Business Loans

Ranking Business Loans Types Updated for 2023: Comparing Interest Rates

Benjamin Lam
May 30, 2023

Securing the right loan with a favourable interest rate is vital for businesses seeking financial stability and growth. As we step into 2023, it becomes essential for business owners to stay updated on the available loan options and their associated interest rates. In this article, we will rank and analyse six types of loans for businesses based on their interest rates for the year 2023. By understanding these options, entrepreneurs can make informed decisions and select the most suitable financing solution for their specific needs.

Types of Loans for SMEs Based on Interest Rates in May 2023:

Loan against Publicly Traded Shares or Insurance:

A loan against publicly traded shares or insurance policies with surrender value offers businesses an attractive interest rate of 5.5% per annum which is the cheapest option. This option allows leveraging the value of these assets, providing access to funds at a relatively lower interest rate compared to other loan options. However, the loan amount may be limited to a percentage of the asset's value. For shares, this can range from 30% to 70% depending on the share type and for insurance, you loan can be up to 70% of the surrender value.

Property-Backed Loans

Businesses can opt for property-backed loans, which enable them to leverage their property assets. These loans typically offer loan-to-valuation ratios of up to 85% with an interest rate of 7.5% per annum. With non-bank lenders, TDSR requirements can be waived. While the interest rate may be slightly higher than loan options secured against shares or insurance, property-backed loans provide access to substantial funding, making them suitable for businesses with valuable real estate assets.

Unsecured Business Loans from Banks:

Banks offer unsecured business loans without collateral requirements. In 2023, these loans come with an interest rate of 8.5% per annum and a tenor of up to 5 years. While the interest rate is relatively higher, unsecured business loans from banks offer the advantage of longer tenors, providing businesses with manageable monthly repayments and improved cash flow management. Banks may have specific eligibility criteria based on credit history and business track record.

Factoring or Invoice Financing:

Factoring or invoice financing serves as a short-term funding solution to bridge cash flow gaps for businesses. With interest rates of approximately 8.5% per annum, this option allows businesses to access funds by selling their accounts receivable or invoices. Factoring or invoice financing is beneficial when businesses face delayed payments from customers or need immediate working capital to cover expenses. This is also a viable option if a business past 6 months performance was not able to secure a bank loan.

Unsecured Business Loans with Tier-1 Non-Banks

Tier-1 non-banking financial institutions offer unsecured business loans with competitive interest rates. In 2023, these loans have an effective interest rate of around 1.6% per month. Although the monthly interest rate may seem high, it is important to consider the shorter tenor associated with these loans. Tier-1 non-banks provide convenient and speedy loan processing, making them attractive to businesses in need of quick capital. They also have flexible eligibility criteria, making the loans accessible to a wider range of businesses. These lenders are typically the more digital non-bank players like Validus, FAZZ and ZETL as they rely on technology to make their credit assessment.

Unsecured Business Loans with Tier-2 Non-Banks

Tier-2 non-banks offer unsecured business loans to businesses that may not meet the requirements of traditional lenders. These loans come with interest rates ranging from 3-4% effective rate per month. While the rates may be higher compared to other options, tier-2 non-banks provide access to capital for businesses with limited credit history or lower credit scores. These loans are suitable for businesses facing temporary cash flow challenges or requiring funds for short-term projects.


Choosing the right loan for your business is crucial to ensure financial stability and growth. In 2023, several loan options are available, each with its own interest rate structure. Among the ranked loans, a loan against publicly traded shares or insurance policies offers the lowest interest rate at 5.5% p.a., followed by property-backed loans at 7.5% p.a. Unsecured business loans from banks come next at 8.5% p.a., along with factoring or invoice financing. Tier-1 non-banks offer an attractive effective rate of 1.6% per month, while tier-2 non-banks provide options at 3-4% effective rate per month.

When faced with choosing the right loan, it is always advisable to consult a business loan broker. They possess the expertise to understand your specific requirements, guide you through the loan application process, and help you make an informed decision tailored to your business needs.

Take the next step towards securing the ideal loan for your business by consulting your trusted business loan broker at Lendingpot today.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Benjamin heads up Lendingpot with a background in all things SME. He was previously a commercial banker at Citi with experience in Relationship management, Credit Risk, Trade Operations and Corporate FX sales; and understands the difficulties SMEs face in this opaque world of SME financing.

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