Corporate Loan Interest Rates in Singapore: Does Good Accounting Help?

Corporate loan in Singapore

For businesses in Singapore, securing a corporate loan is often a strategic step—whether it’s for expanding operations, stabilizing cash flow, or investing in new assets. However, taking a business loan is a huge consideration. Whether it is an SME working capital loan or a long-term loan package, companies must be aware of the repayment period (in the form of monthly installments) and its impact on their liquidity. Operational cash flow is integral to all businesses, and the availability of a loan facility provides businesses with access to cash. While there are always the debate between usage of debt or equity, for the purpose of this discussion, we will leave this to another day.

More important, the total cost of borrowing is the interest rate attached to the loan. While market rates and economic conditions play a role, a company’s internal financial management—especially the quality of its accounting and reporting—can influence how lenders assess risk and, therefore, the rate they offer. This article explores how business loans work in Singapore, what affects interest rates, and how good accounting can give your business a significant edge.

Understanding Corporate Loan Interest Rate

A corporate loan is a form of debt financing extended by banks or financial institutions to businesses for purposes such as working capital, asset acquisition, or refinancing. These loans may be secured by collateral or unsecured, and they vary in terms of loan tenure, size, and structure, depending on the business's needs and the lender’s risk appetite. Repayment schedules such as monthly repayments, repayment at the end of the loan term, or other arrangements may be agreed upon. In other words, there are numerous loan options to choose from with varying terms.

Corporate loans can be a powerful tool for business growth. Whether used to fund a new product line, increase inventory through invoice financing, or enter a new market, access to external financing allows businesses to pursue opportunities without straining cash flow. Acting as a multiplier for turnover rates, it helps business operations with critical financing, driving business towards expansion. It also helps smooth over cash cycle gaps or manage seasonal variations in revenue.

In Singapore, most corporate loan interest rates are pegged to the Singapore Overnight Rate Average (SORA), which has replaced the Singapore Interbank Offered Rate (SIBOR) as the benchmark rate in the local financial system. Banks typically add a spread—based on the borrower’s credit profile and market conditions—on top of the prevailing SORA to derive the final interest rate. As of 2025, SORA hovers around 3.65% annually, with spreads commonly ranging from 1% to 4%, depending on risk.

To apply for a loan, businesses usually need to present a set of documents that include recent audited financial statements, a cash flow forecast, business plans, and details about existing liabilities. The quality and transparency of these documents play a key role in shaping the lender’s perception of risk.

The Loan Application Process

Getting a corporate loan involves a series of standard steps. The process begins with initial discussions with a banker or relationship manager to gain a comprehensive understanding of the business's needs and align them with suitable financial products. Relationship managers act as the point of contact for most banks. While they might not be necessary financial professionals, they certainly have critical knowledge of business finances and investment products.

Based on the communication, the relationship manager will likely present to you the different types of business loans available, as well as key information such as the indicative interest rate, maximum loan quantum, and loan term. They may also impose additional charges, such as facility fees, processing fees, and repayment fees, as well as other costs associated with the loan facility or loan package. In today's context, commercial loan facilities have competitive rates with significantly reduced processing fees, making such business-term loans attractive.

After reviewing the various types of loans, it is crucial for a company to choose a loan that aligns with the business's specific needs and requirements. A business expansion may require a higher quantum, while overseas expansion may see the need for a foreign currency-denominated loan.

The core of the assessment lies in the credit review. During this phase, the bank conducts a detailed examination of the applicant’s financial health. For informational purposes, financial statements (both audited and unaudited) are reviewed, along with operational performance, industry outlook, and cash flow projections—the credit assessment by the bank is an important step in determining the company's financial worthiness. The lender evaluates whether the company has the ability—and more importantly, the consistency—to meet repayment obligations. Failure to pass the credit review will ultimately result in loan cancellation. The credit review process may differ from bank to bank depending on the types of business loans and the terms negotiated. Secured loans, which are shorter in tenure, will likely have fewer requirements compared to an unsecured term loan product or a long-term loan. Hence, each case is assessed individually.

Once the credit team has completed its analysis, the application moves toward an approval decision. If the application is successful, the bank issues a loan offer that states the approved amount, tenure, interest rate (the actual cost of borrowing), collateral terms, and repayment structure. In cases where the financial records are unclear, inconsistent, or raise red flags, the application may be rejected or approved only on stricter terms, such as higher interest rates or personal guarantees.

Getting a favorable term for your business loan application is always the goal for businesses. A competitive rate, such as a good effective interest rate (EIR), a high maximum loan, and installment plans for outstanding loans, are key areas that companies focus on. Nevertheless, all these terms of a capital loan are ultimately affected by what the bank perceives your company to be. A strong balance sheet, stable financial health, and quality annual sales are just some of the critical information to obtain bank approval.

