Getting a business loan can be beneficial for the expansion and growth of your small business. However, having a low or bad credit score could reduce approval chances, especially with traditional lenders like banks. Fortunately, alternative financing options are available, and with the right approach, you can still access the capital you need to fund operations and expansion of your small business.

The Impact of Low Credit Scores on SME Loan Applications

Credit scores are used by financial institutions in Singapore and many parts of the world to assess a borrower’s creditworthiness. The Credit Bureau Singapore (CBS) assigns individuals (including personal guarantors of business loans) a score based on their financial history, payment habits, and existing credit obligations. When you have a bad credit score, this could signal high risk to lenders, which could lead to:

Limited approval opportunities – Lenders are less likely to approve your loan if your business has bad credit because of the perceived financial unreliability.
Higher interest rates – You may be charged with a higher interest rate to compensate for the risk.
Restrictive loan terms – Loans may come with shorter repayment periods and stringent conditions.
Lower loan amounts – Businesses with low credit scores may struggle to secure adequate funding.
Strained relationships with lenders – Establishing trust with financial institutions becomes difficult, limiting future financing opportunities.

How to Improve Your Credit Score

If you need the funding for your small business’s expansion, operational improvements, or other financial needs, you should prioritise improving your credit score. A higher credit score could increase your chances of loan approval and enable you to access favourable financing terms like higher loan amounts and lower interest rates.

Some of the ways you can rebuild and strengthen your business’s credit score include:

1. Timely Repayments

Your payment history is one of the most critical factors influencing your credit score. Lenders assess it to determine whether you can make consistent, on-time payments. Missing or late payments can affect your score and signal financial instability, making it harder to secure future loans.

To improve your creditworthiness, ensure the following:

Prioritise overdue payments – Settle outstanding debts before applying for new financing to prevent further damage to your score.
Automate payments – Setting up auto-pay for loans and credit card bills can help ensure timely payments.
Use reminders – Make sure to schedule alerts or calendar notifications to stay on track with due dates.

2. Balanced Credit Utilisation

The amount of available credit you use can impact your credit score. If you max out your credit, this can signal financial risk to lenders, suggesting potential difficulties in managing debt. This may make it more challenging to secure financing in the future, as lenders may view you as a higher-risk borrower.

If you want to maintain a healthy credit profile, consider the following:

Keep credit utilisation below 30% – Using less of your available credit shows lenders that you manage debt responsibly.
Monitor your balances regularly – Track your spending and ensure your credit usage stays within an optimal range.
Prioritise high-interest debts – Paying off high-interest balances first reduces overall debt and improves financial stability.

3. Address Outstanding Debts

High levels of unpaid debt could affect your credit score and minimise your chances of securing financing in the future. Therefore, if you are struggling to manage multiple debts, consider strategic repayment solutions to regain financial stability:

Negotiate with creditors – Discuss revised payment terms or request lower interest rates to make repayments more manageable.
Explore debt consolidation – Combining multiple debts into a single loan with better terms can simplify payments and reduce financial strain.
Prioritise high-interest debts – Paying off costly debts first helps minimise long-term financial burdens.

Alternative SME Loans in Singapore Without Collateral

When your private small business needs financing but you lack extensive collateral, there are several alternative loan options available:

1. Business Term Loan

A business term loan provides your business with a lump sum that is repaid over a fixed period, often with interest. This type of loan offers flexibility, making it ideal for funding various business needs, such as inventory expansion, payroll, or marketing.

2. Secured Business Term Loan

If you want to secure a higher loan amount with longer repayment terms and lower interests, you can consider secured business term loans. However, since these loans involve larger sums, lenders may need collateral like property to secure the loan.

3. Equipment Loan

As the name suggests, an equipment loan is a type of loan used to purchase essential equipment for your business, ranging from computers and refrigerators to commercial-grade machinery. These loans typically have low interest rates because the equipment itself serves as collateral.

4. Line of Credit

A line of credit is a revolving credit facility that allows you to borrow funds for your business as needed, making it a flexible cash flow management solution. As repayments are made, the credit line is replenished. With this financing option, you will only pay interest on the outstanding balance.

5. Invoice Factoring

Invoice factoring enables you to convert unpaid invoices into immediate cash for your business’s expenses. The lender advances a portion of the invoice amount and takes a cut once the invoice is paid. This option is particularly useful if you run a B2B company and want to improve cash flow.

