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SME financing in 2023 - What are the lending options for small businesses?

SME financing in 2023 - What are the lending options for small businesses?

  • 21 December 2022
  • By OCBC Business Banking
  • 10 mins read

Loans serve many purposes. Besides helping SMEs tide through difficult times, they can improve the capabilities of a business and ensure it stays profitable and sustainable in the years ahead.

Choosing a loan that is fit to purpose takes time. From general to specialised, there are many types of small business loans in the market with varying repayment periods.

This is good for businesses as sentiment among Singapore SMEs is fast improving.

The sentiment index for the second and third quarter of 2021 is 49.9, according to the Singapore Business Federation and information services firm Experian, which polled 2,100 local SMEs from six sectors.

This is the highest marker since the COVID-19 outbreak, and an improvement from the 48.2 recorded in view of the first quarter.

With that, here are four options for SME funding in Singapore.

1. Government financing schemes

The government offers a range of financing options under Enterprise Singapore’s Enterprise Financing Scheme to support SME lending. Loan default risk, in the case of insolvency, will be shared by the government agency and participating financial institutions like OCBC.

SMEs at various stages of growth can tap on these loans to gain capabilities, create products and expand overseas.

The government introduced the SME Working Capital Loan (WCL) to help SMEs across all industries get access to working capital for their business needs. The loan programme comes under the Enterprise Financing Scheme (EFS), with the government taking on a co-risk share of the borrowing amount.

Meanwhile, the Business Venture Loan supports the growth plans of later-stage enterprises like SMEs and start-ups. These businesses, with a group annual sales of S$500m or less, may not have enough collateral to qualify for traditional bank loans. Therefore from 1 April 2021, businesses are allowed to borrow up to S$8m under this scheme.

2. Sustainable financing

ESG is a buzzword today because it safeguards the future of businesses and individuals alike. As such, more businesses are looking to commit more to sustainability, which speaks volumes in business partnerships.

Consumers, partners and investors are all looking to align themselves with businesses that are trying to improve the world. Individuals are also inclined to work for businesses that share these aspirations.

In addition, businesses at the forefront may benefit from conversations with regulators, to shape their industries into hubs for green collaboration.

To further encourage businesses on a green path, the Monetary Authority of Singapore has launched the world’s first grant scheme to encourage SMEs to take up green loans and sustainable financing to meet their sustainability goals.

Functioning like regular loans in financial terms, these green and sustainability-linked loans help spur your business on towards green transformations by defraying the costs. OCBC has an SME Sustainable Financing Framework that makes this process simpler for businesses, and also covers areas of funding that include renewable energy, green buildings and sustainable water and wastewater management.

3. Invoice financing

Another lending option for SMEs is invoice financing. This is different from regular-term loans, in that businesses only borrow amounts that have been invoiced.

You may use our SME funding tool for purchases, so large and unforeseen expenses do not disrupt the cash flow needed for routine expenses like rent or salaries.

On the other hand, you can use it for sales too, which allows you to offer longer payment terms to your clients. This can help make your business more attractive than competitors, especially as economies continue to struggle to recover from the pandemic.

With invoice financing, businesses can also get quick access to the funds they need through their trade finance credit facility at banks like OCBC. The costs are relatively low if clients stick to the allotted payment terms, which is why invoice financing can be a harbour for businesses in uncertain times. In another article, we did a comparison between term loans and invoice financing.

4. Commercial property loan

Getting a space to call your own is a milestone for business owners. Commercial property loans from financial institutions like OCBC can help SMEs better finance this big-ticket purchase.

At first glance, an office space might seem like an unnecessary and large expense. It would take most businesses years to pay the bill, on top of forking out for routine expenses like maintenance costs.

However, there are many upsides to owning your own business property. Among these are not having to meet strict refurbishment and visitor guidelines, and not having to renegotiate with landlords once rental contracts are up.

Buying vs Renting: What should your business choose?

As an owner, you will also be able to structure and use the spaces as you see fit to bolster a company culture, thus increasing employee loyalty.

Furthermore, it is a historically good time to make a purchase now. Prices of office spaces in the central region of Singapore are at their lowest since the first quarter of 2018, according to data from the Urban Redevelopment Authority.

Property loans are structured to reflect what businesses can afford. You could be able to borrow as much as 80% of your property purchase price or valuation.

However, as it is often said, there is no one-size-fits-all approach to any business. The same goes with loans. As an SME owner, you should match the offerings in the market to your unique challenges and goals. Only then will the chosen lending option further your business’ reach, capabilities and growth.


You may be directed to third party websites. OCBC Bank shall not be liable for any loss suffered or incurred by any party for accessing such third party websites or in relation to any product and/or service provided by any provider under such third party websites.

The information provided herein is intended for general circulation and/or discussion purposes only. Before making any decision, please seek independent advice from professional advisors. No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake any obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein. Any reference to any specific company, financial product or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.

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