Key takeaways
- Working capital financing pays for day-to-day running costs, such as stock, salaries and rent, while you wait for cash to come in.
- Common forms include term loans, revolving credit facilities and trade financing. [27]
- Lenders usually look at your ability to repay, cash flow, account conduct and the background of the owners and guarantors. [21]
- Many SME loans are unsecured but need a personal guarantee from directors. [25][21] LEGAL REVIEW
- The government-supported EFS Working Capital Loan goes up to S$500,000 per borrower, but the lender still decides. [2]
Key facts
Key terms
- Term loan
- A loan of a fixed amount, repaid in instalments over a set period, often fixed monthly instalments. [25] In the glossary
- Revolving credit facility
- A limit you can draw on, repay and draw again. Interest is usually charged only on the amount drawn, but some facilities also carry a fee on the limit. [39][40] In the glossary
- Overdraft
- A facility that lets your current account go below zero, up to an agreed limit. You pay interest on what you use. MoneySense lists fees for going over an approved limit among the costs to check. [10] In the glossary
- Personal guarantee
- A promise by a director or owner that they may have to repay the business debt personally if the business cannot. LEGAL REVIEW In the glossary
What is a working capital loan?
A working capital loan or facility covers the money a business needs to keep running: paying suppliers, staff, rent and other bills while waiting for customers to pay. It is different from financing a specific asset, like a machine or a property.
Common forms
Banks in Singapore describe several types of working capital financing. One bank's working capital page lists a revolving credit facility, a term loan and block discounting, with a choice of collateral and repayment structure. [27]
| Form | How it works | Repayment | Ask about |
|---|---|---|---|
| Term loan | You borrow a fixed amount | Instalments over a set period, often fixed monthly [25] | Whether the rate is flat or monthly rest [10] |
| Revolving credit facility | A limit you can draw on, repay and draw again [39] | Interest usually only on the amount drawn [40] | Any annual or commitment fee on the limit [40] |
| Overdraft | Your current account can go below zero, up to an agreed limit | Interest on what you use; the limit is reviewed from time to time | Fees for going over the approved limit [10] |
| Trade financing | Short-term financing tied to buying stock or specific trade transactions [3] | Tied to the transaction; EFS Trade Loans run up to 1 year [3] | What happens if the trade is delayed |
- Term loan. You borrow a fixed amount and repay it in instalments over a set period. One bank describes its SME business loans as repaid in fixed monthly instalments. [25]
- Revolving credit facility. You get a limit you can draw on, repay and draw again. [39] Interest is usually charged only on the amount you have drawn, but some facilities also carry an annual or commitment fee on the limit, so ask about fees as well as the rate. [40]
- Overdraft. Lets you take your current account below zero, up to an agreed limit. MoneySense lists fees for going over an approved limit among the costs to check. [10]
- Trade financing. Short-term financing tied to buying stock or to specific trade transactions, such as financing inventory or invoices. EnterpriseSG's Trade Loan covers inventory and stock financing, among other uses. [3] Letters of credit and trust receipts are explained in types of business financing. See also invoice financing.
How does a working capital loan work?
A working capital loan is repaid in one of two common ways, depending on its form. With a term loan, you usually repay a fixed amount every month that covers interest and part of the principal. With revolving credit or an overdraft, you pay interest on what you use, and the limit is reviewed from time to time.
Interest may be quoted as a flat rate or on a monthly rest (reducing balance) basis. The two are not comparable at face value. MoneySense explains that the effective interest rate on a flat-rate loan is higher than the advertised rate. [10] Read our flat rate vs EIR guide before comparing offers.
What lenders usually ask for
Exact requirements vary by lender and by loan size. Typical documents mentioned by banks and the Association of Banks in Singapore include:
- Financial statements for the latest two years, plus recent management accounts. [21][25][26]
- Recent business bank statements, often three to six months. [25][26]
- Notices of Assessment (income tax) for key directors or guarantors. [21][26]
- A business plan or cash flow projections. The ABS lists a business plan for startups. [21]
- Company details, which banks may retrieve with your consent through Myinfo Business. [26]
The ABS page is older and still names schemes from before Enterprise Singapore was formed in 2018, so treat it as a general guide only. [21] See preparing to apply for the full list.
How lenders assess you
The ABS lists the factors banks typically weigh, including: [21]
- your business plan and cash flow projections
- positive net worth
- your ability to keep up with repayments
- how your bank accounts have been run
- the background of the owners and guarantors
The ABS describes your ability to pay as the most important consideration. [21] A longer trading history, steady revenue and clean accounts generally help. Each lender has its own criteria. One bank's unsecured term loan, for example, asks that the business has been registered and operating in Singapore for at least 2 years, with at least 30% local shareholding. [26]
Do working capital loans need a personal guarantee?
