Key takeaways
- Business financing splits into two broad types: unsecured, with no property or other asset pledged, and secured, where an asset such as property backs the loan. [39]
- Unsecured does not mean nobody is on the hook. Banks often still require guarantors, usually the directors, and guarantors can be asked for on secured loans too. [25][58] LEGAL REVIEW
- In general, unsecured loans tend to have higher interest rates. With a secured loan, the asset can be repossessed and sold if the loan is not repaid. [39]
- The Enterprise Financing Scheme (EFS) is not a separate type of financing. It is a government-supported scheme that runs across loan types, and the borrower still repays 100%. [3][4]
Key facts
- MoneySense: a secured loan is backed by assets such as property, which can be repossessed and sold if the loan is not repaid; unsecured loans have no collateral, and their interest rates tend to be higher. [39]
- One bank's SME working capital and term loans need no physical collateral, but guarantor(s) are required. [25]
- Under the EFS, the borrower repays 100%, and if a borrower defaults, the lender must follow its usual recovery steps, including realising security, before claiming from EnterpriseSG. [3][4]
Key terms
- Secured loan
- A loan backed by an asset, such as a property, pledged as collateral. If the loan is not repaid, the asset can be repossessed and sold. [39] In the glossary
- Unsecured loan
- A loan with no property or other asset pledged. Lenders may still require guarantors. [25][39] In the glossary
- Collateral
- An asset, such as a property, pledged to a lender as security for a loan. [39] 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
- Trade financing
- Short-term financing tied to buying stock or to specific trade transactions, such as letters of credit, trust receipts and invoice-related facilities. [3][55][56] In the glossary
- Letter of credit (LC)
- A bank's undertaking, issued at the buyer's request, to pay the supplier up to a stated amount within a set time, once the required documents are presented. [55] In the glossary
- Trust receipt
- A trade facility where the bank pays your supplier and the goods are released to you against your undertaking to sell them and repay the bank from the sale proceeds. [56][57] In the glossary
- Property-backed business financing
- A business loan secured against a property, such as an office, shop or factory, used to buy or refinance it or to raise working capital. [58][59][60] In the glossary
What is the difference between unsecured and secured business financing?
The simplest way to sort business financing is by what backs it.
- Secured financing is backed by an asset, such as a property, that is pledged as collateral. If the loan is not repaid, the asset can be repossessed and sold. [39]
- Unsecured financing has no property or other asset pledged. The lender relies mainly on the business's finances and ability to repay. [39]
How do pricing, repayment period and loan size usually differ?
In general terms, MoneySense notes that interest rates on unsecured loans tend to be higher, because there is no collateral. [39] Beyond that, terms depend on the lender, the business and, for secured loans, the asset. The table shows general patterns only.
| Unsecured financing | Secured (property-backed) financing | |
|---|---|---|
| What backs it | No property or other asset pledged [39] | A property, mortgaged or charged to the lender [60] LEGAL REVIEW |
| Personal guarantee | Often required [25] | May also be required [58] |
| Pricing | Interest rates tend to be higher [39] | Usually priced lower than unsecured loans |
| Repayment period | Usually shorter; bank SME loans are typically repaid over a few years [25] | Can be much longer [58][59] |
| Loan size | Based mainly on the business's finances and repayment ability [21] | Linked to the property's value as well as the borrower's finances [60] |
| If the loan is not repaid | The lender can pursue the business and any guarantors LEGAL REVIEW | The property can be repossessed and sold, and guarantors may also be pursued [39] LEGAL REVIEW |
| Examples | Working capital term loans, trade financing, invoice financing | Commercial and industrial property loans, refinancing, working capital secured on property [58][59] |
Riverell does not quote typical rates, loan-to-value limits or repayment periods here. They change, and each lender sets its own. Ask for them in writing and compare the effective interest rate (EIR). [10]
What counts as unsecured business financing?
The two most common unsecured types for SMEs are working capital term loans and trade financing.
Working capital term loan
You borrow a fixed amount and repay it in instalments over a set period. [39] One bank describes its SME working capital loan as paying for daily operating costs such as inventory, payroll, rent and supplier payments, repaid in fixed monthly instalments, with no physical collateral but with guarantors required. [25] Our working capital guide covers term loans, revolving credit and overdrafts in more detail.
