Secured Business Loans in Singapore
Any business is powered by funding. To support all kinds of projects it’s tough to generate a huge amount of owned capital. This is where the secured business loans help. If the loan is needed for a long term on low-interest rates, this is the best available option. Read further to learn more about the secured business loans in detail.
Secured Business Loans
When a valuable asset is pledged as collateral security or a personal guarantee is provided against the loan funding, it’s termed as secured business loans. In case the borrower fails to pay back the loan amount, the lender seizes the asset or the amount pledged and resells or uses it to recover losses.
What Can Be Used As Collateral For Secured Loans?
There are many types of assets that can be used as collateral for procuring secured loans in Singapore. They are blanket lien, business or personal real estate, home equity, business property like machinery or specialized equipment, business or personal vehicle, farm assets and products, accounts receivable, inventory, natural reserves, insurance policies, investment accounts, paper investments, business savings accounts and valuables such as fine art, jewelry or collectables.
The main advantages of secured loans in Singapore:
- Lower interest rates: Collateral asset is used in the form of security and the lending institutions have a lower risk compared to unsecured loans. So they offer lower interest rates comparatively.
- Larger loan amount granted: The installments can be paid for a longer-term and a larger loan amount is available for the borrower in order to ease the repayment process. Many a time, the flexibility of repayment option is also available.
- Better credit score: When the loan is fully paid, the company’s credit score increases as well. It can be further used for much bigger venture opportunities ahead.
- Less strict requirements on credit rating and debt to income ratio: Compared to unsecured loans, a lower credit rating would not affect the grant of secured loan because an asset is pledged as a recovery option.
Different Types Of Secured Business Loans:
- Traditional Term Loans: The common business loan in which the lender lends lump sum money and the borrower returns it with interest over the set period. It generally ranges from $25000-$500000, over a period of 1-5 years with an interest rate of about 5%-25%.
- Mortgage Loan: When a business property is assured as collateral, a mortgage loan is rendered to the borrowing company.
- Trade Loans: These loans are for financing inventories or materials purchased. Usually, a letter of credit is issued to an overseas supplier. These are granted against guarantee or immovable property as security.
- Invoice Financing: Financing institutions lend 80% – 90% of the payment as an advance against receivable invoices of the company as loans.
- Equipment financing: These loans are granted against equipment to fund its purchase thereafter.
- Line of Credit: Much like a credit card, an approved limit amount is set aside to be used by the borrower. The interest on the amount used is charged at the end of the agreed term.
- Merchant Cash Advance: An advance money is lent to the borrower in lieu of debit or credit card sales. At the time of repayment, a fee and a percentage of daily or weekly debit/credit card sale is charged from the borrower.
List of essential documents to be prepared while applying for a secured loan
For preparing to apply for a secured business loan in Singapore, the following are the basic documents required:
- Age of business
- Revenue statements
- Balance sheets
- Personal credit score
- Business credit Score
- Business Plan
- Industry type
- Proof of collateral
- Employer identification number
- Ownership or franchise agreements
- Business Tax returns
- Other licenses, if any
Many other details may be required depending upon the loan type and format. Since the loan process is risky for the lender and the borrower, its best to prepare for the proper application process beforehand.
Business Loans by Finaxar
Now all your business needs are ready to be fulfilled. Just keep in mind to increase your business presence and draft a good repayment plan for a greater advantage. It is important to note that Secured Business Loans should be obtained with appropriate planning of funds and resources. In case you are unable to repay the loan, you will end up losing your collateral asset.
Finaxar is a financing institution in Singapore that provides collateral-free loans to small businesses via services like Finaxar Credit Line and Receivable Financing. For further information on these loans contact us.