6. Merchant Cash Advance

A merchant cash advance can give you a lump sum, but it requires a portion of your future sales in return. Repayments are typically made daily or weekly as a percentage of credit and debit card transactions, making it a suitable option for businesses with high card-based sales volumes.

Tips for Securing the Right Loan

Applying for a business loan requires careful planning, research, and strategic decision-making. Key steps on how to improve your chances of getting financing for your business needs include:

1. Proactive Financial Planning

Before applying for a loan, evaluate your business’s financial health and determine how much funding you need. Having a well-structured financial plan not only strengthens your loan application but also ensures you borrow an amount that aligns with your business’s capacity to repay. Consider creating a detailed financial plan that outlines:

Your current financial standing
Projected revenue and expenses
Loan repayment capabilities
The specific purpose of the loan (e.g., expansion, working capital, equipment purchase)

2. Compare Loan Options

Not all loans are the same, and choosing the right one depends on your business needs and repayment ability. Explore your financing options, from traditional bank loans to alternative lenders, so that you can secure the best deal for your business. Some key factors to compare include:

Interest rates – Lower rates reduce borrowing costs over time.
Repayment terms – Shorter terms may lead to higher monthly payments but less interest paid overall.
Collateral requirements – Some loans require assets as security, while others are unsecured.
Loan processing time – If you need quick funding, look for lenders with fast approval processes.

3. Partner with Financial Consultants

Collaborating with financial consultants or advisors can greatly enhance your chances of securing financing for your small business. These professionals provide expert guidance by assessing your business’s financial health and recommending the most suitable loan options.

They can also assist in preparing a strong loan application, ensuring all necessary financial documents are in order. Additionally, they offer valuable advice on improving your credit score and increasing your chances of qualifying for better loan terms.

Work with Greystone Advisory to Find Financing for Your Small Business

While securing small business financing with bad credit can be challenging, it is not impossible. By understanding credit scores, improving financial health, and exploring alternative funding options, SMEs can access the capital needed to thrive.

For tailored financing solutions, consider consulting with Greystone Advisory, a finance broker in Singapore, to navigate your funding options. Our consultants can work closely with you to assess your business’s financial position, identify what would be the easiest loan to get, and connect you with reputable lenders. With our expertise and industry insights, we can help streamline the application process for your private small business loan, potentially improve your chances of approval, and help you secure financing with favourable terms.

For more information about securing loans even when you have a low credit score, check out our guide on how to get a home mortgage loan with bad credit.

Situation 1	BANK’S REPOSSESSION
Deal Type	Refinancing with Fresh Cash-Out
Property	3 Bedroom Condo along Meyer Road
Property Value	$3.2M
New Loan Amount	$2.4M (with fresh cash-out of $500K)
LTV	75%
Synopsis	Customer, age 51, a senior marketing director in the food logistics industry, was being retrenched in August last year without any prior notice. With his wife being a full-time homemaker, he found himself soon having difficulties in servicing his mortgage repayments, resulting in the bank taking steps to repossess the property for a mortgagee sale within a short span of 6 months. Despite only having a $1.4M outstanding mortgage with $600K of CPF usage, the bank was unable to grant him additional cash-out facilities to tide him through this challenging period, as he couldn’t pass the 55% TDSR threshold in the absence of regular reported income.
Solution (1)	Luckily, the customer managed to find us in time and we eventually saved his house from being repossessed. Arranged our private property lender to grant a $2.4M mortgage loan, out of which $1.4M to redeem his existing mortgage, $600K to refund to CPF with remaining $400K fresh term loan for his personal use, which includes servicing of the monthly instalments with the new private lender.
Solution (2)	The customer managed to find a new employment sometime in March this year. We had since successfully helped the customer to refinance the $2.4M from the private lender sometime in September this year.

