Acquiring funds for a startup can be challenging, especially if you want to work with traditional lenders.
Some banks can be picky about who they grant business loans to and typically prefer those with high cash reserves, sales volume, and at least a year of business history coupled with strong credit. Many new businesses find it difficult to meet these strict lending requirements.
Understanding your financing needs and goals will aid in picking the best type of business funding. However, many top banks are now starting to provide assistance with government grant for SME. Alternatively, you can consider other financing options.
Self-financing your business
Self-financing, aka personal investment is one of the best-tested ways to finance startups. Even when you secure a loan, get a government entity, or ask a venture capitalist to provide funding for your startup, they will inquire how much capital you will invest in the business. Investing in your savings is a top option if you have it. You can easily opt for business loans in the later stages of business, and lenders will be keener to provide it since they will consider the stability and lower risk factors.
Securing an angel investor
Individuals with extra cash for investing are known as angel investors since these individuals have a keen interest in new business in Singapore and worldwide. The risk in these investments through angel investors is higher compared to loans offered via financial institutions because angel investors prefer to invest for higher profit returns. SME business owners can typically contact these investors directly for funding support.
Crowdfunding
In a nutshell, crowdfunding is a technique to collect funds via multiple investors for majorly business purposes. This idea or concept aids in raising funds for new business owners and promotes cultural and social causes. Crowdfunding portals also raise funds for different purposes like charities social causes, disaster relief, ideas, events, etc. Leading Crowdfunding platforms include Kickstarter and Indiegogo.
Business credit cards
If your business does not initially need large amounts of money, consider credit cards. Credit cards for business purposes have risen thanks in part to the emergence of startup enterprises. Just pay timely to avoid debt or added interest rates from penalties.
Peer-to-peer lending
Peer-to-peer lending is a borrowing scheme without intermediaries in the entire process. Peer-to-peer lending institutions are regulated for the benefit of both lenders and borrowers. Lenders lend money to borrowers as their investment and borrowers acquire money for use in their business. Lenders in this model can earn from borrowers since the interest rates is higher compared to banks, MFIs, and NBFCS.
Government grants
In Singapore, entrepreneurs are encouraged and assisted via government grants for SME. You can leverage a bank’s assistance for grants, including COVID-19 Relief Loans, SME Fixed Assets Financing, Merger & Acquisition, Venture Debt Loan, Enterprise Financing Scheme Trade Loan (EFS-TL), and Project Loan.
These are some of the most popular financing options for funding your startup. Out of all the techniques above, at least one should help acquire funding for your business.