SMEs (Small to Medium enterprise) are the pivotal force behind the thriving and growing economy of Singapore. The economy is expected to grow by 0.5% in 2019 on year to year basis. The finance and insurance sector witnessed a phenomenal growth of 4.30% year to year basis. SMEs contribute about 99% of the business, 2/3 rd of employment, and 49% of the GDP of Singapore. Adequate cash and revenue generation is the lifeblood of this entrepreneurial business .34percent of these SMEs go through a cash crisis due to the delay of payments from customers. Singapore’s economy is one of the most exposed economies of this world, along with a low tax regime and 3rd highest GDP of the world. Read more to know about Capital match loans Singapore.
Table of Contents
Enormous Gap
The SME owners face a lot of difficulties due to trickling cash flow, which affects their production and competitiveness. Inadequate cash hampers production unable meeting customer demand; delaying projects and expansion work. Banks are the first priority of SMEs to fulfill their financial needs. But unfortunately, 8 out of 10 are not eligible for bank loans. Most of them earn below $221,000 annually and low cash flow, making them incompetent for a bank loan. Another clause for a bank loan is that your business must be at least three years of continuous operation. In this initial gestation period, you need cash to survive and grow. Other sources of funding are expensive and difficult to find. A mammoth financial gap of SG$20 billion is threatening the survival of SMEs of Singapore.
Invoice Financing
Financial companies regulated by the Monetary Authority of Singapore are offering new loan products that are very different from traditional loans. They are designed to bridge the enormous cash flow gap which SMEs are facing. One of these innovative ways is invoice financing. You can borrow money from a third party against receivables i.e., invoice. Factor financing is an age-old method of maintaining cash flow. The modern technology and data have made assessing the risk factor easy and quick, thus disposing of the loan amount inappropriate time.
Summing up
This financial instrument enables us to receive the money which is supposed to be received at a specific date in the future for a fee. In lieu of cash, you submit the invoice to the third party, who collects the money at the stipulated time. Invoice financing gives you a leverage of low cost, flexible financing facility over the stringent traditional loans.