Funding Societies


How Peer-To-Peer Lending Supports Financial Inclusion

Financial inclusion is increasingly becoming a buzzword in the finance arena. While crucial in setting a strong foundation for development, the Southeast Asian (SEA) region and the world still has a lot of room for improvement. This is where Peer-to-Peer (P2P) lending can step in to steer the money lending economy in the right direction.

Why is financial inclusion important?

Financial inclusion refers to people and businesses having access to affordable and useful financial products and services, delivered in a sustainable manner. This can include access to transactions, payments, credit, savings, and insurance, just to name a few.

A crucial foundation

Financial inclusion is important as it contributes directly to the ability of communities to develop and grow. It equips people with the tools to manage their wealth by having savings and enabling the allocation of resources to various aspects of their lives such as health, education, and business. According to the American Economic Review, financial inclusion can aid in the reduction of poverty through an increase of one’s income potential and asset-building capabilities. Financial inclusion also acts as a safety net to let companies survive financial emergencies through business loans.

The state of financial inclusion in SEA

Despite the importance of financial inclusion, many individuals and businesses still lack access to quality financial services. Global Findex Database found that 1.7 billion people worldwide do not have access to basic financial services, like a bank account. Deloitte reported that less than 60% of Small Medium Enterprises (SMEs) in Indonesia, Malaysia, Philippines, Singapore and Thailand have access to bank loans as a means of financing. Shockingly, the region around us continues to use personal funds as a dominant source, particularly in Indonesia.

The reality is that SMEs’ financial requirements are more often than not too large for microfinance, yet too small to be effectively served by corporate banking models. As such, there are many underserved companies with poor access to mainstream financial services and need to rely heavily on alternative financial services.

How does P2P lending support financial inclusion?

The presence of financial exclusion reveals a potential market for lenders. In particular, P2P lending can help address the issue of accessibility while providing an alternative form of investment.

Accessibility upgrade

P2P lending brings lenders and borrowers in direct contact through a common platform. By skipping traditional financial institutions through a convenient digital platform, the P2P lender is able to enhance access to much-needed working capital. Lenders and borrowers are not bogged down with the same degree of bureaucracy and regulation imposed by traditional credit providers, and other measures of assessing creditworthiness are in place. Instead of waiting for a week to process loan applications, a more immediate relief can be provided through P2P lending for business emergencies in the form of SME loans, bridge loans, invoice financing, and more.

Viable investment opportunity

On top of the improved access to funds, P2P lending also adds more options to the pool of investment types available. As opposed to a large starting capital of $10,000, P2P lending allows easy entry with affordable options starting from $20. New and seasoned investors alike can look forward to diversifying their portfolio through this form of alternative investment.

In this digital age, there are lesser excuses for financial inclusion to remain problematic. Banks and Fintech businesses need to ensure that the underserved community is not left behind. P2P lending has the potential to reinvent the funding sphere.

Read Also: Step-By-Step Guide To Investing With Funding Societies In 2019

Step-By-Step Guide To Investing With Funding Societies In 2019

Are you interested to start investing in SMEs with us but have no idea how to start? We have created a step-by-step guide to facilitate your sign up process.

Step 1: Create your profile on our sign up page.

Step 2: Upload a scanned copy of the relevant documents for investor application

Singapore Citizen and Permanent Resident Foreigner residing locally or overseas
NRIC Passport + Proof of Residential Address*

What can be used as Proof of Residential Address?

Utility bills, credit card/bank statement, letter from government bodies or landline telephone bill which are not older than 3 months can be used as Proof of Residential Address. Kindly note that bills for mobile plans are not accepted.

For non-Singaporeans residing overseas holding an overseas bank account, you may also upload your Bank Statement to serve as your Proof of Residential Address

Step 3: Fill up a quick 5 minutes Subscription Agreement

You will be directed to fill up a quick 5-minute form relating to your personal information and your source of wealth.

Complete a General Questionaire about your Investment Profile

Fill in your bank details

Step 4: E-sign the Subscription Agreement

We will then email a Subscription Agreement by the next business day for e-signing.Ensure that all details are correct before electronically signing the Subscription Agreement. If any changes are required, reach out to us to amend the agreement immediately. Please note that your documents can only be legally reviewed once you have signed the agreement. Just follow the yellow arrow which will direct you to the 4 fields that you have to fill up!

