(65) 6589 8119sales@linkflow.com.sgContact us Now

sme business loan interest rate

Business Loan Interest Rate in Singapore

Business loan interest rate differs from various banks and type of financing.

In general:

For unsecured loans without collateral, interest is usually higher compared to secured loan with collateral pledged to the banks.


Below table shows the range of business loans interest rates for various SME loan products:

 

Loan TypeInterest Rate (EIR)
Unsecured Business Term Loan10 – 13% p.a.
SME Micro Loan6.5% – 7.5% p.a.
SME Working Capital Loan6.5% – 7.5% p.a.
Trade Financing Line6.75% – 8% p.a.
Factoring / Receivables Invoice financing6% – 8% p.a.
Overdraft10% – 13% p.a.
Equipment/Machinery Loan5% – 8% p.a.
Commercial/Industrial Property Loan1.3% – 2.5% p.a.
Alternative Financing/P2P Crowdfunding1% – 5% per month

 

To know more about the various loan products and facilities listed above, do take look at our SME financing guide.

Your company’s credit profile and financials also affects the business loan interest rate you’ll be quoted.

You can compare all banks SME business loans and see indicative interest rates instantly with our free online loan assessment tool:

sme-loans-compare

Effective interest rate (EIR)

Business loan interest rates are usually quoted in EIR (effective interest rate).

What does EIR mean?

The effective rate is the actual cost of borrowing and is usually amortized on a monthly reducing principal balance basis. 

Simply put, the principal (original) loan amount is reduced monthly via the monthly installments paid.

For the initial periods of the loan tenure, a larger portion of the monthly installment payments will be apportioned towards servicing interest portion of the loan. 

Most SME owners usually mistaken the calculation of EIR.

When quoted 10% p.a. EIR interest for loan amount $100K, most will mentally derive interest per year of $10K. 

The actual net interest paid for a year on the above example is actually only $5,499. The below amortization table will provide a clearer picture on the calculation for EIR

 ammortization table

You’ll need either a financial calculator or loan amortization table to derive the above figures. You could still calculate the interest portion of the loan for the 1st month with a simple calculator.

Here’s how it’s done:

10% p.a. = 0.1
0.1 / 12 months = 0.00833  (monthly reducing balance)
$100k (principal amt) x 0.00833 = $833 (that’s the interest portion for the 1st month you see on the table above)

For a easier and faster way, you can just use the loan calculator on the right side bar of this page to derive monthly installment and total interest. 

You can also generate an amortization table to see the loan details breakdown with the business loan calculator.

Business Loan Calculator