Starting a small business is no mean feat, especially if you’re planning on setting up your company in Singapore’s competitive commercial environment. You need to have a solid business idea, easy access to tools and services that are essential to your operation, and skills that will help you get your company off the ground.
You also need to find or build a team of reliable individuals who can help you grow your operation and provide your clients and customers with top-notch products, services, and experiences.
Getting sufficient funding is an essential part of translating your business idea into a real enterprise. Many entrepreneurs choose to save up for years so that they can slowly accumulate the amount they need for the business they dream of owning.
However, not all business ideas can wait. If you feel that now is the best time to set up your small business and that waiting further can significantly decrease your chances of finding success, then don’t let your lack of funds stop you from starting your company.
Here are 3 practical ways of financing your start-up company in Singapore.
If you need capital as soon as possible, you can apply for a business loan from a bank or a private financial institution. This route offers plenty of choices, and you’ll need to make a comparison of the loan products available to you so you can end up with the one that offers the best value for money.
Because you’re starting from the ground up, you can make use of loans that are specifically designed with budding enterprises in mind. To qualify for your first business loan, you typically need to submit a business plan and showcase skills and experiences that will prove to be vital in growing your company.
Some of the things you need to consider when choosing the right business loan include the maximum amount that you can borrow, interest rate, tenure, fees, and the effective interest rate (EIR). What is effective interest rate? This is the true cost of your loan, and it can be much higher than the rate advertised by the bank. Knowing this number will give you a good idea of how much you actually need to pay back to clear your debt.
The Singaporean government support SMEs with government assisted financing programmes. SMEs can access a number of government-backed loan schemes and grants that will allow them to borrow money to finance their enterprise.
Highly innovative enterprises, for one, can take on Venture Debt to finance their growth or diversification and augment their working capital needs. Then there’s SME Working Capital Loan, which offers up to SGD 300,000 per borrower and a 5-year repayment period.
Working capital loans, in general, can be used to pay off unpaid invoices, purchase high inventory assets like automobiles, cover staffing costs, cover daily operation expenses, or help the company fulfil its current financial obligations.
In special circumstances, such as during the COVID-19 pandemic, the government offers Temporary Bridging Loans to help tide over businesses that have been affected by calamities. These government-backed programmes are available to companies that are 30 per cent owned by Singaporeans or Permanent Residents.
Bootstrapping, to put it simply, means financing your business using only your existing resources, without assistance from financial institutions or investors. This can mean using your own savings, paying out of your own pocket, or even getting a loan from your family members to kick-start your company.
The benefits of bootstrapping include having 100 per cent control over all business decisions and your direction as a company. This setup will also make it easier for you to pass the ownership of your company to the next generation of your family.
On the other hand, you’ll be forced to build a business that really works; otherwise, it will fail completely. Also, you have to accept the fact that there’s a good chance that your company will not grow as quickly as those that have access to external financing such as SME loans or venture capital funding.
Of course, you can use a combination of these options to finance your small enterprise in Singapore. Evaluate all your financing options properly and plan your new business well so that you can set a solid foundation for your new company.