SGDLoan.com – Securing the right financing is crucial for any business aiming to grow or sustain operations, and understanding a commercial loan example can make the process smoother.
In Singapore, commercial loans are a common financial solution used by businesses to acquire property, fund expansion, purchase equipment, or support working capital.
A well-chosen commercial loan example helps business owners visualise how these loans operate and the benefits they bring, enabling them to make informed financial decisions.
This article explores various types of commercial loans, real-world examples, step-by-step application processes, and essential considerations when choosing the right lender in Singapore.
By examining comprehensive examples and practical information, you will better understand how to leverage commercial loans effectively for your business needs.
What is a Commercial Loan?
A commercial loan is a type of financing extended specifically to businesses rather than individuals.
It is often used to fund significant business activities such as expanding premises, purchasing equipment, or improving overall cash flow.
Commercial loans can range from a few thousand dollars for small enterprises to millions for large corporations depending on the needs and capacity of the business.
Typically, commercial loans require businesses to provide some form of collateral, such as property or equipment, to secure the loan.
In Singapore, the commercial lending market is competitive, with major banks offering a wide range of tailored solutions for businesses across industries.
Interest rates on commercial loans may be fixed or variable, depending on the product chosen, and repayment terms can span from a few months to several years.
Lenders assess various factors, such as the company’s financial health, credit history, and business projections, before approving a commercial loan.
Understanding a commercial loan example in detail helps businesses anticipate what to expect during the loan process and manage their financing more strategically.
Types of Commercial Loans Available in Singapore
Before applying for financing, businesses should familiarise themselves with the different types of commercial loans available in Singapore.
Each loan type serves a specific business need and comes with its own set of requirements and benefits.
Commercial Property Loans
- Designed for businesses that want to purchase, refinance, or renovate commercial properties such as offices, retail shops, warehouses, or factories.
- Loan-to-value (LTV) ratios typically go up to 80%–90%, depending on the lender and the type of property.
- Repayment periods often range from 15 to 30 years, providing long-term financial planning options.
- Some banks, like UOB and DBS, offer flexible repayment packages based on the business’s projected cash flow.
Business Term Loans
- Ideal for general business expansion, purchasing inventory, or investing in operations.
- These loans are usually unsecured, meaning no collateral is required, but they do come with slightly higher interest rates.
- Loan amounts can vary from SGD 50,000 to SGD 500,000 or more, with repayment terms typically between 1 to 5 years.
- OCBC Bank provides attractive packages for SMEs with minimal documentation.
Equipment and Machinery Loans
- Help businesses purchase heavy machinery, vehicles, or essential operational equipment.
- Financing typically covers 70% to 90% of the equipment’s cost.
- Tenures vary between 3 to 7 years, and some lenders offer options like seasonal repayment plans.
Working Capital Loans
- Provide short-term funding to manage operational expenses such as salary payments, rent, and supplier invoices.
- These are usually unsecured loans, with quicker approval processes and shorter tenures, typically up to 3 years.
- Maybank and DBS offer working capital loan solutions under government-assisted schemes, such as the Enterprise Financing Scheme (EFS).
Green Loans
- Tailored for businesses investing in sustainable practices, including energy-efficient building upgrades, renewable energy projects, and eco-friendly technologies.
- Lenders like DBS and OCBC offer green loans with preferential rates and terms for businesses that meet green certification standards.
- These loans align with Singapore’s broader commitment to sustainability and are increasingly popular among modern enterprises.
Example of Commercial Loan
Looking into a commercial loan example can provide practical insight into how businesses leverage loans to meet their goals effectively.
Case Study: Atome Financial’s $80 Million Credit Facility
In early 2024, Atome Financial secured an $80 million credit facility from global investment management firm BlackRock and leading venture debt provider InnoVen Capital.
This commercial loan was aimed at boosting Atome’s “buy now, pay later” services and expanding its regional footprint across Southeast Asia.
The facility allowed Atome to access funding as needed, offering flexible drawdown options tied to the company’s operational milestones.
This strategic move enabled Atome to scale rapidly without diluting ownership through equity financing.
Case Study: SingTel’s $476 Million Green Loan
In 2023, SingTel, Singapore’s leading telecommunications company, obtained a S$476 million green loan from DBS Bank and OCBC Bank to finance the development of a sustainable data centre.
This initiative aligned with SingTel’s commitment to environmental stewardship, supporting its goal of achieving net-zero emissions by 2050.
