Navigating Singapore’s Tightening Credit Market: Your Complete Guide to Securing Business Financing

Understanding how to get a business loan in Singapore has become more critical than ever, as small and medium enterprises face the highest borrowing costs in recent memory and increasingly selective lending criteria. The landscape has shifted dramatically from the easy credit conditions of previous years, demanding a more strategic approach to business financing.

The Current Reality: Higher Costs, Tighter Access

Singapore’s SME lending environment has shifted dramatically. Average borrowing costs surged to 8.47% per annum in 2024, the highest in recent years. SME loan approval rates dropped to 70% in 2024, down from 76% in 2023, whilst approvals for loans above $300,000 fell to just 3% of approved loans, down from 10% in 2023.

Essential Requirements for Business Loan Eligibility

Before exploring financing options, businesses must understand the fundamental criteria that lenders evaluate:

Basic Registration and Ownership Requirements: 

• ACRA-registered business entity operating in Singapore 

• At least 30% local equity held directly or indirectly by Singapore citizens or Permanent Residents 

• Business operational for a minimum of 6 months to 1 year (most banks prefer 2-3 years) 

• Group Annual Sales Turnover cannot exceed $500 million

Financial Health Indicators: 

• Minimum annual turnover requirements (typically starting from $60,000-$750,000, depending on lender) 

• Stable cash flow demonstrated through bank statements 

• Clean credit history for both business and key personnel 

• Group revenue of up to $100 million or a maximum workforce of 200 employees

The emphasis on local ownership reflects Singapore’s policy priorities, ensuring that government-backed lending schemes primarily benefit businesses with substantial local stakeholders.

Understanding Your Financing Options

Government-Assisted Schemes

The Enterprise Financing Scheme and, SME Working Capital Loan offer the most accessible options. The loan cap was permanently raised to $500,000 in 2024, with 15 participating banks providing competitive terms whilst benefiting from government risk-sharing.

Traditional Bank Loans

Commercial banks offer unsecured business term loans from $100,000 to $800,000. Interest rates range between 7% to 11% per annum, though banks have notably decreased their risk appetite.

Alternative Financing

Licensed moneylenders provide more flexible options for businesses struggling with traditional criteria, offering loans up to $200,000 with faster approvals at higher rates.

Strategic Preparation: Documentation and Positioning

Successful loan applications require meticulous preparation. The current lending environment demands high-quality documentation and strategic business positioning.

Essential Documentation: 

• Financial statements for the past 2-3 years 

• Recent bank statements showing cash flow stability 

• GST declarations and tax assessments 

• Business plan with a clear fund utilisation strategy 

• Directors’ and shareholders’ identification and credit reports

The Application Process: A Step-by-Step Approach

Securing business financing requires a systematic approach, particularly given current market conditions:

1. Assess Your Funding Needs: Determine precise requirements and realistic repayment capacity

2. Research Suitable Lenders: Compare options across banks, government schemes, and alternative providers

3. Prepare Comprehensive Documentation: Ensure all financial records are current and professionally presented

4. Submit Applications Strategically: Consider applying to multiple lenders simultaneously to maximise approval chances

5. Negotiate Terms: Don’t accept the first offer—interest rates and terms remain negotiable

Current Market Dynamics and Industry Considerations

Local banks maintained 59% of the loan origination share, but this represents a decline from 70% in 2022. Foreign banks increased their share to 26%, suggesting greater willingness to compete for Singapore’s SME market.

Certain sectors face particular challenges. F&B businesses dropped from 12% of clients in 2023 to 8% in 2024, aligning with over 3,000 F&B establishments shutting down in 2024. Conversely, construction-related businesses have seen increased lending interest due to resumed infrastructure projects.

Maximising Your Approval Chances

In this constrained lending environment, businesses must adopt sophisticated approaches to loan applications:

Financial Positioning

• Maintain strong personal credit scores—directors’ credit histories significantly impact business loan approvals 

• Demonstrate consistent cash flow rather than sporadic high-revenue periods 

• Prepare contingency plans showing how you’ll service debt under various scenarios

Relationship Building

• Establish banking relationships before you need financing 

• Consider concentrating your banking business with potential lenders 

• Maintain regular communication with relationship managers.

Application Timing

• Apply during periods of strong cash flow to demonstrate financial health 

• Avoid applying during industry downturns or immediately after poor financial quarters 

• Consider seasonal factors that might affect your business’s perceived stability

Looking Ahead: Market Outlook and Strategic Planning

Early indicators suggest potential relief on the horizon. The 3-month SORA benchmark has fallen from 3.03% in January to 2.55% by April 2025. However, business lending rates are expected to adjust slowly, with any meaningful reductions possibly materialising only from Q3 2025 onwards.

This lag effect means businesses should prepare for continued challenging conditions throughout the first half of 2025. Pre-emptive financing planning becomes crucial, securing credit facilities during periods of strength rather than waiting for urgent need.

The Bottom Line

Singapore’s business lending environment has fundamentally shifted from the accommodating conditions of recent years. Success in securing financing now requires careful preparation, strategic positioning, and realistic expectations about costs and availability.

The current environment particularly challenges newer businesses and those in struggling sectors. However, opportunities remain for well-prepared enterprises that can demonstrate clear value propositions and realistic repayment capacity. Government schemes continue providing valuable support, whilst competition among foreign banks may create pockets of opportunity for businesses that don’t fit traditional local lending criteria.

Ultimately, understanding these market dynamics and positioning your business accordingly will determine your success. The businesses that thrive in this environment will be those that treat loan applications as strategic exercises requiring the same rigour and preparation as major business decisions. Whether you’re an established enterprise seeking expansion capital or a growing business managing cash flow challenges, mastering how to get a business loan in today’s Singapore market demands both financial acumen and strategic thinking.