The processing time may differ depending on the information required. It is common for banks to conduct reviews from time to time to ensure a company does not have significant changes that may alter its risk profile.

What Determines the Interest Rate Spread?

Cost is an important component of all loans. So everyone is naturally concern with the interest rate.

The SORA doesn’t solely determine the final interest rate a business pays on a corporate loan. A spread is added to account for the additional risk taken. The spread applied by the bank reflects the perceived risk of lending to that particular business. This spread is influenced by several core factors.

One of the most significant is creditworthiness. Businesses with healthy financial statements—marked by stable annual turnover, positive operating cash flows, and strong capitalization—are seen as lower risk and are, therefore, offered lower spreads.

The structure of the loan also matters. A longer repayment term or a larger loan amount may result in a higher interest rate spread as the bank’s exposure increases over time. The availability and quality of collateral can mitigate this; secured loans generally attract lower interest rates due to reduced risk to the lender.

External market conditions also influence spreads. In a loan marketplace with rising rates or economic uncertainty, banks may incorporate additional risk premiums into their pricing. However, a business with a proven track record and strong fundamentals can often mitigate these effects and negotiate better terms.

Lowering Your Interest Rate Through Good Accounting

Many businesses underestimate the role that good accounting plays in their borrowing journey. Lenders rely heavily on the accuracy and consistency of financial statements to evaluate a company's performance and future outlook. By ensuring high-quality, timely, and transparent reporting, a business can improve its credibility and reduce perceived risk.

A company that shows strong asset management, sufficient liquidity, and consistent cash flows is typically more attractive to banks. These traits reassure lenders that the business can withstand economic fluctuations and repay debt reliably. For Singapore-registered businesses, some of this information, such as the business premises, can be found in the company's business profile.

Another advantage lies in operational resilience or a solid shareholder structure. If a business has experienced promoters, a clear governance framework, or a unique competitive edge, these non-financial aspects can boost lender confidence and justify a lower interest spread. Hence, if the profit or Loss statement is not favorable, there are still other options to consider.

If your financials are weak or unstructured, it's not necessarily a dead end. Working with a competent accountant can help identify areas for improvement, restructure financial reports, and position your business more favorably. Banks prefer companies that are proactive in financial management—and presenting a strong financial profile can be the key to securing funding on more advantageous terms.

How OakTree Can Support Your Loan Journey

This is where OakTree plays a critical role. As a trusted advisor to SMEs and MNCs in Singapore, we go beyond compliance to help businesses strengthen their financial positioning and access better financing opportunities.

We start with a comprehensive review of your financial statements, including your business's daily operations. Our team analyses profitability, liquidity, solvency, and other key metrics to evaluate how your company is likely to be assessed by lenders. This initial fact-finding exercise provides a clear picture of where you stand—and where you can improve.

Based on our findings, we offer tailored suggestions to strengthen your financial position. Whether it’s restructuring debt, adjusting accounting policies, or improving cash flow disclosures, we work with you to present the best possible version of your business to financial institutions.

But our support goes beyond the numbers. We also advise on strategic areas, such as shareholder structures, corporate governance, and operational strengths—all of which are important during credit evaluations. While you must complete the online loan application, OakTree will offer guidance and areas of focus when you submit information to the bank, thus increasing the chance of a favourable rate.

Most importantly, we help bridge the gap between your business and the bank. By preparing accurate financial documentation and guiding you through discussions with lenders, OakTree ensures that your business is presented with clarity, professionalism, and confidence. We believe companies deserve access to financing options, and it is unfortunate if they are rejected solely based on poor financial statements.

Why Good Financial Records—and the Right Partner—Matter

In today’s competitive and cost-sensitive environment, accessing financing on favorable terms can make a significant difference in business growth opportunities. The strength of your financial records often speaks louder than your pitch to the bank. Lenders want clarity, consistency, and transparency—and that starts with solid accounting.

Having a capable partner like OakTree ensures that you're not only compliant but also strategically positioned for success. Good accounting isn’t just about ticking boxes; it’s about helping your business grow stronger, have wider access to financing options, gain trust, and secure opportunities when they matter most.

If you're looking to secure a corporate loan or want to improve your financial readiness for future funding, OakTree is here to help. With a deep understanding of Singapore’s financial ecosystem and a hands-on, client-focused approach, we support you through every step of the journey. Contact us today to find out how we can help your business put its best financial foot forward.

DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily represent the views and opinions of any individuals or organizations with which the author may be affiliated, either in a professional or personal capacity, unless explicitly stated.