Step 5: Transfer a minimum of S$500 to our escrow account

Once the due diligence process by our escrow agency has been completed, transfer a minimum of S$500 to our escrow account (account details will be provided on the Deposit page).

Remember to upload the transaction receipt, which should show your account number, our escrow account number and the amount transferred.

Read More: What Is An Escrow? How Does It Work?

Note: The requirement to transfer a minimum of S$500 only applies for the initial deposit. For subsequent transfers, there is no minimum amount required.

Step 6: Start investing with us

We will confirm the deposit and activate your account by the next business day. When your deposit has been confirmed, you can begin investing with us. To invest and monitor your portfolio on the go, download our investor mobile app! Available for Android and iOS users.

Get in touch with our friendly CX team here if you have any questions regarding your signup process.

Top 5 Investment Articles That Singapore Investors Should Read In 2019

The good thing about investing is that there’s never a lack of new things to learn. No matter how experienced you may be, you can always look forward to understanding different asset classes, new tools, or investing concepts.

To help you in your journey of self-improvement as an investor in 2019, here is our  list of our top 5 P2P investment-related articles that you may find useful, covering a wide range of topics from P2P lending to loan fact sheets.

#1 An Overview of P2P Lending in Singapore

If you have ever considered venturing into alternative investment options such as peer-to-peer (P2P) lending, then “An Overview of P2P Lending in Singapore” is the article for you.

This article provides a closer look at the important components of P2P lending such as its risk, returns and opportunities. P2P lending is an alternative financing option for businesses to obtain funds without traditional financial institutions. It has been growing rapidly in the past few years and has quickly become a new way for investors to diversify their portfolios. Find out how P2P lending serves both the needs of SMEs and investors.

#2 Why a Loan Default Does Not Mean a 100% Principal Wipeout

A guest post by an avid user on Crowdfund Talks discusses “Why a Loan Default Does Not Mean a 100% Principal Wipeout”.

This article discusses the two most asked questions by investors regarding defaults on P2P loans, namely “If a loan defaults, will I lose 100% of my principal?” and “When a loan goes into default, is it non-recoverable?”. If these questions have ever crossed your mind, you should hop on over to the article to learn more about his perspective on these issues.

#3 Understanding The Loan Fact Sheet

One of the key steps to becoming an investor on Funding Societies is to understand the loan fact sheets provided on the businesses you can potentially invest in. “Understanding the Loan Fact Sheet” will walk you through the important information that investors should take note of when considering a new crowdfunding opportunity such as the loan details, repayment schedule and company’s summary, etc.

The loan fact sheet summarises Funding Societies’ risk-based assessment of the business’ creditworthiness, based on key components of the business such as its financials, repayment behaviours, etc. Thorough reviewing of the fact sheet will allow investors to make an informed investment decision.

#4 What is an Escrow? How does it work?

Common concerns of potential investors include: How do investors ensure that their funds will reach borrowers? How is the fund provided protected if the platform goes bankrupt? Well, the answer is escrow accounts, which are used to establish transparent transactions and give you peace of mind. You can find out more here on “What is an Escrow? How does it work?”.

Funding Societies was the first P2P lending platform in Singapore to use an escrow. We engage Vista Trust Singapore, which is regulated by the Monetary Authority of Singapore (MAS).

#5 What You Can Expect When Investing with Funding Societies

Southeast Asia has seen significant growth in the P2P lending landscape in recent years, predominantly spearheaded by Singapore. We have onboarded more than 70,000 investors across Singapore, Indonesia and Malaysia and is the only P2P lending platform to have received the MAS Fintech Award in 2016.

If you are looking to start investing with us, this article  “4 Things You Can Expect When Investing with Funding Societies” helps to summarise the potential returns, user interface and updates you experience on our platform.

Top 3 Announcements From Budget 2019 That SME Owners And Entrepreneurs Need To Know About

On Monday, 19 Jan 2019, Finance Minister Heng Swee Keat delivered the Budget 2019. Mr Heng announced new initiatives and expansions worth S$1 billion, aimed at enabling businesses to grow. Here is how Budget 2019 will impact your business.

The budget outlines three areas of focus to deepen enterprise capabilities:

1. Customised Assistance 

The budget highlights two programmes help you identify and overcome business challenges – the Scale-up SG programme and the Innovation Agents programme.

