest timeframe!

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