Trade financing
Trade financing is short-term financing tied to a specific purchase or sale of goods, rather than to the business in general. [3] Banks offer it as a set of facilities. In plain words:
- Letter of credit (LC). Your bank issues it at your request to assure payment to your overseas or local supplier, up to a stated amount and within a set time. The bank checks the shipping and other documents before it pays. [55]
- Trust receipt. Your bank pays the supplier for you, and the goods are released to you against your undertaking to sell them and repay the bank from the sale proceeds. You repay at the end of an agreed period. One bank says you need an existing credit facility with it to apply. [56]
- Invoice-related facilities. Short-term financing linked to your invoices, for example sales invoice financing, where a bank advances money against invoices you have issued to customers. [22]
- Banker's guarantees. A bank guarantees a payment or performance on your behalf. The EFS Trade Loan can support bank guarantees. [3]
The government-supported EFS Trade Loan covers uses such as inventory financing, pre-delivery working capital, factoring with recourse, receivables discounting, overseas working capital and bank guarantees. [3]
Invoice financing
Invoice financing turns unpaid invoices from business customers into cash sooner. It is grouped here because no property or fixed asset is pledged. The invoices themselves are usually assigned or pledged to the provider. See our invoice financing guide.
What is property-backed business financing?
Property-backed financing is a business loan secured against a property, such as an office, shop unit, factory or warehouse. One bank explains that the loan is secured against the property, and that banks look at both the property's value and the borrower's financial position. [60]
Banks describe three common uses:
- Buying an office, shop, factory or other business property. [58][60]
- Refinancing an existing property loan, for example to change lender or package. [58]
- Raising working capital against a property the business already owns. One bank describes "access to additional working capital financing for your business using your property". [59]
What is typically involved?
Requirements vary, but one bank's property loan checklist gives a sense of what to expect: [58]
- Property details. The address, floor size and tenure, and the valuation or purchase price. For a purchase, the option to purchase.
- Business documents. Recent financial statements and recent bank statements.
- Guarantors. The bank contacts the guarantors to endorse the application.
- A package choice. Banks offer fixed-rate or floating-rate packages, for example pegged to SORA, the Singapore Overnight Rate Average. [58][59]
- Valuation and legal work. The lender values the property, and the mortgage is set up by lawyers. [TO CONFIRM: which valuation and legal costs the borrower pays]
What are the risks?
The main risk is simple: the property is at stake.
- You can lose the property. If the loan is not repaid, the asset can be repossessed and sold. [39]
- Falling value. If the value of the collateral falls, you may need to top up. [39]
- The guarantee still applies. Guarantors may be asked to sign as well, so a shortfall can become personal. [58] LEGAL REVIEW
- Rate changes. Repayments on floating-rate packages, such as SORA-pegged ones, can go up as well as down. Ask how long any fixed rate lasts. [58]
- Lock-in charges. Refinancing or repaying within a lock-in period can incur charges. [58]
- Government support does not protect the property. Under the EFS, if a borrower defaults, the lender must follow its usual recovery steps, including realising security, before it can claim from EnterpriseSG. [4]
Our full guide to property-backed business financing is coming soon.
Where does the Enterprise Financing Scheme fit?
The EFS is not a type of financing in its own right. It is a government-supported scheme in which EnterpriseSG shares part of the lender's risk, and it runs across loan types: for example working capital loans, trade loans, and fixed asset loans that can be used to buy or build factories and business premises. [2][3][4] The borrower repays 100% of the loan, the interest rate is set by the lender, and approval is up to the lender. [3][4] See the EFS, explained.
How do I choose between unsecured and secured financing?
There is no right answer for every business. These steps help you narrow it down. LEGAL REVIEW
- Start from what the money is for. Day-to-day costs point to working capital. A specific shipment or stock purchase points to trade financing. Buying premises points to property-backed financing.
- Match the repayment period to the purpose. Short-term needs usually suit short-term facilities; long-lived assets such as premises are usually financed over longer periods.
- Weigh cost against what is at stake. A secured loan may cost less, but you put an asset on the line. An unsecured loan may cost more, but usually still needs a personal guarantee. [39][25]
- Compare the full cost. Use the effective interest rate (EIR) and all fees, not just the headline rate. [10]
- Plan for the bad case. Ask what happens, step by step, if the business cannot repay.