The Scale-Up SG programme is an initiative by Enterprise Singapore that partners you with companies in both private and public sectors to provide you with advice on how to scale up your business.

The Innovation Agents programme allows you to tap on the expertise of experienced industry professionals by matching innovation experts with your business. The experts will provide you with advice on innovation and commercialisation opportunities.

2. Increase Technological Adoption 

The SMEs Go Digital programme that was launched in 2017 will be expanded to other sectors. The programme aims to help you use digital technologies and improve digital capabilities in areas such as accounting, human resources management and payroll, digital marketing, digital transactions and cybersecurity.

The programme will also provide your business with Industry Digital Plans (IDPs) which contains advisories on which digital technologies to adopt.

3. Improved Financing Options 

Mr Heng announced an additional S$100 million for an SME Co-Investment Fund III. This is in addition to S$400 million set aside since 2010 to invest in SMEs, alongside the private sector.

Existing schemes by Enterprise Singapore will be streamlined into a single Enterprise Financing Scheme which will be launched in October.

The SME Working Capital Loan Scheme will be extended for two more years, until March 2021. It will then be folded under the Enterprise Financing Scheme.

Under the Enterprise Financing Scheme, the government will take on up to 70 per cent of risk for bank loans to younger companies that have incorporated for less than five years.

As you look forward and plan for the fiscal year 2019, it is wise to stay updated with government initiatives that may provide financial support for you and your business. On top of that, you may also want to look into alternative financing options such as Peer-to-Peer lending(P2P) to help to fund new and additional projects.

P2P lending is an offshoot of crowdfunding that matches investors and SME-owners through an online platform. You can take up a loan for your business while investors that collectively funded these loans will earn an interest in return. P2P lending holds many advantages for SME-owners as it has an easier and quicker application process than traditional financial institutions and requires no collateral. This enables many SMEs with limited credit history to obtain business funding.

For further reading, check out our definitive business financing guide where we will endeavour to cover all aspects of financing your business.

Running Your Own Company? Here Are 5 Singapore Government Agencies You Need To Know About

While dreadful, documentation, as well as other logistical and administrative matters, are unavoidable when doing business. Here are some government agencies in Singapore that you should be familiar with as an SME owner to make the administrative process a breeze.

Accounting and Corporate Regulatory Authority (ACRA)

Given that every registered business on our sunny island is done through ACRA, this agency is a definite must-know. A national regulator of business entities, public accountants and corporate service providers in Singapore, ACRA aims to provide good corporate governance as well as high-quality financial reporting and audit. On their website, there are various useful guides on how to prepare financial statements, file financial statements, file annual returns, strike off a local company, and more.

More often than not, the first contact that business owners have with ACRA would be through BizFile+, ACRA’s online filing and information retrieval system. BizFile+ has more than 400 electronic services to help business owners with their submission of statutory documents and more.

Inland Revenue Authority of Singapore (IRAS)

As a business owner, you absolutely need to know about IRAS, the main tax administrator for the Singapore government. You are likely to be in contact with IRAS for all tax matters ranging from corporate tax to goods and services tax (GST).

The agency also provides a comprehensive range of useful tax guides so that you can educate yourself on tax matters such as what are the taxable income and deductible expenses for a company, when to apply for GST registration, how to report your employees’ earnings, just to name a few.

Enterprise Singapore

In April 2018, International Enterprise Singapore and SPRING came together to form Enterprise Singapore. This agency supports companies to build capabilities, innovate, and internationalise. Startups, SMEs, and high-growth companies can all stand to benefit.

Information on financial assistance such as grants, loans and insurance, tax incentives are all available on their site. For instance, the Startup SG Tech grant is listed as an early-stage funding option to fast-track the commercialisation of scalable in-house solutions. Local companies can also look at the Enterprise Development Grant to support business upgrade, innovation, and overseas venture.

In addition, non-financial assistance is also available. Singapore companies can explore the range of business toolkits, while foreign companies can find useful resources on the site, such as information on Free Trade Agreement.

Singapore Ministry of Manpower (MOM)

MOM handles a multitude of things relating to employment. If you want to find out more on applying for work passes and permits, workplace safety and health, or employment practices, this is the place to go to. In addition, MOM also provides useful labour market information on unemployment, income and more which can be useful when conducting market researches. After accessing their homepage, there is even a short virtual tour to guide you on how to navigate around the site.

