Singapore’s small and medium-sized enterprises (SMEs) experienced a slight relief in borrowing costs in 2025, with average unsecured lending rates dropping to 8.18% from a high of 8.47% in 2024, according to Linkflow Capital’s latest survey. The return of larger loans, particularly those above $500,000, marked a significant change after their absence in 2024.
Despite this improvement, the recovery was uneven. Bank loan processing times increased to an average of 33 days, compared to 22 days in 2024, whilst nonbank funders managed to disburse loans in just seven days. This disparity has reshaped the competitive landscape for lenders, with nonbank entities gaining traction due to their speed.
The survey revealed that 82% of SMEs seeking financing in 2025 had no prior bank loan facilities, indicating a substantial untapped market. The loan approval rate improved to 74%, up from a five-year low of 70% in 2024. However, personal credit-related rejections for unsuccessful applicants nearly tripled, rising from 3% to 11%, highlighting increasing personal credit stress among SME owners.
Benjamin Teo, spokesperson for Linkflow Capital, noted, “2025 was the year SME credit conditions began to thaw after the 2024 squeeze, but the recovery was uneven.”
Looking ahead, the Middle East conflict, which began in February 2026, poses a new challenge. The conflict has increased freight, energy, and shipping costs, potentially reversing the modest gains of 2025 if tensions escalate. This situation could lead to tighter credit conditions for Singapore’s SMEs in the coming year.
