SME borrowing costs ease to 8.18% in 2025 as larger loans return, but Middle East conflict threatens 2026 outlook
Singapore’s SMEs experienced their first easing in borrowing costs in three years, with average unsecured lending rates falling to 8.18% per annum in 2025 from a multi-year high of 8.47% in 2024, according to Linkflow Capital’s latest SME Financing Accessibility Survey. Larger loan approvals above $500,000, which had disappeared entirely in 2024, also returned to form 5% of approvals in 2025.
The recovery, however, was uneven. Bank loan processing times stretched to 33 days on average, up from 22 days in 2024, while non-bank funders disbursed approved cases in just 7 days. The widening gap reshaped lender competition through the year.
Key findings from the 2025 survey:
Borrowing costs eased modestly: Average SME loan interest rate fell 29 basis points to 8.18% per annum but remain stubbornly high against the backdrop of a significant decline in benchmark 3-month SORA rate throughout 2025.
- Larger loans returned: Approvals above $500K returned to 5% of approved loan dollar volume in 2025 after disappearing entirely in 2024. Loans in the $300K–$500K bracket also expanded from 3% to 7%.
- Loan approval rate recovered to 74%, up from 70% in 2024 (a 5-year low).
- Foreign banks extended their market share of loan origination within our platform: Foreign lenders grew their share of approved loan dollar volume to 38% in 2025, up from 26% in 2024 and 19% in 2023, while local banks fell to 46% (from 59%). Digital banks recovered modestly to 11% (from 8%).
- Credit-related rejections nearly tripled: Among unsuccessful applicants, those rejected due to adverse personal credit records jumped from 3% in 2024 to 11% in 2025, signalling rising personal credit stress among SME owners.
“2025 was the year SME credit conditions began to thaw after the 2024 squeeze, but the recovery was uneven,” said Benjamin Teo, spokesperson for Linkflow Capital. “Banks gradually reopened to larger loans, yet took meaningfully longer to process applications. Some SMEs facing immediate cash flow pressure turned to non-bank funders for speed, even at higher costs.”
A new and more severe headwind for 2026
Linkflow Capital flagged the Middle East conflict which began in February 2026 as the most consequential macroeconomic event facing Singapore SMEs in the year ahead. The conflict has elevated freight, energy and shipping costs through Iran’s intermittent disruption of the Strait of Hormuz.
“Singapore SMEs entered 2026 facing a potential macro shock with the Middle East conflict,” Teo said. “The inflationary price pressures feed directly into SME operating costs through fuel, freight, and energy. We expect credit conditions to re-tighten, and the modest 2025 thaw could partially reverse if the conflict escalates.”
The full survey findings and detailed charts are available at: https://smeloan.sg/blog/2025-sme-finance-accessibility-survey/