Central Provident Fund Board (CPF)

CPF is a social security system that helps Singaporeans and Permanent Residents (PR) who are working to set aside funds for retirement. On top of that, it also helps to address home ownership, healthcare, asset enhancement and more.

As an employer, you will need to make CPF contributions to your employee based on the rate prescribed by the CPF Board. Under the employer guide, you can also find a wealth of information regarding company set up, hiring matters such as Foreign Worker Levy, compliance, and more.

We hope that the list of government agencies listed above will come in handy when you are setting up or expanding your company. Be sure to explore the wealth of readily accessible information online to tap on as many resources as possible to further improve your business processes.

How To Grow The Ang Pow Money Your Receive This Chinese New Year

Chinese New Year is just around the corner and it is an exciting season for many reasons – it’s the best time to catch up with your family over good food, to do house visitations and of course to receive Angpaos. (Chinese red packets containing money gifts) However, many people do not know what to do with their Angpao money.

At a younger age, their parents would usually help to keep them in a bank account. After a certain age, many will end up spending a portion of their Angpao money to splurge on an item they’ve been eyeing and stick the remaining portion in the bank. But all of these are actually missed opportunities to make your Angpao money work harder for you!

If you have ever wanted to try investing but always felt that you didn’t have enough capital to start with, this is the golden opportunity for you to start making small investments and build up! For first-time investors, it may seem daunting to make your first investment and you may be wondering how and where to invest your money. Thus, we have compiled a list of 3 simple ways you can start growing your Angpao money!

Singapore Savings Bond

Singapore Savings Bond (SSBs) are safe, long-term and flexible bonds that are offered by the Singapore government. You can start by making small investments from as little as $500 and receive an interest on your investment that will grow over the duration of 10 years. SSBs are also one of the safest instruments as it is backed by the Singapore government (which has received the strongest “AAA” credit ratings from international credit rating agencies). Moreover, an attractive feature of SSBs is its flexibility where you can cash out your bond at the end of every month and still retain whatever interest you have accrued up to that point – a feature that most of the other bonds do not have! You can head on over to SSB’s website to read up more on it.

Contribute to Your CPF Account

If you are above the age of 18 and are working, you are likely to already be automatically contributing to your CPF Account.

It is wise to top-up your CPF account for a multitude of reasons. Firstly, it does not hold any risks as it is guaranteed by the Singapore government. Secondly, it offers attractive interest returns especially since it holds such low risk – up to 3.5% per annum for the Ordinary Account (OA) and up to 5% per annum for the Special Account (SA). This interest return is better than most bank savings accounts and even safer than investments in big firms. Thirdly, you can receive tax reliefs if you top up to a certain amount, which you can find more information about on the CPF website.

However, it is important to note that a downside to topping up your CPF account is that your investments will be ‘locked’ in your account till withdrawal after you reach 55 years old or through paying for housing or medical bills through MediSave.

Investing in Peer-to-Peer Investments

Peer-to-Peer investments (P2P lending) are an alternative investment option that gives investors an opportunity to earn passive income by financing business loans for small and medium-sized enterprises (SMEs). Our platform connects investors and SMEs looking for business funding, allowing individuals to earn interest on the business loans you invest in.

P2P lending is an easy-to-understand instrument where you can expect your first repayment in as fast as a month after the funds have been disbursed to the SME. Funding Societies will perform a scorecard-based risk assessment to minimise the risk involved in your investment. You can expect returns of up to 14% p.a. depending on the risk profile and is also a great way to diversify your portfolio if you are an experienced investor. You can read more on the  “Overview of P2P lending in Singapore” here!

An attractive feature of investing with Funding Societies is that you can make small investments starting from just $20! It is easy to start investing with us, and you can begin by following our Step-by-Step Guide to Investing!

We hope that this article has motivated you to start growing your Angpao money in these 3 simple ways. Chinese New Year does not have to be just a season of splurging and indulging but it can also be one where you start building your financial securities!

5 Key Reasons Why Successful SMEs Take Business Loans

One of the greatest misconceptions about SME financing is the notion that taking on debt is always a bad thing. Many people associate loans (aka. debt financing) with financial difficulties and cash flow problems and often assume that companies will only take up loans if they are in a poor cash position. However, this cannot be further from the truth.

