Top 6 Alternative SME Finance & Business Loans Options in Singapore

Securing financing is a major challenge that many small and medium-sized enterprises (SMEs) in Singapore face. Traditional banking institutions may have strict requirements, and their loan application processes may be time-consuming. Fortunately, there are alternative financing options that have emerged in recent years, offering SMEs a wider range of options to obtain the financing they need.

In this blog, we will discuss some of the alternative financing options available to businesses in Singapore. We will also examine the benefits and potential risks of each option.

• Peer-to-peer lending (P2P)

Peer-to-peer lending platforms connect borrowers with investors who are willing to lend money. SMEs can apply for loans on these platforms, and investors can choose to lend money to them based on their risk appetite and investment goals. P2P lending platforms have less stringent requirements than traditional banks, making them a popular choice for SMEs.

One of the key benefits of P2P lending is the speed of the loan application process. Unlike traditional banks, P2P platforms can process loan applications quickly. This means that SMEs can access financing more quickly, allowing them to seize growth opportunities as they arise.

However, SMEs should consider the potential risks of P2P lending, including the possibility of fraudulent platforms. Some P2P platforms may not be regulated by the Monetary Authority of Singapore (MAS), making it difficult to assess their credibility. Additionally, interest rates on P2P loans may be higher than those offered by traditional banks.

• Invoice financing

Invoice financing is a financing option in which SMEs can sell their outstanding invoices to a third-party financier at a discount. This provides SMEs with immediate cash flow, allowing them to cover expenses and invest in growth opportunities. banco, a leading invoice financing company in Singapore, is one such financier that SMEs can work with. 

banco Invoicepaid+ is an invoice financing solution that enables businesses in Singapore to get quick and easy funding by converting their outstanding invoices into cash. With just two document submissions and a fast approval time of only 3 hours after document submission, businesses can receive up to 80% of the value of their outstanding invoices, up to a credit limit of $150,000. The solution also offers a simple, all-in-one convenience fee of 2% of the invoice amount, ensuring that businesses don't have to worry about hidden costs or additional fees. 

With its fast approval process, high credit limit, and transparent pricing, banco Invoicepaid+ is an excellent alternative financing option for SMEs in Singapore. One other key benefit of invoice financing is that SMEs do not need to take on additional debt to access financing. This can be particularly beneficial for SMEs that are already carrying debt. 

However, SMEs should carefully consider the terms of the financing agreement before pursuing invoice financing. The discount rate offered by the financier will impact the amount of financing that SMEs receive. SMEs should also consider the potential impact of invoice financing on their customer relationships, as the third-party financier may need to contact their customers to collect payment.

• Revenue-based financing

Revenue-based financing (RBF) is a flexible and innovative approach to financing for SMEs based on potential revenue rather than credit history or collateral. Businesses agree to repay a percentage of future revenue in exchange for funding, and the repayment structure varies depending on business performance. RBF is ideal for early-stage companies prioritizing growth, as it doesn't require repayment until revenue is generated. 

RBF providers use advanced algorithms to assess risk and offer quicker decisions than traditional banks. The process is simple, with minimal paperwork and fewer restrictions than traditional loans. However, higher financing costs and revenue-based repayment could potentially strain cash flow, making it important to consider the terms and costs before committing to RBF. Overall, RBF is a flexible and useful financing option for SMEs in Singapore seeking to grow their business.

• Alternative lenders

Alternative lenders are financial institutions that provide financing to SMEs outside of traditional banking channels. They may have less stringent requirements than traditional banks, and they may be able to process loan applications more quickly. SMEs with less established credit histories may be able to obtain financing through alternative lenders.

One of the key benefits of alternative lenders is their flexibility. They may be more willing to work with SMEs that have less established credit histories, making them a viable option for newer businesses. Additionally, alternative lenders may be able to provide financing for a wider range of purposes than traditional banks, such as short-term loans or loans for equipment purchases.

banco also provides alternative lending options for businesses in Singapore, including equipment financing. This is an attractive option for businesses looking to acquire the necessary tools, machinery, or vehicles to support their operations and drive growth, without the limitations and challenges of traditional bank loans. banco’s alternative lending solutions offer flexible repayment terms, competitive interest rates, and streamlined approval processes, enabling businesses to get the funding they need quickly and efficiently. By providing a wide range of financing options, banco is committed to supporting the growth and success of businesses in Singapore.

• Government financing schemes

The Singapore government offers a range of financing schemes to support SMEs. These schemes are designed to help SMEs access financing, build capabilities, and improve productivity. Some of the government financing schemes available to SMEs include the SME Working Capital Loan and the Enterprise Financing Scheme.

One of the key benefits of government financing schemes is their accessibility. SMEs can apply for these schemes through participating financial institutions, making the application process more streamlined. Additionally, interest rates for government financing schemes may be lower than those offered by traditional banks.

However, SMEs should ensure that they meet the eligibility requirements for these schemes and carefully consider the terms of the financing agreement. Additionally, government financing schemes may have limitations on the purposes for which financing can be used.

• Business credit cards

Business credit cards can be a useful financing option for SMEs, particularly for short-term expenses. Business credit cards allow SMEs to make purchases and pay bills using a credit line and may come with rewards and benefits such as cashback or travel rewards.

One of the key benefits of business credit cards is their accessibility. SMEs can often obtain a business credit card with less stringent requirements than traditional loans. Additionally, business credit cards can provide SMEs with a way to manage cash flow and expenses.

However, before pursuing this option, SMEs should carefully consider the interest rates and fees associated with business credit cards. Interest rates may be higher than those offered by traditional loans, and late fees or other penalties may apply if payments are not made on time.

In conclusion, various alternative financing options are available to SMEs in Singapore. Each option has its own benefits and potential risks, and SMEs should carefully consider their options before pursuing financing. By taking the time to understand their financing options, SMEs can access the funding they need to grow and succeed.

If you're a business owner in Singapore looking for alternative financing options, banco is here to help. Drop us an email or contact us today for a quick review of your business and personalized advice on the best financing solutions to meet your needs. 

Let us help you unlock the full potential of your business and drive growth.