Guide to loans for starting a business in Singapore (2026): personal loan vs. business loan?

Starting a new business venture all by yourself can be exciting yet challenging, securing the necessary funding is often a critical first step. Entrepreneurs can choose between personal loans and business loans, each with its own advantages and drawbacks. Let's find out which option is better for your business!

What is a business loan?

As a business owner, you may need financing to kick-start your operations, scale up your business, or simply maintain a steady cash flow. This is where business loans come in, which can help entrepreneurs in Singapore take their businesses to the next level.

There are two main types of business loans available in Singapore: government-linked loans and private business loans. Government-linked loans come with specific requirements, such as shareholding, but offer 50% to 70% risk-sharing on the loan, which can help moderate interest rates.

Private business loans, on the other hand, are offered by banks and financial institutions and allow for more flexibility in loan structure, interest rates and loan tenure. This gives borrowers the opportunity to negotiate favourable terms that suit their specific business needs.

To apply for all standard business loans, it’s important to be aware that only registered businesses which have been operating for at least 6 months are eligible.

How do I get a small business loan?

If you are a small business, and your company is relatively new or not making the required revenue to apply for a regular business loan, you can consider applying for a special business loan targeted towards smaller or struggling companies:

SME Working Capital Loan: A type of low-cost business loan that local Singapore-registered SMEs can apply for which can be repaid within 1 to 5 years.

Startup Business Loan: Similar to a standard business loan, but with a smaller loan amount cap. This type of loan is good for companies that have only been operating for a few months.

Enterprise Financing Scheme – Working Capital Loan (EFS-WCL): The EFS-WCL is a government-assisted scheme that supports eligible SMEs with working capital needs. Key criteria include at least 30% local equity, group revenue up to $100 million or a maximum group employment size of 200, and being registered and operating in Singapore. The maximum loan quantum is $500,000 with a repayment period of up to 5 years. Applications are submitted through participating banks and financial institutions.

In short, if you’re at the early stage of your business or just in the process of turning your entrepreneurial dream into a reality, applying for one of these small business loans or a personal loan would be a better option.

How is a personal loan different from a business loan?

As opposed to a business loan, you don’t need to be registered as a business to apply for a personal loan. This type of loan comes in handy especially when you’re just embarking on this journey and need funds for initial investments, inventory, or other expenses. Here’s a quick comparison of business and personal loans to better guide you through the decision-making process.

Business loan vs. personal loan in a nutshell

How to apply for a business loan in Singapore?

After taking your time to understand the differences between business and personal loans, you might now be interested in taking out a business loan in Singapore. Here are a few simple steps to guide you through your application:

1. Start by determining how much you need to borrow and what type of business loan would work best for your business.

2. Gather your financial documents and check your credit score to ensure you meet the eligibility requirements.

3. Research different loan providers and compare their rates, fees, and terms.

4. Complete the business loan application form and provide all necessary documentation and wait for approval. If approved, you'll receive the funds in your business account to use as intended.

Best business loan options in Singapore

As mentioned earlier, when it comes to business loans in Singapore, you have two main options: government-linked loans and private business loans. Government-linked loans come with specific requirements but offer attractive interest rates and risk-sharing by the government. Private business loans are offered by banks and financial institutions, with interest rates and terms that vary depending on the loan provider and product.

Some popular private business loan options include the OCBC Business First Loan, DBS Business Term Loan, and UOB BizMoney Loan. Make sure to do your research and compare different options before choosing a loan that fits your business needs. And don't forget to read the fine print before signing on the dotted line!

If you want to compare matched offers from multiple banks and financial institutions without applying to each separately, Lendela's business loan matching lets you do this with one application via MyInfo Business.

Things to keep in mind when applying for loans in Singapore

• When applying for a loan, there are several factors to consider beyond just the loan type. You'll need to provide a variety of documents, including your bank statement, proof of income, and business plan.

• The loan application process can also be lengthy, so be prepared to provide detailed information and answer any questions the loan provider or bank may have.

• Consider the repayment period and interest rates associated with the loan, as these can greatly impact your financial situation over time.

• Carefully review the terms and conditions of the loan before signing and make sure you have a clear understanding of your repayment obligations.

• Finally, be sure to undergo thorough financial planning and have a backup plan in case your business comes across unexpected challenges that impact your ability to repay the loan. You can consider renegotiating your repayment schedule or going for debt counselling should this happen.

Does applying through Lendela affect my credit score?

No. Submitting your details through Lendela for business loan matching does not trigger a credit check. A credit assessment by the bank or financial institution you choose only occurs if you proceed with their offer, and only with your consent at that stage.

What is the difference between EFS-WCL and a standard business term loan?

EFS-WCL is a government-assisted scheme administered by Enterprise Singapore through participating banks and financial institutions. It offers risk-sharing between the government and the institution, which can moderate interest rates for eligible SMEs. A standard business term loan is a commercial product with terms set entirely by the bank. Not all SMEs qualify for EFS-WCL – eligibility depends on local equity shareholding, group revenue, and other criteria.

Can a sole proprietor or partnership apply for a business loan?

Yes, in principle – but approval criteria vary significantly by institution. Sole proprietors often find it harder to qualify for larger business loan amounts since there is no separation between personal and business liabilities. Some banks and financial institutions are more flexible than others. (Policies vary – check with your bank.)

Should I take a personal loan or business loan for my startup?

If your business has been registered and operating for at least 6 months, a business loan may be the better structure – it keeps liabilities ring-fenced to the entity and builds your company's credit history. If you are in the very early stages before registration or in the first few months of operation, a personal loan is often the more accessible option, since business loan eligibility typically requires a trading history.

How to get a business loan or personal loan in Singapore?

With many types of business financing available in Singapore, comparing offers across multiple banks and financial institutions in one go saves time and reduces the risk of applying to products you may not qualify for. You can compare business loan offers through Lendela – one application, no impact on your credit score from checking your options.