Fixed Assets Loans

Provided by EnterpriseOne

Fixed Asset Loans are handy for buying assets such as factories, heavy equipment and industrial machinery. The asset purchased becomes the collateral for the loan.

           What Are Fixed Assets?
         What Is A Fixed Asset Loan?
           Am I Eligible?
           How Long Is The Repayment Period?
         What Are Some Of The Terms?
         What Are Some Of The Advantages And Disadvantages?
         What Fixed Asset Loans Does The Government Offer?

What Are Fixed Assets?

• Fixed asset is an accountancy term. It refers to assets and property that cannot easily be turned
into cash.

• Examples of fixed assets are land, buildings, fixtures, fittings, plants and machinery (industrial).

What Is A Fixed Asset Loan?

• It is a loan to buy a fixed asset.

• The loan is secured by the fixed asset you are buying. In other words, the fixed asset becomes
the collateral for the loan.

• If you are unable to service the loan, the lender can seize your fixed asset.

• When you buy business premises or a factory, you can mortgage your property to the bank or
lender. A mortgage is a type of Fixed Asset Loan.

Am I Eligible?

• The key to getting a Fixed Asset Loan is convincing the lender that the item will help you
to generate more profits.

• The bank or lender will determine your credit worthiness by examining your:

     o    long-term business prospects
     o    cash flow
     o    profitability
     o    capital structure (debt vs. paid-up shares)

• The bank or lender will also consider other qualitative factors such as:

     o    transparency of your business operations
     o    credibility
     o    integrity of the management

How Long Is The Repayment Period?

• Usually, Fixed Asset Loans are long-term. The repayment period can range from 1
to 10 years.

• Every month or quarter, you repay part of the principal sum borrowed and part of
the interest due.

What Are Some Of The Terms?

• The loan amount will vary with the value of the item you are purchasing.

• The loan repayment period is usually based on the bank's assessment of the time it
will take for your new item to generate profits.

• The interest rate is usually fixed for the entire duration of the loan. This will help
you determine exactly how much money you will need to service the loan.

•    Sometimes, the lender may require you to put up a personal guarantee or additional
     assets to secure the loan. It depends largely on his/her assessment of your credit
     worthiness, or ability to pay back the loan.

What Are Some Of The Advantages And Disadvantages?

Advantages

• Fixed Asset Loans are relatively stable and fixed. It is possible to plan repayment and
work long-term loans into your budget.

• They can help you acquire assets that you would otherwise not be able to afford.

• The asset you are buying becomes the collateral for the loan.

Disadvantages

• The interest rate for long-term loans is higher than short-term loans.

• The loan application is usually very detailed. The lender will require a lot of information
on your purchase and your business' finances.

• If you breach terms of the loan, you may have to repay the entire loan immediately.

• If you fail to service the loan, the lender may seize your asset which may cripple your
business operations.

What Fixed Asset Loans Does The Government Offer?

• Local Enterprise Finance Scheme (LEFS)
Strengthen, upgrade and expand your business with the help of a fixed interest rate loan.

•    Internationalisation Finance (IF) Scheme
     Need funds to expand overseas? Get a loan of up to S$15 million to buy fixed assets
     and finance your overseas projects or orders.

• Micro Loan Programme
Very small businesses can get loans of up to S$50,000.