All About Corporate Loans: Tax, Interest and Payments
Corporate loans can be complex financial instruments, each tailored with different repayment structures, interest rates, tax treatments, and usage scenarios.
Whether you’re a business owner exploring financing options or an individual seeking to understand how companies fund their operations, it’s important to know that not all loans are created equal.
If you need additional assistance or solutions to apply for loans, contact us here today!
This article will break down the most common types of corporate loans—like term loans, revolvers, syndicated facilities, and more—and explain how they work, when they’re typically used, and where they can be applied effectively.
What Types of Corporate loans can I apply for in Singapore?
- Term Loans
Term Loans are traditional corporate loans that offer either fixed or floating interest rates, typically benchmarked to rates like SOFR or EURIBOR, and adjusted based on the borrower’s creditworthiness.
These loans are repaid through amortisation over 1 to 30 years, involving regular payments of both principal and interest. One key advantage is that interest paid is generally tax-deductible as a business expense—an important cost-saving feature for companies .
This is typically offered in Singapore by banks!
- Revolving Credit Facilities
Revolving Credit Facilities (or “revolvers”) provide flexible access to funds within a set limit, with floating interest rates and additional fees charged on undrawn portions. Borrowers can draw, repay, and redraw funds up to the limit, often on a rolling annual basis (commonly 364 days). Similar to term loans, the interest paid on drawn amounts—even facility fees—can be tax-deductible .
Singapore’s major banks—DBS, CIMB, OCBC, Bank of China, HL Bank, and others—regularly offer RCFs tailored for SMEs and corporates.
- Syndicated Loans (Not Commonly used for SME’s)
Syndicated Loans pool lending across multiple banks, typically offering more competitive interest rates (floating with a risk-based spread) due to shared credit risk. They may include term and/or revolving components and are managed by a lead bank. In line with other business loans, interest is tax-deductible .
Large-scale borrowers—like Marina Bay Sands, which secured an SGD 12 billion facility—typically use such loans, arranged by a lead bank (e.g., UOB, OCBC) and syndicated across multiple lenders.
- Payment-in-Kind (PIK) Loans
Payment-in-Kind (PIK) Loans carry very high interest rates—usually 20% or more—that are capitalised (added to the principal) rather than paid in cash. These loans appeal to businesses needing cash flow flexibility but pose risks as debt accumulates. Generally, the accrued PIK interest is tax-deductible when recognised, although special high-yield loan rules may limit deductions in some jurisdictions .
In Singapore’s corporate finance environment, PIK loans are accessible, particularly in private equity or leveraged buyout situations. They allow companies to defer interest payments by rolling them into the principal, typically at higher rates—while still benefiting from tax deductibility
- Debentures (Not Commonly used for SME’s)
Debentures (or corporate bonds) offer a fixed coupon rate (with higher yields for subordinated or convertible types), paying interest semi-annually and returning the principal at maturity. Like loans, coupon interest is tax-deductible for the issuer .
Singapore corporations can issue debentures or bonds with fixed coupons, either publicly or privately placed. These function similar to global bonds—paying interest semi-annually and maturing at a set date, with coupon payments typically tax-deductible.
These instruments are regulated under the Securities and Futures Act, and most public debenture issues are listed on the Singapore Exchange (SGX).
Which One Suits You Best?
- Cash flow needs → Working capital, revolving credit, invoice financing
- Asset acquisition → Term loans, equipment/asset loans
- Growth and expansion → Government schemes, venture debt
- Financial speed and flexibility → Fintech and P2P platforms
| Loan Type | Interest Rate Characteristics | Repayment Structure | Tax Treatment |
| Term Loan | Fixed/floating; tied to credit rating | Regular principal + interest | Fully deductible |
| Revolving Facility | Floating + facility fee | Flexible draw/repay within limit | Deductible when incurred |
| Syndicated Loan | Floating, spread over benchmark; often more competitive | Term and/or revolving, shared among banks | Deductible |
| PIK Loan | Very high; interest capitalised | Pay-in-kind (added to principal) | Deductible despite non-cash structure |
| Debenture (Bond) | Fixed coupon; subordinated pay more | Regular coupon + lump sum principal at maturity | Coupon payments deductible |
Where do I Go to Get a Loan?
Bank loans Providers:
DBS, OCBC, UOB, Maybank, Hong Leong, Standard Chartered, Trust Bank
Government-Assisted SME Loans (Enterprise Financing Scheme):
Provider: Enterprise Singapore with participating banks
Venture Debt & Startup Loans:
Providers: Banks (UOB Business First, OCBC Business First), fintech lenders, venture debt providers
Equipment, Asset & Green Loans:
Providers: Banks (DBS, OCBC, UOB, Maybank, Hong Leong, Standard Chartered, Trust Bank)
Alternative & Fintech Financing:
Providers: Crowdfunding, P2P platforms like Funding Societies