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Is access to financing still a major obstacle to growing businesses in today’s landscape?

Business financing is crucial for every business.

This is especially so for Small and Medium-sized enterprises (SMEs), in particular, the start-ups, as they do not have a high bargaining power over their suppliers and customers for better payment and credit terms.

This means that new SMEs will likely have to pay for goods and services upfront, while receipt for the goods and services they provide may take a longer time to collect.

This puts SMEs under a lot of financial stress, especially when there are delays in receipts collected by them.

Hence, SMEs have to make sure that they are sufficiently financed to prevent unexpected circumstances in which they fall short of cash to continue operating or sustain themselves.

The traditional way to get businesses financed is through bank loans. This is the primary source of business financing by SMEs, because of their relatively affordable interest rates and their legitimacy.

Some banks also have loan schemes with relatively lower interest rates for loans to businesses because of assistance from the government. Many of these schemes are also collateral-free.

However, securing a bank loan may be especially hard for newer SMEs as they may not have been able to establish a strong financial track record yet.

Application for a bank loan can also take a long time, which will not be favourable when a business urgently needs financing in an emergency.

Other than the bank loans, there are also various ways to finance a business in today’s dynamic environment.   

Credit Card Financing

Credit cards make it possible to make purchases and pay later, allowing businesses to still be able to operate when they are still awaiting incoming payments from customers.

But what if some suppliers don’t accept credit card payments?

Thankfully, there are now ways in which you can use credit cards to pay for virtually anything.

Online payment platforms such as CardUp and ipaymy allows businesses and individuals to make payments with their credit card as long as the recipients have a bank account.

These platforms work by paying your recipients on your behalf through bank transfer, and then charging your credit card for your payment amount plus a small percentage of fee.

Government Funding

Singapore provides a wide range of funding schemes to help small businesses grow.

These schemes are typically in the form of loans or grants and are applicable for a myriad of different business expenses. This includes funding for equipment, software, and even training expenses.

Some examples of such schemes include:

  • Enterprise Development Grant (EDG), which provides up to 70% funding for business development projects,
  • SME Micro Loan, which provides up to $100,000 in funding for daily operations of small companies with 10 or fewer employees,
  • Productivity Solutions Grant (PSG), which provides up to 70% funding for companies to adopt technology for improvement in productivity.

Peer-to-Peer (P2P) Lending

P2P lending involves loaning from individual investors, who are usually connected to businesses through P2P online platforms such as Funding Societies, KapitalBoost and MoolahSense.

Investors are attracted to these platforms because of the high interest rates. Businesses, on the other hand, benefit from the ease of application.

Applications for these loans can be done online, made within minutes and processed within days or even hours.

Furthermore, no collateral is needed to secure these loans, making it more attractive to smaller businesses that may not be able to obtain a loan from a bank.

With the increasing number of financing options, it may seem that businesses are less likely to run out of funds to operate.

However, most of these financing options might not be able to be processed immediately for fund disbursements on short notice.

Hence, businesses will be better off planning ahead to choose the appropriate financing options.

To do this, businesses have to be well-informed of their financial position at all times.

This is where cloud accounting could come in as a powerful tool by allowing the business’s financial data to be visualised in real-time.

Together with the professional advice about the pros and cons of different financing options, it could allow businesses to make better and well-informed decisions for their working capital needs or expansion.

If you would like to find out more about how you could optimise your financing strategy, we would be glad to share with you more details about it.

Contact us here if you need more information.

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