What’s the Loan To Valuation (LTV) for HDB Shophouse with Residential Component ?

Hdb Shophouse in Singapore

When it comes to financing HDB shophouses with residential components, understanding the loan-to-valuation (LTV) ratio is critical. This metric not only determines how much financing you can secure but also influences your investment strategy. Let’s break down the key aspects of LTV calculations for such properties and clarify some misconceptions about HDB shophouses.

 

What is Loan-to-Valuation (LTV)?

LTV is the percentage of a property’s value that a bank or financial institution is willing to finance. For example, an 80% LTV means the bank will finance 80% of the property’s valuation, and you will need to cover the remaining 20% through your own funds.

 

How is LTV Calculated for HDB Shophouses with Residential Components?

HDB shophouses are unique properties with a mix of commercial and residential components, which can affect how banks calculate the LTV. Different banks adopt varied approaches:

  1. Unified LTV for the Entire Property: Some banks offer an LTV of 80-90% for the entire property’s valuation. This approach simplifies the financing process, as the bank treats the property as a single asset.
  2. Split LTV for Commercial and Residential Components: Other banks may assess the property’s components separately, offering 80-90% LTV for the commercial portion and only 15% LTV for the residential component. This method reflects the different risk profiles associated with commercial and residential spaces.

Understanding which approach your bank uses is essential for planning your down payment and overall financing strategy.

 

Are HDB Shophouses Commercial or Residential?

A common misconception is that all HDB properties are residential. However, HDB shophouses are classified as commercial properties, even if they include a residential component. This classification impacts their eligibility for certain financing schemes and ownership regulations.

 

Ownership Restrictions for HDB Shophouses with Residential Components

It’s important to note that owning an HDB shophouse with a residential component comes with specific restrictions. If you already own a private property, you cannot own such an HDB shophouse. This rule aims to ensure equitable access to HDB properties and prevent conflicts of interest between private and public housing markets.

 

Key Considerations for Buyers

 

  1. Financing Approval: The LTV offered by a bank is always subject to approval, based on factors such as your creditworthiness and the property’s valuation.
  2. Higher Down Payments: If the bank applies a split LTV calculation, the lower financing cap for the residential portion means you’ll need to allocate more funds for your down payment.
  3. Regulatory Compliance: Ensure you meet the eligibility criteria for owning an HDB shophouse, especially if you already own private property.

 

Why LTV Matters for Investors

For investors, the LTV ratio significantly impacts the return on investment (ROI). Higher LTVs allow you to leverage your capital more effectively, while lower LTVs require a larger upfront investment. Understanding the nuances of LTV calculations for HDB shophouses helps you make informed decisions and optimize your financing strategy.

 

Conclusion

HDB shophouses with residential components are unique investment opportunities, offering both commercial and residential utility. However, the financing landscape can be complex, with varied LTV calculations and ownership restrictions. By understanding these factors, you can better navigate the process and make sound investment decisions. If you’re considering purchasing an HDB shophouse, consult with us to explore your options and secure the best financing terms for your needs.

Business Loan Interest Rates in Singapore : Everything SMEs Need to Know

Best rates for business loans in Singapore, showcasing a comparison chart of interest rates offered by various loan products

Managing working capital is crucial for small and medium enterprises (SMEs) to sustain operations and seize growth opportunities. However, securing the right business term loan with favorable interest rates can be challenging.

In this guide, we’ll break down the intricacies of business term loan interest rates in Singapore, explore factors that influence these rates, and provide actionable tips to help SMEs make informed financing decisions.

Understanding Working Capital Loans

A business term loan is designed to help businesses manage day-to-day operational expenses like payroll, inventory, and overhead costs. These loans are typically short-term and can be either secured (collateral-backed) or unsecured (no collateral required).

Indicative Business Term Loan Interest Rates in Singapore

Interest rates for working capital loans vary based on the lender, loan type, and borrower profile. Here’s a quick overview of typical interest rates for SME loan products:

 Loan Type  Interest Rate (EIR) 
 SME Working Capital Loan  7.5% – 8.8% p.a.
 Trade Financing Line  6.5% – 8% p.a.
 Factoring / Receivables Financing  7% – 12% p.a.
 Overdraft  9% – 12% p.a.
 Equipment/Machinery Loan  4% – 7% p.a.

 

Factors Influencing Working Capital Loan Interest Rates

Lenders consider various factors when determining the interest rate for a business term loan:

  1. Creditworthiness: A strong business and personal credit profile can secure lower rates.
  2. Business Age and Stability: Established businesses (3+ years) are more likely to receive favorable terms.
  3. Loan Type: Secured loans generally offer lower rates than unsecured loans.

The Role of Government-Assisted Loans
 

Government-backed loan schemes, such as the SME Working Capital Loan, are designed to improve access to financing for SMEs. These loans often feature lower interest rates due to risk-sharing arrangements between the government and participating financial institutions (PFIs).

For example, the SME Working Capital Loan in Singapore has interest rates ranging from 7.5% to 8.8% p.a., making it a competitive option for businesses seeking affordable financing.