Did you know that even large and established companies such as Apple still take on business loans? There are many advantages to debt financing that are often overlooked by SME-owners due to risk adversity or years of hearing misguided information.

This is the opportunity for you to uncover the perks of undertaking on business loans (and the precautions you can take) so that you can clear your misconceptions and make an informed financing decision.

#1 To Speed Up Business’ Expansion And Growth Rate

Common Myth: A healthy business always has excess cash on hand and will not require any form of business loans.

The truth is that excess cash may not always be a good thing, as it begets the question of “Why isn’t this excess funding being reinvested into new investment ideas and expansion opportunities?”

A healthy business will usually be seeking ways to speed up their rate of growth. Hence, it will often utilise excess cash to increase its capacity for growth (through upgrading equipment and machineries, increasing marketing efforts or expanding working capital).

However, relying on cash-flows alone to finance growth is often insufficient for businesses and may cause them to take a longer time to reach its goals. Therefore, many successful SMEs choose to leverage business loans to accelerate its expansion and growth, which is an opportunity you can consider for your business as well!

Possible Precautionary Actions: Create a revenue forecast based on existing balance sheets to ensure that your business will be profit-making on top of covering loan repayments.

#2 To Avoid Cash-Flow Issues

Common Myth: Cash-flow problems are an inevitable reality for SMEs.

It is true that many SMEs struggle to maintain a positive cash-flow due to a multitude of reasons:

  1. Freak Incidents i.e. Warehouse fire or natural disasters that may affect supply shipments.
  2. Cyclical Business Downturns i.e. A restaurant chain may face business slowdowns in certain periods of a year, where their operating costs may be greater than that period’s revenue.
  3. Poor business decisions/estimations or negligence of partners i.e. A firm overestimates its financial ability to follow through with a large project or subcontractors face financial problems due to main contractor’s delayed payments.

These unexpected circumstances may cause an inevitable fall in period cash flows. But they can be easily remedied through undertaking business loans in advance, to allow cash to be set aside as a buffer against such circumstances. A stable and affordable line of credit also allows your business to continue operating as normal during cash-strapped periods. Generally, loans help prevent your overall business cash flows from being susceptible to uncontrollable situations and cyclical downturns.

Possible Precautionary Actions: There are other actions you can take to better manage your cash flows, you can find out more on 5 Steps For Better Cash Flow Management.

#3 To Capitalise On Business Opportunities

Sometimes, there may arise unexpected opportunities for the business such as:

  1. Discounted bulk orders of inventory
  2. Retail space priced lower than market rate
  3. Good deals on vehicles auctioned off by banks in a foreclosure

Having extra cash on hand or obtaining a business loan will allow your business to capitalise on these opportunities in time to potentially generate greater revenues. This is also important for businesses in capital-intensive industries such as manufacturing.

They often need to spend large amounts on machinery, labour and inventory far before they start receiving any revenue from their projects. They risk having insufficient funds to complete the project if unexpected expenses are incurred midway through. A solution is to cover these heavy initial investments with short-term loans to leave the business with sufficient cash reserves.

Potential Precautionary Actions: Conduct a revenue forecast to estimate the true costs and profits generated from this investment. It will be helpful to determine the return on investment of the opportunity through weighing the cost of the loan against the potential revenue that can be generated. Basing decisions on hard number rather than gut instincts will prevent over-enthusiasm from clouding your judgment.

#4 To Build Creditworthiness And Profit Off It

Do you know that taking on a loan can reap long-term benefits for your business?

When your business undertakes a loan, it establishes relationships in the financial sector and builds up lenders’ confidence through timely repayments. This is especially important for young SMEs that often find it difficult to qualify for larger loans when they lack a strong credit history to support its request.

Responsible debt financing will help to boost your business’ creditworthiness and business credit score. This may increase your chances of getting bigger loans in the future as your business grows.

The saying that the “bank is a place that will lend you money if you can prove that you don’t need it” also holds very true here. The best time to apply for a loan is the period where your business is financially strong, maintaining healthy cash flows and has a comprehensive business plan for future growth. It is wise to take advantage of periods with higher credit ratings to apply for loans, as banks and investors will perceive lower risk and issue a lower interest rate on the debt. SMEs can also re-invest excess cash in securities or instruments that repay a higher interest rate, profiting off the difference in interest rates.

Possible Precautionary Actions: SMEs should be cautious of taking on an early loan and ensure its ability to afford the loan as every late payment on a small loan may affect their qualification for future bigger funding.