Situation 3	INHERITANCE DISPUTES
Deal Type	To finance purchase of sibling’s share in the property
Property	Sem-Detached house along Jalan Seaview
Property Value	$$7.5M
New Loan Amount	$2.8M
LTV	37.5%
Synopsis	Customer, age 62, had jointly inherited the above fully-paid property together with his sister when their father passed away sometime in June last year. Both siblings were at constant disagreements regarding the sale of the property. Customer had always wanted to keep the property for future capital appreciation and his sister was in favour of selling the property so that she could use the sales proceeds to fund her new condo purchase.
Solution (1)	Unable to reach a consensus, the Customer then wanted to buy over his sister 50% equity stakes in the property (valued at $3.75M). Customer was unable get the bank to finance his part purchase exercise as he cannot meet the TDSR requirement and loan tenure. We then managed to get our private lender to finance his purchase of his sister’s share with a $2.8M loan (with a 75% LTV against the $3.75M purchase price)
Solution (2)	Separate financing had also been arranged for the remaining $950K cash difference (being the balance of the remaining 25% purchase price), which was secured by pledging part of Customer’s 50% stakes in the property as well.

Situation 2	BANKRUPTCY LAWSUIT
Deal Type	Refinancing with Fresh Cash-Out
Property Type	Detached House in Newton Area
Property Value	$14M
New Loan Amount	$10M
LTV	71.4%
Synopsis	Customer, age 72, was facing one of the biggest challenges as a veteran businessman, when one of his suppliers had filed a bankruptcy application against him (being the guarantor for his group of F&B companies). After successfully obtained the court judgement for a claim-sum of $1.9M, the customer was eventually given 2-month timeline to settle the payment, failing which he would be in imminent danger of being declared a bankrupt, thus crumbling his business empire which he had built for decades. Despite only having an outstanding mortgage of $7.5M (with a 53.5% LTV against its $14M valuation), no bank is willing to explore the fresh financing in view of his age and more importantly, the pending bankruptcy lawsuit.
Solution	Secured a $10M financing (@ 71.4% LTV from a non-bank lender, out of which $8.5M was to redeem his existing bank loan with another $1.9M to be earmarked to be paid to the supplier on the agreed deadline. Remaining $600K was disbursed to the Borrower for his personal use. With the payment made to the supplier and eventual complete withdrawal of the bankruptcy application, we have thus successfully helped our customer to avert the disaster of being made a bankrupt at this age and he can now refocus on rebuilding and restructuring his other business portfolio

Challenge 6	MULTI-PROPERTIES OWNER
Deal Type	Refinancing (with fresh cash-out)
Property	Good Class Bungalow (“GCB”) in Holland vicinity
Property Value	$70M
Existing Mortgage	$28M
New Loan Amount	$50M (with fresh $22M cash-out)
LTV	71.4%
Synopsis	At the age of 60, our borrower stood as a seasoned property investor with a remarkable portfolio of prestigious GCBs and luxurious Sentosa Bungalows. His journey was a testament to years of astute investment decisions. However, even a seasoned investor can face hurdles. Despite his impressive corporate and professional profile, the ever-evolving TDSR regulations had cast a shadow over his aspirations for further financial growth. His own bank had to adhere to these stringent regulations, leaving him unable to access additional facilities.
Solution	With determination and creativity, we set out to secure a $50 million mortgage loan from a non-bank lender. What made this solution stand out was the 18-month interest servicing repayment plan. Now equipped with fresh capital, our borrower could breathe new life into his retail business, expanding it like never before with a $22 million cash-out facility. But our assistance didn’t stop there. We successfully guided the borrower in refinancing the mortgage loan back to a local private bank just nine months after the initial disbursement. This win is a narrative of resilience and adaptability.

Challenge 3	POOR CREDIT GRADING
Deal Type	Refinancing with Fresh Cash-Out
Property	Bungalow in Katong
Property Value	$9M
Existing Loan	$5M
New Loan Amount	$7.5M (with fresh $2.5M Cash-Out)
LTV	83.3%
Synopsis	At 62 years old, our customer faced a roadblock. His aspirations for additional mortgage financing hit a snag as his bank hesitated due to both his age and an unfavorable “HH” credit bureau rating. This rating was a result of overdue credit card facilities amounting to a hefty $1.2 million.
Solution	With a determined spirit, we sought out an alternative path. Through our network of non-bank lenders, we secured a remarkable $7.5 million term loan facility. It was not just a financial transaction; it was a lifeline. The first step was to use $2.5 million of this fresh term loan to clear off the burdensome $1.2 million in overdue credit card facilities. It was a moment of relief, a chance to leave the past behind. But that was not all. The remaining funds were now at our customer’s disposal for personal investments, a fresh start to chase new dreams. This story encapsulates our commitment to finding solutions when doors seem closed. .