Microfinance in Singapore: How can SMEs benefit from it?

Microfinance for Singapore’s small businesses

Need a business loan but worried you won’t qualify? Well, not all business loans are massive loans that you need a successful track record to qualify for. If you’re a startup or small business owner, microfinancing is a helpful alternative. Microfinance in Singapore typically comes in the form of microloans.

Microloans are small loans intended to help startups and SMEs to maintain and scale their operations, with the maximum financing amount typically capped at $100,000. They can be especially useful to small businesses that need a small boost to succeed. In other times, they might be beneficial to SMEs who need help staying afloat in times such as the pandemic.

If you’re an SME taking on a microloan, you’ll need to honour loan repayments as stipulated by your loan agreement.

How does microlending for SMEs work?

Assuming you’re an SME owner, you might either get approached with the offer of a microloan, or you might approach a financial institution for one.

Often, investors might keep an eye out for promising SMEs who may be in need of microloans. Depending on the circumstances, an investor might seek a share in your profits in exchange for giving you the resources to scale your growth and succeed.

If you’re approaching a financial institution for a loan, the institution might calculate your credit rating. They will do this by assessing your credit history, the value of assets you own, and repayment capability.

By doing this, the lender will be able to tell if you’re a good candidate to loan money to, or if you’re an applicant who might be at risk of defaulting on the loan.

Providing a microloan to a small business might be a little more risky for investors to undertake (as compared to banks providing a traditional bank loan). Part of this is because small businesses may not turn massive profits, or may be in the younger stages of their business.

As such, microfinancing loans in Singapore might have higher interest rates that range between 6-25%, depending on the credit rating of the borrower.

How can SMEs get the best interest rate for microloans?

If you’re an SME owner looking to get a microloan with good interest rates, here’s what you can do:

1. Pay your monthly repayments on time to build up trust

On a base level, always make sure to make your monthly repayments on time. This can help you build trust with investors and lenders to prove that you’re reliable.

2. Possess assets that can be easily converted to cash

It might also be a good idea to possess assets that can easily be converted or sold in exchange for cash, to ease your cash flow in the event you find yourself cash-strapped.

3. Improve your credit rating

To get a better understanding of how your financial situation looks in the eyes of investors and lenders, you should acquire a copy of your credit report so that you can work towards improving your credit rating if need be.

Why do SMEs turn to microfinancing in Singapore?

1. Easier approval with less credit checks compared to traditional bank loans

Typically, many SMEs turn to microloans because they’re much easier to get as opposed to traditional bank loans, which comes with more stringent checks, regulations and requirements. Funds can also be disbursed to the borrower more quickly with less credit checks

2. Microloans are offered on a short-term basis with a small quantum

You might also appreciate the shorter term basis and smaller quantum of these loans, since they would usually be more manageable as compared to larger loans.

3. Your credit ratings may be improved if you make repayments on time

Thankfully, applying for microfinancing does not always require scrutiny of your credit history, as compared to taking a traditional bank loan. Nevertheless, if you make timely repayments, it can improve your credit ratings.

4. Option to reach out to investors on your own terms

Microfinancing also gives you the option of reaching out to investors to grow your company on your own terms.


As a small business owner, a microloan can make a massive difference if you’re short on cash to continue business operations. Not to mention it’s also beneficial to ensure a healthy availability of funds to avoid cash flow problems when running the operations, such as office rental payments and employee salary payments.

What are the disadvantages of microfinance or microloans?

1. Collateral might be required

Microfinancing is not always the best option for all businesses. While they may be a little easier to receive than bank loans, there may still be some collateral required by financial institutions or investors to secure the loan. These can include pledging your company assets or personal assets.

2. Detailed documentation required

There are also a number of documents required, such as a business profile from ACRA, bank statements, cash flow projections, and audited balance sheets, amongst other things. These help to give an idea of the legitimacy of your business, and how you might intend to use the money you receive from microfinancing.

3. High interest rates

Another disadvantage of microloans is that interest rates are higher, ranging between 6-25%. This makes taking a microloan a less favourable option for some businesses, especially if you require a somewhat larger amount of money.

If you are a large business that can qualify for longer-term loans with lower interest rates, you might be better off taking a longer term loan through more traditional avenues.

Where can I apply for microfinance in Singapore for my SME?

If you’re looking for a short-term microloan in Singapore, there are many options available. These include Enterprise Singapore’s Micro-Loan Programme (MLP), which comes with selection criteria like having up to 10 employees, having a 30% local shareholding, being registered in Singapore, and having an annual turnover less than or equal to $1 million.

Some of the other options available include banks, and crowdfunding platforms such as Fundedhere and Fundnel.

But perhaps none of these options are as convenient and easily accessible as taking a business loan from licensed money lenders, which generally only require a quick online application and fast verification at the money lender’s office.

If you’re looking for a short-term SME business loan, Elite Investment & Credit offers safe microloans at low interest rates, with instant loan approval and generous repayment terms. Apply with us now.


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