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Corporate Loans
The amount a lender will offer and the amount you should accept are different numbers, arrived at in different ways.
This framework supports scenario planning. It does not produce a recommended borrowing amount, and it cannot tell you what any institution would approve.
List every expected use: supplier deposits and balances, inventory, payroll during a defined project period, equipment and installation, freight, GST, professional fees or other direct costs, and a clearly justified contingency.
Assign an amount and a date to each item. Remove vague categories.
Then subtract cash the business can contribute safely. "Safely" means without putting payroll, tax, rent, essential suppliers or a minimum reserve at risk.
The result is your initial external funding requirement. It is not yet the final borrowing amount.
Extra cash feels reassuring, but borrowed cash creates compulsory repayments and a financing cost. Ask:
A facility with flexible drawdown handles uncertainty differently from a fully disbursed term loan. Compare the written terms rather than the idea of the product.
Start with cash generated by operations, after ordinary operating expenses, payroll and CPF-related commitments, tax and GST, existing debt and leases, necessary maintenance spending, and other committed outflows.
Do not use revenue as though every dollar is available for repayment. Revenue may still be uncollected, and it has to cover the cost of delivering the sale in the first place.
Base case: realistic collections, sales and costs.
Downside case: slower receipts, lower sales or higher costs.
Severe but plausible case: loss of a material customer, a delayed project, a major repair, or stock that has to be marked down.
Each case needs the same dated cash-flow treatment: Build a rolling 13-week cash-flow forecast
For each case, show every proposed repayment and the closing cash balance. Define a minimum reserve you do not intend to breach, and hold yourself to it.
If the downside case falls below that reserve, consider reducing the amount, extending or changing the repayment shape, staging the investment, negotiating payment terms, waiting, or using a funding source with different risk characteristics.
The obligation should make sense beside the life of the need.
Short-lived inventory should not automatically create years of debt. Equipment with a long productive life should not automatically be funded through a facility that matures before the equipment generates cash.
Consider the cash-conversion period, the useful life of the asset, the date the investment becomes productive, the likely date the financing need ends, any early-repayment charges, and the risk of needing to refinance at maturity.
A long tenure lowers the regular payment but can increase total cost and extend exposure. A short tenure may reduce total cost while creating unsafe monthly pressure.
Record net proceeds after deductions, interest and rate basis, processing and annual fees, legal or valuation or other third-party costs, early-repayment or cancellation charges, security and personal-guarantee exposure, floating-rate risk, and the consequences of default.
Test the amount using the actual payment schedule, not an estimated headline rate: Compare offers on the same basis
Equipment can be delayed. Inventory can sell slowly. A new outlet can take longer to break even. A customer can postpone a contract.
The debt remains payable whether or not the expected benefit arrives. Test whether the existing business can carry the repayment for a period without sacrificing essential commitments. If it cannot, reduce the exposure or reconsider the plan.
A business identifies S$140,000 of project and supplier costs. It can contribute S$30,000 while keeping its minimum reserve intact, leaving a preliminary need of S$110,000.
In the base case the proposed monthly payment is comfortable. But the project's largest customer pays on 60-day terms, and if that payment slips by 30 days, the business is left covering two months of repayments plus payroll out of reserve. The modelled result is a cash position roughly S$25,000 below the minimum reserve for about six weeks.
Nothing about that outcome is unusual or catastrophic. It simply means the facility is sized for the plan rather than for the plan going slightly wrong. Possible responses include a smaller first-stage project, milestone billing, a facility timed to the receivable date, or waiting until more customer cash is secured. "Borrow the full approved amount" does not address the mismatch.
The figures above are illustrative and fictional. They demonstrate the method, not a benchmark for your business.
There is no universal percentage of revenue, and no single ratio, that determines the right amount for every SME. Margins, seasonality, volatility, existing commitments and facility terms all differ.
Work with a range instead:
The final decision still requires the institution's assessment and, where appropriate, accounting, legal or financial advice. Whatever the worksheet produces, do not label it an approved amount.
Figures verified on 3 August 2026. Scheme parameters, rates and lender requirements change — check the primary source before relying on any figure.
Fundwise is an intermediary, not a lender. This is general information, not individual financial, legal, tax, accounting or credit advice. Financial institutions run their own eligibility and credit assessments and set all terms — we cannot guarantee approval, rate, amount or timing.
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