The green loan example reflects the growing importance of sustainable finance in Singapore’s business ecosystem, offering businesses both financial support and reputational advantages.
These examples demonstrate that a well-structured commercial loan example can fuel both traditional business expansion and modern sustainability initiatives.
Major Commercial Loan Providers in Singapore
Choosing the right commercial loan provider is a critical step towards securing favourable financing terms.
Here’s an overview of some major commercial loan providers in Singapore:
| Bank | Type of Loan Offered | Key Features |
|---|---|---|
| DBS Bank | Commercial Property Loans, Working Capital | Up to 90% financing, flexible structures |
| OCBC Bank | Business Term Loans, Equipment Financing | Fast approval, government-assisted options |
| UOB | Commercial Property Loans | High loan amounts, tailored packages |
| Standard Chartered | Business Property Loans, Business Loans | Extended tenures, competitive rates |
| CIMB | Commercial Property Loans | Simplified process, attractive interest |
Each bank has its own unique set of terms and conditions, and businesses are encouraged to engage a relationship manager for personalised advice.
Moreover, Singapore’s robust financial infrastructure ensures that businesses have access to transparent and competitive lending options.
How to Apply for a Commercial Loan in Singapore
Applying for a commercial loan in Singapore involves a series of critical steps.
A clear understanding of the process will significantly improve the chances of a successful application.
Eligibility Criteria
- Businesses must be registered and operating in Singapore, either as a sole proprietorship, partnership, or private limited company.
- Most lenders require the business to have been operating for at least one to two years with evidence of profitability or strong cash flow.
- Good credit standing for both the business and the directors is usually required.
Required Documentation
- Latest two years of audited or unaudited financial statements.
- Company bank statements for the past six months.
- ACRA business profile and recent GST filings, if applicable.
- Identification documents such as NRIC or passport copies of key shareholders or directors.
- Business plans or project proposals may also be required for large loan amounts.
Application Steps
- Preparation: Gather all necessary documents and ensure financial statements are updated.
- Initial Consultation: Meet with potential lenders or business loan brokers to understand available options.
- Submission: Fill in the application form and submit all requested documentation.
- Assessment: The lender evaluates the business’s financial health, industry risks, and repayment ability.
- Approval and Offer: If approved, the bank issues an offer letter detailing loan terms and conditions.
- Acceptance: Review the terms carefully, negotiate if necessary, then sign the offer letter.
- Disbursement: Funds are released once all legal documents are completed.
Timely preparation and transparency during the application process can greatly enhance a business’s chance of securing a favourable commercial loan example.
Factors to Consider When Choosing a Commercial Loan
Choosing a commercial loan is a major financial decision.
Several important factors must be evaluated to ensure that the chosen loan aligns with your business’s financial goals and capacity.
Interest Rates and Fees
- Always request a full breakdown of the effective interest rate (EIR) and compare it across different lenders.
- Check for hidden charges like prepayment penalties, cancellation fees, and legal costs.
Repayment Terms
- Consider whether your business prefers shorter repayment terms with higher instalments or longer terms with lower monthly payments.
- Some lenders offer repayment holidays or interest-only repayment options at the beginning of the loan tenure.
Loan Amount and Financing Needs
- Calculate your business’s real funding needs and avoid the temptation to over-borrow.
- Overextending debt obligations can put unnecessary stress on business operations.
Lender Reputation and Customer Support
- Choose banks or financial institutions that are known for reliability and responsive customer service.
- Good communication and ongoing support can prove invaluable, especially during tough economic periods.
Flexibility of Loan Packages
- Look for lenders that allow refinancing or loan restructuring options if your business conditions change.
By considering these factors carefully, businesses can select a commercial loan example that not only meets immediate financing needs but also supports sustainable growth.
Expanding a business in Singapore requires careful financial planning, and choosing the right commercial loan example can significantly influence the success of your expansion efforts.
Understanding the types of commercial loans, reviewing real-world examples like Atome Financial and SingTel, and preparing a strong loan application are essential steps.
Taking time to compare offers, understand interest rates, and align loan structures with your business needs will help you secure financing that fuels sustainable growth.
Whether you are aiming to purchase a new office space, invest in machinery, or fund an eco-friendly initiative, Singapore’s robust financial system provides a wide range of commercial loan solutions to support your vision.
When managed wisely, a commercial loan is not just a financial product — it is a strategic tool for long-term business success.
