4 must-know ways to finance your business growth
For start-ups, SPRING offers equity financing programmes such as Start-up Enterprise Development Scheme (SEEDS); Business Angel Scheme (BAS); and Sector Specific Accelerator (SSA). The cash-grant programme, Technology Enterprise Commercialisation Scheme (TECS), is suitable for technology-oriented start-ups, while the Market Access Incubation Programme (MAIP) supports up to 70 per cent of third-party expenses for start-ups looking for overseas markets.
SPRING options for existing businesses with fewer than 10 employees or annual sales under S$1 million include the Micro Loan Programme (MLP).
iDAEnhanced in August 2014, cash-grant programme iSPRINT, offers support of up to 70-80 per cent for deployable IT solutions. Tax incentive scheme, Productivity and Innovation Credit (PIC), and the Innovation and Capability Voucher (ICV) programme also help. Visit myBusiness, EnterpriseOne, iDA or SPRING for full range of grants available.
Government financing programmes offer non-repayable cash grants, co-financing for equity-based programmes, tax breaks, and fixed-interest rates for loans, but often provide only part of the total financing. Besides, competition for grants is stiff, the paperwork takes time, and there are often specifically targeted ends, e.g. increasing innovation.
Major banks such as DBS, UOB and OCBC offer SMEs working capital loans, fixed-asset loans and instalment loans. They are often easy to procure and overdrafts are especially useful for quick cash flow. However loan applications can take time and full financing is not always possible. Debt financing is usually against collateral and failure to repay loans on time could lead to poor creditworthiness or even bankruptcy.
Credit cards, taking a mortgage on a home, or ploughing savings into the business are also options. On the plus side, you retain control. A credit-free period is also available for personal credit cards. Risks include losing the “nest egg” or family home, while late or non-payment could mean difficulties getting future financing.
Comparatively new and largely done online, crowdfunding connects a business with potential investors, who contribute towards a set goal. Kickstarter is an example. Another crowdfunding example is Peer-to-Peer lending (P2P) online with individuals or small businesses lending to one another. Returns are potentially high for investors, and the SME pays a lower interest rate. In Singapore this is still at an exploratory stage.
With crowdfunding, you usually need a large number of investors and funding amounts are low for many campaigns. However, some out-of-the-box business ideas do well with crowdfunding.
Venture capital or angel investors step in when companies need significant funding, especially at the start-up or expansion stage. With the right idea and pitch, a mutually beneficial relationship is possible with this option.