How SMEs Can Use Property Loans to Lower Borrowing Costs (2026)

A secured home loan costs far less than an unsecured business loan, so some SME owners borrow against their private home and put the money into the business. That can cut interest costs. But you pledge your home for a business risk, the new loan counts in your TDSR, and the 2015 figures in our original article are all out of date. Compare it with government-backed business loans first.

At a glance

• Cheaper, but secured on your home. Floating home-loan packages are around 1.5–1.8% and fixed packages about 2.0–2.2% after the US Fed’s September hike. Unsecured business loans usually cost much more.
• Cash-out rules: MAS caps an equity loan at 75% of the home’s value (45% if you have another housing loan), and TDSR does not apply if all loans on the home total 50% or less of its value.
• Government-backed option: the Enterprise Financing Scheme (EFS) working-capital loan goes up to S$500,000, and the risk share is 70% for all enterprises from 1 September 2026 to 31 March 2027.
• Banks count only income they can verify. Low declared pay can block a cash-out loan that TDSR covers.
• Lending to companies at 14–18%: we have dropped that 2015 suggestion. See below.

What the 2015 article said, and what has changed

The 2015 article argued that SMEs struggle to borrow in a downturn, that unsecured business loans cost 10% or more, and that home loans cost about 2%. It suggested that directors refinance their homes, take cash out and lend the money to their company at 5%. Since then SIBOR and SOR have ended, and Singapore home loans use SORA or fixed rates. The ABS confirmed the SORA transition as complete in February 2025. SORA-linked rates rose above 3.5% in 2023 (see our interest-rate outlook) and have since come down. Today’s package rates are in the At a glance box, and the Business Times reported them on 2 October 2026.

Three ways to borrow, compared

Route	Cost	Security	Main catch
EFS working-capital loan through a participating bank	Set by the lender	Lender decides	Max S$500,000 per borrower, 5 years
Cash-out loan on your private home	Home-loan level, but ask for a written quote	Your home	The business risk lands on your home
Unsecured business term loan	Usually the highest of the three	Often none, but guarantees are common	Cost, and short tenures

Government-backed loans. EnterpriseSG’s EFS working-capital loan lets SMEs borrow up to S$500,000 for up to 5 years. The government normally shares 50% of the lender’s loss (70% for young enterprises). From 1 September 2026 to 31 March 2027 the share is 70% for all enterprises, as MOF announced on 29 July 2026. But the borrower still repays 100%, and the bank sets the interest rate. An SME here means group revenue up to S$100 million or no more than 200 employees, with at least 30% local equity.

How a cash-out loan against your home works

MAS calls it a mortgage equity withdrawal loan. The limits, including any outstanding loan on the same property and any CPF used, are 75% of the property’s value if you have no other outstanding housing loan, and 45% if you have one. The tenure cannot exceed 35 years. TDSR does not apply if the new loan and all other loans on the same property total 50% or less of its current valuation. Above that, TDSR applies to any loan secured by a property, and the bank uses the higher of a 4% floor or the actual rate. Ask your bank whether it will lend for business use, because each bank sets its own policy.

Example (assumed figures). You own a private home worth S$2m with S$500,000 outstanding and no CPF used. You take S$400,000 out. Total secured debt is S$900,000, or 45% of value. That is under 50%, so TDSR does not apply.

Now take a home worth S$1.2m with S$400,000 outstanding. The same S$400,000 cash-out brings secured debt to S$800,000, or 66.7%. TDSR applies. Over 20 years at the 4% floor, the S$400,000 instalment is S$2,424 a month. At the 55% cap you need at least S$4,407 of gross monthly income for this loan alone, before your existing loan. The bank counts income that it can verify, and MAS tells banks to haircut variable income and rental income by at least 30%. If you pay yourself a low salary, you may be refused. Ask how your bank counts director’s fees and dividends.

The saving. Say the actual rate is 2.2%. Interest on S$400,000 is S$8,800 a year. If the company’s alternative were an unsecured loan at an assumed 9%, interest would be S$36,000. The saving is about S$27,200 in the first year. But the cash-out also uses TDSR room: at the 4% floor it takes S$2,424 a month, which could cut the bank loan you qualify for on a later property purchase by about S$500,000.

The shareholder-loan structure, updated

The 2015 case study had two directors borrow S$400,000 on their homes at 1.8% and lend it to their company at 5%. Three points need care today.

• Tax: IRAS lists interest from loans to companies as taxable. Interest of 5% on S$400,000 is S$20,000, so the spread over S$8,800 is S$11,200 before tax. Ask a tax adviser how your interest cost and the company’s deduction work.
• Ranking: a shareholder loan is usually unsecured. If the company fails, banks with security are generally repaid first, and your home loan is still due in full.
• Fairness: if you have co-directors, document who may lend, on what terms, with a written resolution and loan agreement.

We have dropped the 2015 suggestion that investors lend to growing companies at 14% to 18% a year. That is a high-risk lending business. Regular lending to companies can raise Moneylenders Act questions, so take legal advice first.

What can go wrong

• Tenure mismatch. A 20-year loan funds a business need that may last 18 months. You keep paying after the money is gone.
• Rate risk. Floating packages move with SORA. If you pick a fixed rate, find out what happens when the fixed period ends.
• Personal exposure. If the company fails, the home loan does not shrink. Missed payments put your home at risk.
• Lost borrowing room. The loan counts in your TDSR until you repay it. See our TDSR guide.

A decision checklist

1. Have you asked at least one bank about the EFS loan first?
2. Can the business pay this loan if revenue falls by a third?
3. What is the all-in cost of the cash-out, with legal, valuation and any early-repayment fees? Our refinancing guide lists them.
4. How much of your own borrowing room will the loan use? Test it in the mortgage calculator.

Bottom line

A home-secured loan can cut an SME’s interest bill, and the rules allow it for private property owners. But the real price is the risk to your home and your TDSR room. Use the EFS and unsecured quotes as the benchmark. Only borrow against your home if the numbers still work when the business has a bad year.

Sources

• Enterprise Financing Scheme – SME Working Capital Loan — Enterprise Singapore (checked Oct 2026)
• Applying for a new mortgage equity withdrawal loan — MAS (checked Oct 2026)
• Who TDSR applies to — MAS (checked Oct 2026)
• Calculating TDSR — MAS (checked Oct 2026)
• Interest income — IRAS (checked Oct 2026)
• SOR and SIBOR to SORA transition — Association of Banks in Singapore (checked Oct 2026)
• Singapore mortgage rates rise following Fed hike — Business Times, 2 Oct 2026