Often, yes, even when the loan is unsecured. Many SME working capital loans are unsecured, meaning there is no property or other asset pledged. That does not mean nobody is on the hook. One bank's SME loan page notes that guarantors are required even though no physical collateral is needed. [25] The ABS says banks may ask directors for a personal guarantee as a sign of commitment. [21]
A personal guarantee means you may have to repay the business debt personally if the business cannot. Read it carefully and take independent advice if you are unsure. LEGAL REVIEW
Government-supported working capital
The Enterprise Financing Scheme - SME Working Capital Loan (EFS-WCL) is offered through participating banks and financiers. As at 25 Oct 2026, EnterpriseSG lists: [2]
- up to S$500,000 per borrower, within a S$5 million group limit for EFS-WCL
- repayment over up to 5 years
- interest set by the participating lender based on its risk assessment
EnterpriseSG shares part of the lender's risk, but the borrower is responsible for repaying 100% of the loan, and approval is still up to the lender. [2] These figures can change. See the EFS Working Capital Loan in our EFS guide.
Fees to ask about
Beyond interest, ask about processing fees, cancellation fees, late payment charges and early repayment fees. [10] Some banks charge a facility fee in addition to the effective interest rate. [26] MoneySense also notes that a bank can change terms by giving notice, so check how changes are communicated. [10]
What to check before you agree
- Is this a term loan, revolving credit or overdraft, and how is interest charged?
- What is the effective interest rate (EIR), and can I see a full repayment schedule? [10]
- What are all the fees: processing, late payment, early repayment, cancellation? [10]
- Do I need to give a personal guarantee? Who else must sign?
- Can the lender review, reduce or recall the facility, and with how much notice?
- Is the monthly repayment affordable in a slow month, not just an average one?
- Is the lender regulated? Check the MAS Financial Institutions Directory for banks and finance companies. [16]
Frequently asked questions
How does a working capital loan work?
With a term loan, you borrow a fixed amount and usually repay a fixed amount every month that covers interest and part of the principal. With revolving credit or an overdraft, you pay interest on what you use, and the limit is reviewed from time to time.
What is the EFS Working Capital Loan?
It is an Enterprise Financing Scheme loan offered through participating banks and financiers, with EnterpriseSG sharing part of the lender's risk. As at 25 Oct 2026, EnterpriseSG lists up to S$500,000 per borrower, repaid over up to 5 years. The borrower repays 100% of the loan, and approval is up to the lender.
Source: [2]
Are working capital loans secured or unsecured?
Many SME working capital loans are unsecured, meaning no property or other asset is pledged. That does not mean nobody is on the hook: one bank's SME loan page notes that guarantors are required even though no physical collateral is needed.
What do lenders ask for in a working capital loan application?
Requirements vary by lender and loan size. Banks and the Association of Banks in Singapore commonly mention financial statements, recent business bank statements, directors' Notices of Assessment and business registration details.
Do I need a personal guarantee for a working capital loan?
Often, yes. Many SME lenders ask directors for a personal guarantee, even for unsecured loans. A personal guarantee means you may have to repay the business debt personally if the business cannot, so read it carefully and take independent advice if you are unsure.
Disclaimer. This guide gives general information only. It is not financial, legal or tax advice, and it is not a recommendation of any product or provider. Riverell is not a lender and does not arrange loans. Figures and scheme details were checked against the sources listed on 25 Oct 2026 and can change. Always confirm terms directly with the provider, and get independent professional advice if you are unsure. LEGAL REVIEW
Sources
- [1]EnterpriseSG - Enterprise Financing Scheme (overview). https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme (accessed 25 Oct 2026)
- [2]EnterpriseSG - EFS SME Working Capital Loan. https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme---sme-working-capital (accessed 25 Oct 2026)
- [3]EnterpriseSG - EFS Trade Loan. https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme---trade-loan (accessed 25 Oct 2026)
- [10]MAS MoneySense - Costs of borrowing: flat rate, monthly rest and effective interest rate (last updated 22 Apr 2026). https://www.moneysense.gov.sg/costs-of-borrowing-flat-rate-monthly-rest-and-effective-interest-rate/ (accessed 25 Oct 2026)
- [16]MAS - Financial Institutions Directory. https://eservices.mas.gov.sg/fid (accessed 25 Oct 2026)
- [21]The Association of Banks in Singapore - SME FAQs (older page, no date, footer (c) 2022; still names pre-2018 SPRING-era schemes). https://abs.org.sg/sme/faqs (accessed 25 Oct 2026)
- [25]DBS - Business loans for SMEs (product description only). https://www.dbs.com.sg/sme/business-loan.page (accessed 25 Oct 2026)
- [26]OCBC - Business Term Loan (product description only). https://www.ocbc.com/business-banking/smes/loans/business-term-loan (accessed 25 Oct 2026)
- [27]UOB - Working capital loan (product description only). https://www.uob.com.sg/business/finance/working-capital-loan.page (accessed 25 Oct 2026)
- [39]MAS MoneySense - Understand the types of loans (last updated 28 Sep 2026). https://www.moneysense.gov.sg/understand-the-types-of-loans/ (accessed 25 Oct 2026)
- [40]OCBC - Business revolving short-term loan (product description only). https://www.ocbc.com/business-banking/smes/loans/business-revolving-short-term-loan (accessed 25 Oct 2026)