At SmartFunding, we offer SMEs Term Financing as one of the options to finance their business. What is term financing, and how is it different from the Buy Now, Pay Later (BNPL) option? Find out more.
With so many financing options made available to SMEs, you might be wondering whether a term financing is suitable for your business needs. If you have a high-priority and specific expense, term financing may be the right option for you. Why?
Because upon successful application, you will receive cash upfront before making small repayments over a specific period. Term financing will help business owners to make large purchases. Not only that, this type of financial assistance could help SMEs purchase a new piece of equipment, vehicle, or location in order to improve their profits.
The advantages of term financing
Apart from borrowing a large amount of money for your urgent business needs, term financing could actually help with improving your business credit score as well (if you managed to pay off all the repayments on time). Additionally, you will normally receive lower interest rates compared to other financing options.
Term financing allows you to get quick short-term funding, ranging from 12 to 24 months, for working capital. You may choose between a short-term (12 months) or a long-term (24 months) financing period; depending on your business needs and goals.
With term financing, SMEs could typically enjoy lower interest rates. Depending on the lender that you choose, you could expect to receive timely and accurate information about fees and interest charges, which are normally between 8% to 18%. That said, the applicable interest on your loan depends on your credit assessment result.
Although term financing is often necessary and useful for the growth of your business, it may come with a cost; just like any other financing option. Therefore, remember to also include these additional costs when you’re planning to borrow money. Besides the monthly repayments, here are the borrower’s fees and charges at SmartFunding:
|Processing fee||S$250||This will only be charged after the borrower passes a preliminary assessment by SmartFunding. This fee is to cover the cost of our credit assessment. It is refundable upon successful funding.|
|Platform fee||4% of loan amount disbursed||This will only be charged if the funding is successful and the loan is disbursed. This fee will be deducted upfront from the loan amount disbursed.|
|Applicable interest||6% – 18% per annum||The applicable interest on your loan depends on your credit assessment result, based on our proprietary credit scoring system.|
|Late payment interest||0.1% per day on the outstanding principal||Borrowers will only be charged a nominal penalty or even no penalty for early loan repayment.|
When it comes to how much financing an SME can obtain, the maximum amount of a loan request depends on the lender’s credit assessment. In general, the debt securities on our platform are above S$10,000 and do not go above S$500,000.
How does a term financing work?
Contrary to traditional loans from banks or other credit providers, online lenders like SmartFunding can provide you the loan needed with fewer conditions and faster.
If you’re wondering how term financing works for a small business, here’s an example: Company ABC is a small clothing vendor that has been in operation for quite some time. It has achieved admirable financial success, and now it’s time to expand the business; perhaps in the neighbouring town.
The company might have loads of cash flow. However, it would still take them a very long time before they save enough funds to operate a new store in a different location. With term financing, the company would be able to open the new store immediately.
Some other examples
Other examples of how term financing could come in handy are when you require new machinery to run your business smoothly. This means you can purchase the required item as soon as possible with term financing.
Apart from being used to purchase large single items, term financing can also help with smaller business expenses, such as stocking up the shelves with new products.If you are not sure what kind of financing option best fits into your business plan, visit our site here.
This article is for informational purposes only and should not be considered as advice, solicitation, offer, or recommendation to buy or sell any financial products or services. We highly encourage you to consult a licensed, trusted financial advisor before making any major money decision and avoid investing any sum of money that you cannot afford to lose. Remember to research every investment and exercise your due diligence beforehand.
SmartFunding is a licensed SME financing platform regulated by the Singapore Central Bank, Monetary Authority of Singapore (MAS) under the Singapore Securities & Futures Act. SmartFunding holds a Capital Markets Services License, which deals in securities (CMS100637-1). For more info, follow this page or visit SmartFunding.sg