What questions should I ask a lender?
- Is this facility secured or unsecured? If secured, on what: property, goods, invoices, deposits or something else?
- Who needs to sign a personal guarantee, and for how much?
- What is the effective interest rate (EIR), and what fees apply, including valuation, legal, commitment and early repayment fees? [10]
- Is the rate fixed or floating? If fixed, for how long?
- Is there a lock-in period, and what does it cost to refinance or repay early? [58]
- For trade facilities: what rights do you keep over the goods or sale proceeds until I repay? [57]
- What type of lender are you, and how can I check? See types of business lenders.
What to check before you agree
- Is this facility secured? If so, on what: property, goods, invoices, deposits or other assets?
- Who must sign a personal guarantee, and for how much? LEGAL REVIEW
- For trade facilities: what rights does the lender keep over the goods or sale proceeds until I repay? [57]
- For property-backed loans: is the rate fixed or floating, how long is any lock-in, and what does it cost to refinance or repay early? [58]
- What is the effective interest rate (EIR), including all fees? [10]
- What happens, step by step, if the business cannot repay?
Frequently asked questions
What is the difference between secured and unsecured business loans?
A secured loan is backed by an asset, such as a property, that is pledged as collateral and can be repossessed and sold if the loan is not repaid. An unsecured loan has no asset pledged. In general, interest rates on unsecured loans tend to be higher.
Source: [39]
Do unsecured business loans need a personal guarantee?
Often, yes. One bank states that its SME loans need no physical collateral, but guarantors are required. A personal guarantee means a director or owner may have to repay the business debt personally if the business cannot.
Source: [25] LEGAL REVIEW
Is trade financing secured or unsecured?
Trade facilities such as letters of credit and trust receipts usually have no property pledged, so Riverell groups them as unsecured. But they are tied to specific goods and documents, and a bank may keep rights over the goods or sale proceeds until it is repaid. Ask each lender what security it takes.
What is property-backed business financing?
It is a business loan secured against a property, such as an office, shop, factory or warehouse. Banks offer it to buy or refinance business property, and some also offer working capital secured on property the business owns. Banks look at both the property's value and the borrower's finances. If the loan is not repaid, the property can be repossessed and sold.
Is the Enterprise Financing Scheme a type of loan?
No. The EFS is a government-supported scheme in which EnterpriseSG shares part of the lender's risk. It runs across loan types, including working capital, trade and fixed asset loans. The borrower repays 100%, and if a borrower defaults, the lender must first follow its usual recovery steps, including realising any security.
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 26 Oct 2026 and can change. Always confirm terms directly with the provider, and get independent professional advice if you are unsure. LEGAL REVIEW
Sources
- [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)
- [4]EnterpriseSG - EFS SME Fixed Assets Loan. https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme---sme-fixed-assets (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)
- [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)
- [22]DBS - Sales Invoice Financing (product description only). https://www.dbs.com.sg/sme/trade/export-services/sales-invoice-financing (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)
- [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)
- [55]DBS - Letter of Credit Issuance (product description only). https://www.dbs.com.sg/sme/trade/import-services/letter-of-credit-issuance (accessed 26 Oct 2026)
- [56]OCBC - Trust Receipt Financing (product description only). https://www.ocbc.com/business-banking/smes/trade/trust-receipt (accessed 26 Oct 2026)
- [57]DBS - Import financing (trust receipt) application terms and conditions. https://www.dbs.com.sg/sme/terms/trust-receipt-bills-application-form.page (accessed 26 Oct 2026)
- [58]DBS - Industrial and Commercial Property Loan (product description only). https://www.dbs.com.sg/sme/financing/fixed-asset/industrial-commercial-property-loan (accessed 26 Oct 2026)
- [59]UOB - Commercial & Industrial Property Loan (product description only). https://www.uob.com.sg/business/finance/commercial-industrial-property-loan.page (accessed 26 Oct 2026)
- [60]OCBC - How to get a commercial property loan (bank article). https://www.ocbc.com/business-banking/articles/how-to-get-a-commercial-property-loan (accessed 26 Oct 2026)