Guide to Small Business Funding Options in Singapore

Posted by Suneha Arora on Oct 8, 2018 1:25:00 PM


Guide to Small Business Funding Options in Singapore

It is a fact that any start-up business would fail within its first couple of years of the establishment if it has limited funding as working capital to run the business plan and expand sufficiently. This is the reason why you as a business owner must be sure of a strong financial strategy.

Singapore is no more just a tourist destination. The government here has been encouraging many private investors to actively invest in Singapore’s start-up companies. This has made Singapore an attractive market for venture capital and private equity activities. Over the past few years, this attractive country has been successful in helping people set up a business of their choice. Besides the ease of doing business and low tax rates, another factor that has been attracting entrepreneurs from across the world is the multiplicity of business financing. Thanks to the government and private financing sources, many start-ups have been able to set up their dream business in Singapore.

Different business funding options in Singapore

For the start-ups willing to set up their business in Singapore, there are many attractive funding schemes offered by the government, investing networks, private equity firms, accelerator programs, and investing networks.

Private equity funding

Companies that lack credit-worthiness or burdensome collateral for taking loans for working capital, private equity funding is the right option. However, understand that in order to have a fair chance to secure equity capital, in Singapore you must disclose your potential investors. Else, you will have to consider other funding sources such as banks, venture capitalists, investment companies and business angel investors.

Private funds

Private funds such as financial institutions, banks, and investment companies are other funding options considered by start-ups for their business. Usually, businesses that are well established, or are generating high revenue, have a positive credit track record and high growth potential prefer joining hands with private funding sources. This is because these sources are rarely involved in actively managing your business.

Venture Capitals

Venture capitalists not only offer funds for your business but also contribute to increasing business profitability. They would contribute to operational matters also if your start-up needs some input from various areas of expertise. Venture capitalists would generally contribute towards your business profitability for a period between 2 and 5 years and would expect a high rate of return from the start-ups they invest in.

Angel Investors

Angel investors invest capital and also contribute their business skills and expertise in the early stage of business in return for a noteworthy share in the organization. These investors can be a part of the angel network or individuals that invest in a business with higher growth potential. Angel investors invest especially in industries that they have expertise about or are familiar with.

Angel investors are successful businessmen having an appetite for newbie companies with high risks. Thus is it imperative for your newbie company to have a higher growth potential so as to win the favor of angel investors?

Singapore, undoubtedly, one of the finest places across the globe to set up business, has easy access to not only investors from Singapore but also from many other places. In no time, Singapore has developed as a key start-ups hub in Asia, thanks to its efficient legal system, pro-business environment, and a stable political system.

Invoice factoring

As a small business owner, you might have faced a situation where your customers didn’t pay for your services and goods immediately. How about you sell the invoices or accounts receivable to a third party at a discount? How about you turn the unpaid customer invoices in fast cash? This is where invoice financing and invoice factoring comes into the picture.

What is invoice factoring?

If you say invoice factoring is a loan, you are wrong. Invoice factoring allows you to sell the invoices at a discounted rate to a factoring company. This is done in exchange for cash.

Consider you are a hardware store and you sold hardware worth $5000 to a customer. The customer agreed to pay you after 30 days. But you need cash immediately to pay salaries to your employees. One option is to lend money from banks; for which the processing time would be more. Another option is to join hands with an invoice factoring company that agrees to buy your invoices in cash for $4850 ($5000 – 3% factoring fee). The factoring company will then pay you 85% of $4850 and the balance as soon as the due invoices are collected.

With this immediate working capital, you will be able to cover the funding gap caused by the late-paying customer.

Why invoice factoring?

  • Invoice factoring doesn’t require collateral as it is unsecured financing. It works like an asset such as an inventory or a real estate property that the lender can take hold of if you fail to pay.
  • You can allow loyal customers to pay for your goods and services later and still improve your cash flow for the growth of your business
  • Invoice factoring is for small-scale companies that might find it difficult to avail immediate cash from traditional sources such as banks

How does invoice factoring work?

  • You invoice customers
  • You sell and assign the invoices to a factoring company
  • The factoring company pays you in advance
  • The customers pay the factoring company
  • Factoring company pays you the remaining invoice (minus their fees)

Line of Credit

A small business line of credit is a business funding option that is similar to how business credit cards work. Unlike a bank loan, a small business line of credit does not provide a lump sum of cash Instead, it provides the borrower access to capital which he needs. Similar to using a business credit card. The capital balance on a line of credit is “revolving,” meaning that you can carry the balance from month to month and interest is paid only on the amount used by the borrower. As you repay the principal credit limit goes back up to your limit, allowing you to take advantage to use the available credit again. A business line of credit is flexible it allows the borrower to draw anytime just the amount which he needs and pay interest only on the amount borrowed. There are no pre-payment charges as well.

Finaxar credit Line is an amazing funding option made available for all the merchants across Singapore. It’s a tailored option to help all the merchants to grow their stores quickly and make more profit. A merchant credit line offers higher credit limits with low-interest rates. You can get access to funds in as quick as 24 hrs. Its a completely paperless and hassle-free process which makes it the quick availability of business funds. Finaxar offers the Merchant credit line to online as well as offline or retail merchants.

The small business owners can now enjoy the different options available for them.