Business Loan Interest Rates – Since 2017, we have been aggregating data collected from our SME financing comparison platform. This report summarizes research data from January to December 2021.
For users of our platform who were unable to fund in 2021, here are some common reasons:
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In 2021, the most common reason for users not getting funding was “new startups with a short operating history”.
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Most banks require SMEs to have at least 1 year of operating history before considering a business loan application. It is also not uncommon for some banks to have at least 2-3 years of operating history.
This may be due to the high failure rates of new start-ups and the credit risk inherent in financing young businesses without a viable history.
In the user profile of our platform, the number of new startups with an operating history of less than 1 year has continuously increased over the years.
Between 2019 and 2021, we followed the data obtained from ACRA (Accounting and Corporate Regulatory Authority) on the creation of new businesses.
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ACRA  data shows that the number of newly registered businesses increased to 65,438 in 2021, a 6% increase on the pre-Covid 2019 period.
The increase in the number of new businesses registered despite the pandemic from 2020 to 2021 may explain why we are seeing more and more new startups looking for funding on our loan portal.
Users in the lowest annual income range in our survey, under $300,000, accounted for the largest share of respondents at 59%, compared to 50% in the 2020 survey.
In 2021, 22% of all users reported $1-5M to $5M and over $5M in annual revenue, a significant decrease from 29% in 2020.
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This suggests that in 2020, more SMEs with a lower income base sought financing than in 2021, where larger SMEs sought financing on our loan portal.
In 2021, 50% of SME users said they were profitable in the previous financial year 2020, at the time of the outbreak and the circuit breaker shutdown introduced during that period.
This compares to 51% of users in 2020 who reported profitability in the 2019 financial year, pre-Covid.
This may be due to the unprecedented support measures introduced by the Singapore government to protect jobs and address the financial crisis in Budget 2020 and subsequent supplementary budgets.
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As a result, the impact on FY20 profitability across our users remained consistent with 2019. However, we note that we do not have data on whether this has affected user profit margins.
Although the proportion of contributors to profit remained unchanged in 2020 and 2019, we assumed that the gross profit margin and net profit in absolute numbers may have decreased in the 2020 budget compared to 2019 due to the inevitable economic impact of Covid-19.
More than half (52%) of the SMEs that secured financing on our platform received loans between USD 101,000 and USD 300,000.
The average loan amount raised on our platform in 2021 is $224,398. That’s about 28% lower than 2020’s all-time high average loan amount of $310,909.
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In connection with the other previously highlighted data points, the decrease in the average debt ratio can be attributed to the fact that the number of small SMEs requiring financing increased in 2021.
Thus, the increased average loan amount in 2020 can be attributed to increased growth among SMEs that had a strong credit profile before the pandemic to find financing.
On the supply side of the balance, banks and financial institutions were able to adjust their risk appetite to the reduction of risk sharing in financing schemes supported by the government, from 90% in 2020 to 70% in 2021.
Note that while the average loan size has decreased in 2021, it is nearly 69% higher than the pre-2019 average loan amount of $132,500. This suggests that credit conditions for SMEs in 2021 will remain generally favorable and that demand for financing will remain subdued.
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We took a statistically significant sample of successfully funded users of our platform. Their annual income and sanctioned loan ratio were graphed.
We found that there is a direct correlation between a borrower’s annual income and the successful loan approval rate.
In general, SMEs with higher revenues are usually eligible for higher financing amounts than their smaller counterparts.
The 2021 data show that the proportion of loans granted to foreign banks on our platform has increased, from 24% in 2020 to 32% in 2021.
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We consider this a return to normality. In 2020, a significant portion of loans on our platform (73%) were registered predominantly by local banks.
This is due to the fact that SMEs responded to the uncertainty caused by the pandemic, which led to a surge in business loan applications in 2020. Most of these applications were submitted to local banks, perhaps due to the brand name recognition of the SMEs.
* “Other” financiers on our platform are alternative lenders such as P2P lending platforms, private B2B financiers, alternative lending fintech companies, etc.
The average turnaround time from application submission to disbursement of funds (for approved applications) in 2021 was 29 days. This is a significant improvement over 2020’s lead time of 45 days.
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The reason for the faster processing of applications may be that more bank employees are returning to the office and are familiar with the rules for working from home.
Among the sectors with the largest proportion of SMEs financed through our platform are retail trade (17%), food and beverage production (15%), and construction (11%).
Other industries less affected by Covid-19, such as professional services (11%), wholesale/distribution (10%), and information and communications (8%), are also actively seeking funding to scale and expand for the sake of
The approval rate of SME loan applications initiated on our platform improved slightly from 71% in 2020 to 74% in 2021.
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In general, credit insurance is still tight as most lenders have not fully resolved their selective, sector-specific defensive stances taken during the peak of the 2020 pandemic.
However, the loan conditions can be considered favorable with higher quantum freedoms than before the Covid-19 loan and historically lower interest rates for borrowers who take a premium.
We track the average interest rates of SME loans (typically state-supported financing schemes) over the past 12 years.
The average interest rate on SME business loans fell to a historic low of 2.5% per year. in 2020. Prices will start to rise in 2021, to an average of 4.5% per year. This is less than the last record low of 5% in 2009.
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In 2020, SME loan rates were kept low with the help of MAS. The MAS SGD facility  provided to participating financial institutions for government-backed loans helped eligible SMEs to access low-cost funds.
In the short to medium term, we expect lending rates to move northwards in late 2022 and beyond due to US Fed rate hikes and Singapore’s economic recovery.
According to MAS data on all lending to businesses in 2021, business lending is generally improving on a monthly basis.
Thus, the aggregated data of the 2021 loans granted to businesses for 2021 are presented in two separate parts in order to more accurately reflect the reported data.
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In both parts of 2021, systemic business lending will roughly increase on a monthly basis.
Business recovery is expected to improve further in 2022 as Singapore transitions to localized Covid-19 and global travel gradually normalizes.
With GDP growth forecast between 3% and 5% for 2022 , we expect the stock of aggregate business loans to continue to rise, albeit gradually due to potential risks in the world’s largest economies.
According to the report of the MAS Financial Stability Review , the NPL (non-performing loans) ratio of SMEs will be around 4% in 2021.
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Interestingly, despite the phasing out of various government credit relief support programs in 2021, the SME NPL ratio did not deteriorate in 2021 and was in line with the 2020 NPL ratio.
This could indicate the resilience and strength of the economy recovering in 2021, as well as the government’s strong buffer policy to help SMEs deal with the worst-hit effects of Covid-19.
According to Enterprise Singapore’s 2021 annual report, total SME loans under various government-backed financing programs fell to $8.6 billion in 2021. This represents a decrease of approximately 54% from the $18.6 billion approved in 2020.
In 2021, 91% of all loans went to micro and small enterprises, which are likely to be the segment of SMEs most exposed to external economic shocks due to their weaker balance sheets compared to their larger counterparts.
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Mr PNG said: “The amount of loans disbursed in 2021 has increased – four times more than the pre-pandemic years of 2019 and 2018”, “This means that many companies are still struggling,” said PNG Cheong Boon. – CEO, Enterprise Singapore
Based on data from Enterprise Singapore, the total number of SMEs using government-backed loans remained around 12,600 in 2021, compared to 7,900 before Covid.
The MTI (Ministry of Trade and Industry) study  established that most of the borrowers of the temporary bridging loan (TBL) are SMEs with less than 10 people and between 11 and 50 people.
The TBL was introduced in the 2020 budget
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