#5 Debt is Cheaper Than Equity Financing

Common myth: Equity Financing is better for SMEs as investors will bear all risks and SME-owners will not be liable if the business fails.

Although equity financing has many upsides such as decreasing risk for SME-owners and allowing the business to have more cash and less debt, the truth is that its downsides are incredibly large.

Equity is an expensive financing method as it incurs a greater loss in the long-term. It requires you to give up a stake of your business in exchange for cash. Although 5%, 10% or even 15% may seem a reasonable percentage of equity to give up when your business is cash-strapped, it actually dilutes your ownership of your business.

Ownership governs your control over management decisions affecting small decisions such as the hiring of workers as well as big decisions such as which projects to undertake. The general rule of thumb is that equity investors will seek to have a degree of authority over decisions made by the businesses they invest in, making it unwise to relinquish a large portion of your ownership over your company.

On the flip side, debt financing allows your current management to retain full control and does not dilute your ownership. It also has other advantages such as:

  1. Tax benefits: Interest payments on loans are tax deductible and will decrease the amount of revenue that’s taxable. Comparatively, dividend payments to equity-holders are not tax deductible.
  2. Lower obligations: As equity-holders risk losing all their investments if the business closes down, investors usually expect higher returns. Comparatively, business loans can usually be sourced at a lower interest rate.
  3. Easier forecasting: Loan payments do not fluctuate as much as equity prices, making it easier to forecast expenses.

Possible Precautionary Actions: Too much of a good thing can be a bad thing. Although debt-financing is a good option for SMEs, it is important to not over-leverage and risk defaulting on loans. There is a significant amount of risk for the borrower if they lack confidence in loan repayments. Larger SMEs often use a combination of debt and equity financing to reduce the downsides of each method. You can find out more here on Debt vs Equity Crowdfunding.

In the past, SMEs often found it difficult to obtain a loan even if they recognised its advantages and are interested to undertake one. This usually occurs due to the long application period from traditional financial institutions and lack of business collateral or credit history to back its loan request. This is a common problem faced by SouthEast Asian SMEs that you can find out more about here on The SME Funding Gap in SouthEast Asia.

Fortunately, the proliferation of online financing platforms has led to more sources for SMEs to obtain loans from. One key option is Peer-to-Peer (P2P) loans that can be obtained through debt crowdfunding platforms such as Funding Societies in Singapore. This enables SME-owners to obtain loans much quicker — with simpler request procedures which can even be done through this popular business loan mobile app FS Bolt. You can find out more about Peer-to-Peer Loans here to make a more informed financing decision in the future!

4 Top Finance-Related Issues Faced By SMEs In Singapore

Businesses, especially SMEs, have grown highly competitive in the past 10 years. Local competition is not new, but international and online competition have kept small businesses on their toes. And along with the general cost of living, cost of doing business has gone up as well. In such a scenario, it is absolutely essential for SME owners to keep an eye on their cash flow.

According to an NUS Enterprise study, almost half of all start-ups fail in the initial stage because of cash flow issues in the business. As one of our SME clients aptly explains, “Cash Flow is King” without cash flow, businesses cannot survive.

SMEs face a number of business challenges. According to DP Information Group’s SME Development Survey of 2017,  the biggest challenge for SMEs is financing. Over a third of SMEs surveyed reported finance-related issues. This was up more than 13 percentage points from the previous year and almost doubled since 2014.

What are the finance-related issues plaguing SMEs?

Based on the survey conducted between 2,522 SMEs, four main issues were highlighted by SMEs in 2017.

Statistics based on SME Development Survey of 2017*

#1 Delayed payments from customers

This is the most common issue faced by SMEs. Due to seasonal fluctuations, your clients may not be able to pay you on time. One possible solution is invoice financing, which will be discussed later in this guide.

Read Also: What is Invoice Financing?

#2 Higher interest rates for bank loans

SMEs also highlighted that they encountered higher interest rates when they go to the bank. According to this Business Times article, four in 10 Singapore SMEs lack support from financial institutions. While certain banks are recently looking to grow their SME lending, financial support for Singapore SMEs doesn’t exclusively come from banks.

#3 Suppliers tighten credit access

As financing gets tougher for companies, suppliers start to tighten credit access to their debtors. Suppliers may require companies to pay for inventory upfront or at shorter notices.

