No collateral business loan for SMEs? Here are options to consider.

Looking for a loan to sustain or improve a certain part of your business process? Many startups just have enough to sustain initial operation and a bit of risk – most won’t have collateral to offer if they decide to apply for a business loan.

Banks and other lending institutions generally require a guarantee in the case of non-payment of loans. This is in the form of collateral or assets that the bank can sell to get their money back. This can be real estate, a vehicle, equipment, and others with concrete value.

In Singapore’s booming economy, it pays to have the upper hand in production and market capability. This is why those who can secure requirements for a business loan for new business thrive while others lag.

Yes, not all loans come with collateral. You can still get financing through the following options.

No collateral business loan options

Working capital loans.

This option is recommended for businesses looking to pay short-term expenses, including anticipated cash flow shortfall or investment in growth. This may include a website redesign, product improvement, leasehold improvement, hiring new staff, business acquisitions, and others.

Most banks will require collateral for these in form of accounts receivable, inventory, or an entrepreneur’s assets. However, some institutions don’t need collateral if the loan is for a smaller amount.

If there’s no loan security, bankers will check your company’s cash flow and the amount they can borrow based on EBITDA and/or forecasted cash flow. They’ll also assess how your management style, if the project makes sense, and lastly, your credit score to determine creditworthiness.

A good score on these factors will help you obtain better loan terms even without collateral.

Market expansion loans

This is similar to a working capital loan and obtained without collateral with a focus on business financing for growth. Projects comprise market expansion, opening a new location, or launching a new product.

If there’s no loan security, bankers will check the company cash flow and the amount that can be borrowed based on EBITDA and forecasted sales.

Terms are based on the unique needs of growing businesses. They may include flexible repayment to protect the company’s working capital via structured payments that change based on your cash flow.

Technology financing

This is similar to working capital loans, with terms focused on businesses requiring capital for hardware investment, IT planning, software, or technology firms looking for growth capital. These types of loans generally offer flexible repayment appropriate to tech investments or businesses.

Personal loan.

This financing won’t require collateral. It includes a personal line of credit and credit cards. However, this can put you in debt with its high-interest rates.

Your family, friends, and angel investors.

Look for people willing to lend you money without collateral, although if you don’t pay, you’re risking personal relationships with them.

Angel investors are usually wealthy individuals who invest personally or through angel groups in high-potential SMEs to provide financing. They typically ownership shares that they can sell as profit when the company hits big.

End Note

Still looking for the right business loan without asking your family or waiting to raise it on your own? We got you – there’ a no-fuss way to secure collateral-free funding of up to S$500,000 business loan Singapore and it’s offered by DBS. You read that correctly. You can readily apply online and once approved enhance your cash flow and improve operations as you please. There you have it. Start considering these options and choose the best one according to your needs and capabilities.