As the economy cripples due to the impacts of COVID-19, people have become more resourceful in trying to make ends meet.
Various industries have also been affected by the pandemic, making more communities to venture into creating and retailing. While support is being handed out, governments urge citizens to support those who have set up businesses to help them amid the crisis.
Opening up a start up business loan Singapore is simple but only if you have planned and prepared long enough for it. And to make it possible, it will require a lot of investment in time and more importantly, money.
However, during times of uncertainties, you may be thinking about how you can easily fund your start up business. We’ll share different methods to help you out.
Ways To Get Your Start Up Funded
1. Seek help from your friends and family.
Given they are more aware of your demands and necessities, it would be much easier to receive something from the ones you really know of.
Convincing them for financial or just even moral support could kickstart the project you’re developing. This is also called self-funding.
With this strategy, you retain complete control over your small business but you also take on all the risks yourself. You just have to be careful not to spend beyond you can afford, and especially if you choose to use tap into retirement accounts early.
2. Apply for a Loan.
It’s highly likely this option is amongst the frequently-used. If you feel hesitant about this approach, note that some of the biggest benefits of applying for Singapore business loans are that it can help build your credit history, allow consumers to pay off huge expenses over time, and they can be used for anything- may it be your future business plans.
There are two types of loans you can consider, one is the government-assisted Singapore business loan. This offers a variety of selections, depending on what suits you. In Singapore, we have:
• SME Micro Loan
The SME Micro Loan is a financing scheme to help local SMEs access financing. This program is administered by Enterprise Singapore (ES), a government statutory board. Its application of loan is via different Participating Financial Institutions (PFIs). With this, you can access up to $100k and may be able to repay within 4 years.
*Small Medium Enterprises in Singapore are defined as companies with at least 30% local shareholding, group annual sales turnover of less than $100m, or group employment size of not more than 200 employees.
• SME Working Capital Loan
The enhanced scheme in the Solidarity Budget 2020 helps SMEs access financing until March 2021. Under its new Enhanced SME Working Capital Loan, you can access nearly up to $1m to finance cash flow needs as it offers a five-year repayment duration.
• Temporary Bridging Loan
The Temporary Bridging Loan Programme gives access to working capital for business owners needs. As declared at the Solidarity Budget 2020, eligible enterprises can borrow up to $5m under this plan, with the interest rate capped at 5% p.a., from the PFIs. The Government will provide 90% risk-share on these loans for new applications initiated from 8 April until 31 March 2021. Five years is the maximum repayment period.
• Loan Insurance Scheme (LIS)
This is the ideal option if you are a Singaporean business with at least 30% local equity held directly or indirectly by Singaporeans and/or Singapore PRs, determined by the ultimate individual ownership, and also obtaining a group revenue of nearly $100m or maximum employment of 200 employees. Its loans are insured by commercial brokers which co-share loan default with the PFI in the event of enterprise insolvency. Its maximum loan quantum is $10m, which can be repaid in approximately 15 years.
• Enterprise Financing Scheme (EFS)
This consists of six separate financing schemes that are categorized under one umbrella. Same as the others, this is supported by various Participating Financial Institutions.
This plan will provide business financing for the purchase of local or overseas fixed assets like equipment and machinery. Construction and development costs of factories and business premises are also covered under this loan. Its maximum loan quantum is $30M with a maximum repayment period of 15 years and up to 50% risk-sharing and 70% for young enterprises.
Another type of business loan in Singapore is offered by private companies. These lenders focus more on your ability to pay based on your cash flow projections. This enables newly-opened businesses to gain access to business funding even though they haven’t successfully established a strong credit yet. With this financing option, you can:
• Seek a bank loan or credit-card line of credit.
Banks typically have a lower cost of funds than other lenders. Thus, small businesses may take out a loan to satisfy operational costs until their earnings reach a certain volume.
Note that while depositors keep a lot of money in their checking and savings accounts, banks have easier access to funds in lending out. If banks do not pay interest rates for the deposits or a little interest rates like, then it’s likely the funds are cheap for the bank to use.
On the other hand, a line of credit works differently from a loan. When a borrower is approved for it, the bank advances them a set credit limit so the person can use it over and over again, in all or in parts. And unlike loans seeking a specified goal, it can be used for any purpose.
• Get a loan from money lenders.
Private money lenders on the other hand either have to get funds from investors who are looking for returns from financial institutions.
Unlike banks, they do not have extra fees nor restrictions and other alternative ways to generate revenue. They are usually in business only to make loans which makes a better deal for you.
3. Solicit Venture Capitalist, angel investors.
An angel investor is a high net worth individual investing their money into start up companies with hopes of gaining a return on their assets.
If you find one, pitch your well-drafted business plan. They will immediately check your financials, marketing strategies, your traction in the marketplace as well as the potential competitions. Granted you have impressed them with your presentation, this is a great opportunity.
4. Start a Crowdfunding Campaign.
Although this method requires a lot of convincing, it is still an excellent financing option. Making a campaign will challenge you to share how your business idea can benefit potential funders.
5. Join a Start Up Incubator and Accelerator.
An incubator supports fresh ventures during the ideas stage. They provide access to infrastructure and an environment that’s flexible to developing and building your Minimum Viable Product.
Meanwhile, accelerators help beginners to accelerate their growth. It provides mentorship, offering access to some of the brightest business minds. It also has easier access to investments.
Typical Requirements To Prepare
- You must be a registered business in Singapore.
- A brief write-up on the company information.
- Banks may require the latest two years’ financial report for SME financing assessment.
- Your recent three to six months bank statements for business loan assessment will also be required.
- The minimum operation period of your business is one year.
- Over 30% of shareholdings must be owned by Singaporeans or Singapore Permanent Residents
- The business must have a minimum annual turnover of S$60,000
- Assessment of income tax for the company /directors and sole proprietors
- Singpass (to download the IRAS NOA)
Whichever you choose from the said ways in funding your business, it all depends on what you can get approved for, be able to repay, and profit from. Remember that when you begin a business, and loan for it to grow, it must flourish.
What you borrowed must be paid back and that would only be possible if you will be accountable for handling your money.
While you’re still deciding where to get that loan, visit Fortune Credit, a licensed money lender based in Singapore, licensed under the Ministry of Law. It provides an array of loans including business loans in Singapore that may amount up to $200,000 over a period of up to one year.
We can guarantee that signing up for a business loan with Fortune Credit is straightforward and simple, as it takes approximately one business day to respond to your request.