#4 Need more collateral for the same financing

Typically, traditional banks would require collateral for SME loans of larger amounts. SMEs have highlighted the need for more collateral for the same financing.

Running A Small Business? Here Is What You Need To Know About Your Business Revenue And Expenses

Having proper accounting will enable you to check the health of your business. Hiring an accountant and adopting proper accounting software will ensure that you properly track your revenue streams as well as expenditure.

Business revenue

Let’s start with revenue. Typically, businesses have a core revenue stream. By accurately measuring the performance of each revenue stream, you will be able to identify and plan for revenue growth. As mentioned in the previous section of this guide, SMEs often encounter revenue issues such as delayed payments from customers. In your business planning, besides brainstorming on how to grow a certain revenue stream, you should also prepare a forecast for future revenue.

Business expenses

In general, businesses have two types of expenditures – capital expenditure (CAPEX) and operating expenditure. (OPEX) The main difference between these two expenditures is that in the case of CAPEX, these are expenditures incurred by the business for future use. In the case of OPEX, these expenditures are incurred by the business to ensure the business stays operational.

Here is a basic list of expenses a typical SME is expected to have:

Common CAPEX Expenses Common OPEX Expenses
Hardware Purchases
Equipment Purchases
Vehicle Purchases
Other assets purchases 
Employee / Staff Costs (Salary and CPF contributions, Medical Expenses and Retrenchment benefits)
Utilities (Water, Electricity, Internet)
Repairs and maintenance cost
Upkeep of business premises, equipment and machinery
Cost of travelling on public transport
Research & Development Expenditure
Administrative fees, including business licencing

In every business, it is inevitable that the list of expenses is long and numerous. In addition, many businesses face unexpected expenses which makes it hard to project expenses accurately.

Unexpected business expenses are incurred when business encounter situations such as sudden change in consumer demand, equipment breakdowns and increase in the cost of supplies. These situations are unpredictable and can occur regardless of the nature of your business.

To prepare for such situations, many businesses set aside a “rainy-day” fund. A rainy day fund is an emergency fund that helps to cover any short-term unpredicted business expenses. For businesses who do not have such a practice, you may want to consider getting a business loan.

Thinking Of Taking A Business Loan For Your Company? Here Are 6 Things You Need To Consider

# 1 Specify the purpose of the funds

It is important to identify the specific expense the loan is expected to cover. Besides covering business expenses, the funds can be used for new projects, such as business expansion, asset building and cash flow maintenance.

# 2 Determine the amount you require

With the purpose for the funds set, make the necessary calculations such that you know the amount required. Financial modelling tools can be used to help make accurate financial projections.

There are three forms of capital that can help you divide your needs – fixed, working and human capital.

Fixed capital is composed of durable producer goods, which are used in production again and again until it is worn out. Plants, tractors, and factories are examples of fixed capital. Typically, fixed capital is expensive and illiquid, but necessary for long-term business operations.

Working capital is comprised of single-use producer goods, such as raw materials, goods in process, and fuel. Anything that is used up in a single act of production is considered working capital. Working capital can prove to be more difficult to manage.

Human capital can easily be defined as the people working for your company and their individual skills, educational background, health, etc. Like fixed capital and working capital, spending for human capital needs to be as detailed as possible. Payroll costs, the budget for more human resources, etc – note it all down and create an expense range.

# 3 Determine your ability to repay in a specific period

During the loan application, you will be required by the lender to get your company’s balance sheets, income statements, cash flow statements, and bank statements. Given this information, you must be able to make accurate and realistic projections on your ability to repay.

# 4 Which financial institution is most appropriate for my credit needs?

Different financial institutions have different loan products and structures. Do research on products offered by all the different financial institutions, government-backed loan packages, and alternative financing platforms.

# 5 Have I met my chosen lender’s requirement?

It is important for you to find out the lender’s requirements and before you make a loan application. This is to prepare in the unlikely event of a rejection, the next lender will likely question you why you were rejected for other business loans.

# 6 Do I have my documents in order?

While required documents vary across different lending institutions, every lender will ask for financial statements. In addition, you may be asked for your credit report (personal and/or business), tax returns, bank statements, collateral information (depending on loan type), and legal documents (business licenses and registrations, articles of incorporation, etc) Ultimately, applying for a business loan is all about preparation.