From angel investors to SME loans to venture capitalists, here’s how businesses can score a fresh injection of cash to scale up or stay afloat.
Businesses are facing their biggest challenge yet in COVID-19 and many businesses are struggling to stay in the black.
As companies across numerous industries adapt to stay relevant, additional capital could be required to purchase new equipment, technologies and train manpower. New business ideas will also continue to require initial funding to give them the boost necessary to take the business to the next level.
Here are seven sources of capital business owners can tap on in Singapore.
1. Government schemes and grants
What is it: The Singapore government has been a staunch supporter of local businesses, with efforts introduced over the years to strengthen the startup ecosystem. Government grants in Singapore are typically specialised in growing local companies; these grants can range from providing a fixed disbursement (i.e. getting $10,000 straight up) or as a percentage of the costs incurred. There are different types of grants available for startups, local companies and for partners.
Due to COVID-19, the government has introduced a host of measures to help businesses in Singapore tide through these challenging times. Measures introduced include the Job Support Scheme, tax rebates as well as updates to existing financing schemes. Here are more details on SME grants and COVID-19 measures introduced to support businesses.
Who should get it: Business owners can consider getting these grants if they are based in Singapore and satisfy the eligibility criteria. There are grants available for specific purposes, such as to help a company expand overseas, to adopt IT solutions or to develop the capabilities of their employees.
How to get it: You can apply for these grants on the Enterprise Singapore website where you can find the eligibility criteria, qualifying periods and other application details.
2. SME business loans
What is it: Companies in Singapore can take up business loans from banks and financial institutions. Loan amounts can range anything from $100,000 to $1 million. For banks, you’ll be looking at a variety of loan products like SME Working Capital Loan, Business Loan, Commercial Property Loan, Temporary Bridging Loan, Equipment Financing and more.
Here are more details on the best SME loans available in Singapore 2020.
How to get it: You can apply for SME loans from banks or financial institutions online. The online application process is quick and you can receive approval in minutes. However, this would depend on the credit assessment of the company as well as the documents submitted.
Who should get it: To apply for a business loan, you must meet the eligibility criteria set out by the bank. This typically requires your business to be registered and physically present in Singapore with at least 30% owned locally. Some also require your company to be in business for at least one or two years.
What is it: Fund the business with cash out of your own pocket. Rather than taking on debt with a loan that incurs interest cost, or raising funds by giving up equity in the company, bootstrapping allows entrepreneurs to maintain full control, albeit with financial risk.
How to get it: Pull all the money you can from your financial resources. This could be from the savings in your bank accounts, liquidating assets or a very calculated use of credit cards and credit lines.
Who should get it: For those that are fortunate enough to be flushed with cash on hand to kickstart the business. Also for businesses that prefer not to borrow or raise funds, potentially incurring more interest costs and having to give up part of the stake.
4. Angel investors
What is it: An angel investor (also known as a private investor, seed investor or angel funder) is someone who provides capital for a startup or for an entrepreneur at an early stage, usually in exchange for ownership equity in the company.
This initial funding can help the startup to get off its feet. There are also platforms that allow these investors to pool their capital together and share the returns, such as Fundnel.
Angel investors in Singapore can also enjoy tax deductions under the Angel Investors Tax Deduction Scheme (AITD) if they invest at least $100,000 in a qualifying start-up company, and hold this investment for a continuous period of two years. Angel investors can also join angel investor networks, such as Angel Investment Network, Business Angels Network of South-east Asia (Bansea) and Angel Central, to get connected with startups and other angel investors.
How to get it: This is where your business and social network comes in handy. Angel investors could be an entrepreneur’s family members or friends. Angel investors can also be high networth individuals looking to invest in a startup with a great idea.
Who should get it: Infant startups that are in need of capital can consider looking for angel investors.
What is it: Sites such as Kickstarter and Indiegogo have become synonymous with the term crowdfunding. Crowdfunding is essentially raising money from keen members of the general public, who can pool together a significant amount of capital and finance a viable business model.
People that take part in crowdfunding need not be rich, neither do they need to have connections with the team behind the product. They could be any man on the street that has a bit of extra cash and loves a good idea.
Investors may also participate for reasons such as to receive the new product the business plans to introduce to the market. For example, consumers interested in this bottle that doubles up as a reusable cup could have pledged USD$49 to receive the vacuum insulated bottle and cup shipped to their doorstep when the product becomes available.
How to get it: This form of funding does not require the entrepreneurs to have a wide network of investors. It requires an idea, a platform to showcase the product and ultimately to successfully pitch the product to the would-be investor and end consumer. You can get on crowdfunding sites such as Kickstarter, IndieGoGo and FundedHere.
Who should get it: Any business can consider crowdfunding to raise capital from people who are considered future customers. It doubles as a means to gauge consumer demand and sentiments towards the new product before launch.
6. Peer-to-peer lending (P2P lending)
What is it: Peer-to-peer lending (P2P lending), like its name suggests, is the lending of money from individuals to a business usually through P2P platforms. They receive returns in the form of interest on the money lent out.
Similar to crowdfunding, P2P lets companies reach out to a wider network to obtain funding and the opportunity for investors with little capital to invest in a new business. Investors can start investing in business campaigns with as little as $20, depending on the platform used.
How to get it: Access P2P lending sites such as Funding Societies, MoolahSense, CoAssets, Validus, CapitalMatch, Minterest and SeedIn. Most of these P2P lending platforms reach out to both individuals and businesses, allowing businesses to share their information and target funding amount required, while allowing individuals to choose a project they believe in.
Who should get it: Companies looking to raise money from a wider investor pool, or just want a fast loan approval process. Some platforms disburse funds in less than 24 hours.
7. Venture capital
What is it: Venture capital is a form of private equity that investors, investment banks and other financial institutions provide to companies that have high growth potential. Often in large amounts, this funding is provided to startups and small businesses, usually in exchange for equity in the company.
Yes, this means they have a say in company decisions.
How to get it: You will need to tap on your network of investors and entrepreneurs, or get to know these venture capitalists through other acquaintances. Here’s a list of venture capital firms in Singapore.
Who should get it: Businesses that are looking for larger funding amounts (a few hundred thousand dollars to a few million dollars) can consider venture capital. Companies with high growth potential would also be attractive to venture capital firms.
With a better understanding of these sources of capital, you will now have to weigh the importance of retaining equity and the cost of taking on debt, as you consider the ways to get funds to move your business ahead.
Read these next:
Guide to SME Grants and COVID-19 Measures to Support Businesses in Singapore
Best SME Business Loans in Singapore 2020
Starting Your Company in Singapore: A Guide to All the Costs
5 Key Reasons Why Successful SMEs Take Business Loans
How Insurers and Banks Are Helping You Survive COVID-19 (Whether Quarantine or Debt)
By Ching Sue Mae
A flat white, an adventure-filled travel and a good workout is her fuel. This Manchester United fan enjoys sharing knowledge on personal finance while chasing the dream of financial independence.