Loan Financing in Singapore

Loan is a type of debt. A loan entails the redistribution of financial assets over time between the lender and borrower. In a loan the borrower receives or borrows an amount of money, called the principal from the lender and would have to pay back or repay an equal amount of money to the lender at a later time.

 

The money is paid back in regular installments or partial repayments in an annuity and the amount would be the same for each installment. The loan is usually provided at a cost, known as interest on the debt, which gives an incentive to the lender to engage in the loan.

 

Singapore Government has come up with the the Loan Insurance Scheme II (LIS II) which offers Singapore-based companies an additional source of financing to fuel their entrepreneurial aspirations. LIS II is a variable-cost financing scheme that meets a company's short-term financing needs in Singapore and overseas. Loans offered under LIS II are partially insured against the borrowers' default risks. Participating Financial Institutions (PFIs) have the flexibility to package attractive loan facilities to companies based on their assessment of the companies' risk profiles. 50% of the premium cost is sponsored by the Government.

 

 

A short-term loan which provides money to buy earning assets. Working Capital loan funds provide business the cash it needs to keep growing until all operating expenses are covered out of revenue. Without a working capital loan most businesses would find it difficult to generate revenue to stay in business. These funds provide access to cash which can be used to pay rent, mortgage payments, utilities, marketing expenses, inventory, employees etc. It is difficult to obtain substantial working capital loan unless the business has a good credit rating. Lenders would use the business credit scores to evaluate the performance of the business and if the business would be in a position to repay.

 

Fixed asset loans are provided to borrowers who would want to keep their Capital working. Enterprises would require these loans to make investments in fixed assets. Investments by enterprises in fixed assets include Capital Construction, Technical Innovation, Developing and Manufacturing of the new products as well as related house purchase, civil engineering, purchase and installation of the technical equipment, etc.

 

Hire Purchase Loans
Hire Purchase loan is a form of lending, wherein the borrower obtains goods and then pay back over a period of time. Initially the borrower pays back the deposit and later pays back the cost in monthly installments. Once the term of the loan has been completed, the borrower can make a decision to keep the asset or not. If the borrower wishes to keep the asset, then the borrower settles the remaining balance, else gives the asset back to the provider.