Understanding EIR and the difference between Simple vs Effective Interest Rates

When evaluating a working capital loan, understanding the distinction between simple interest rates and effective interest rates (EIR) is crucial. Both methods calculate the cost of borrowing, but they differ significantly in how they represent and impact your loan repayments.

What Is a Simple Interest Rate?

The simple interest rate is calculated on the initial loan amount (principal) and remains fixed throughout the loan tenure. It is straightforward and often used to give borrowers a quick idea of the overall interest cost.

  • Formula:
    Simple Interest=Principal Amount×Interest Rate×Time (in years)

  • Example:
    A $100,000 loan at 5% simple interest over one year would result in:
    100,000×0.05×1=5,000

This means you’ll pay $5,000 as interest, irrespective of how much of the loan principal you’ve already repaid.

What Is an Effective Interest Rate (EIR) ?

The effective interest rate (EIR) provides a more accurate representation of the cost of borrowing because it factors in the reducing principal balance over the loan tenure. With each monthly repayment, a portion of the principal is paid down, so the interest is recalculated on the remaining balance.

  • Formula:
    EIR=(1+Nominal Rate / Number of Compounding Periods)Number of Compounding Periods−1

  • Example:
    For a $100,000 loan at 10% EIR over 12 months, the monthly reducing balance means that the interest paid in the first month might be $833, but it will decrease over time as the principal reduces.

Key Differences Between Simple and Effective Interest Rates

Aspect  Simple Interest Rate  Effective Interest Rate (EIR)
Calculation Basis  Fixed on the initial loan amount (principal)  Adjusted monthly based on reducing balance
Repayment Impact  Equal interest cost every period  Interest cost decreases over time
Accuracy  Simplistic and may not reflect true cost  Realistic, showing actual borrowing cost
Use Cases  Short-term loans, car loans  Business loans, mortgage loans

Why Do Lenders Use EIR for Business Loans?

EIR is the industry standard for business loans in Singapore as it provides borrowers with a transparent and realistic view of the total cost of financing. It reflects the compounding effects of monthly repayments, helping SMEs better plan their cash flow and repayment strategy.


Visualize Interest Costs with Our Financial Calculator

Curious about how simple and effective interest rates impact your working capital loan repayments? Use our online financial calculator to play around with different loan amounts, interest rates, and tenures.

Our tool generates detailed breakdowns, including:

  • Monthly repayment schedules
  • Total interest paid
  • Side-by-side comparisons of simple vs. effective interest rates

This interactive tool will help you make more informed decisions about your loan options.

Hidden Costs to Consider in Business Loans

  1. Processing Fees: Some lenders charge upfront fees for loan origination, which can increase overall costs.
  2. Early Redemption Penalties: Check for lock-in periods or penalties for early loan repayment.
  3. Collateral Requirements: Secured loans may require assets like property or receivables as collateral.

Tips to Secure the Best Business Loan Interest Rate

  1. Enhance Creditworthiness: Maintain strong financial statements and reduce existing liabilities.
  2. Compare Offers: Evaluate multiple lenders to find the most favorable terms.
  3. Leverage Government Schemes: Consider subsidized loans for lower interest rates.
  4. Seek Professional Advice: Engage a loan consultant to navigate complex terms and secure the best deal.

Conclusion

Understanding business loan interest rates is essential for SMEs aiming to optimize their financial strategy. By comparing rates, considering government-backed options, and factoring in hidden costs, businesses can make informed decisions that align with their goals.

Looking for tailored advice on securing a business loan in Singapore? Schedule a consultation with our experts today!

Navigating Business Loans: Secured vs Unsecured Financing Strategies

business loans

Understanding the Loan Landscape: A Banker’s Insider Perspective

 

When you’re charting the financial course for your business, choosing the right loan can be the difference between strategic growth and financial strain. As a seasoned financing professional, I’ve guided countless entrepreneurs through the nuanced world of business financing, and I’m here to demystify the critical distinctions between secured and unsecured business loans.

 

Key Insights into Business Loan Fundamentals
  1. Loan Structures Defined: Secured loans require collateral, while unsecured loans depend on your creditworthiness and business financial health.
  2. Risk Assessment: Lenders evaluate your loan application through a comprehensive lens of financial stability, historical performance, and future potential.
  3. Strategic Financing: Your loan choice should align with your business’s specific growth objectives, cash flow requirements, and risk tolerance.

Secured Business Loans: Leveraging Your Assets for Financial Opportunity

Secured business loans represent a traditional financing approach where you pledge specific assets as a guarantee against the borrowed funds. Think of this as creating a financial safety net that gives lenders additional confidence in your borrowing proposition.

What Makes Secured Loans Attractive?
  1. Lower Interest Rates: By offering collateral, you’re essentially reducing the lender’s risk, which translates to more favorable borrowing terms.
  2. Higher Loan Amounts: Your pledged assets allow you to access substantially larger financing compared to unsecured alternatives.
  3. Broader Approval Opportunities: Businesses with limited credit history or challenging financial profiles can often secure funding through asset-backed loans.
Real-World Scenario: Manufacturing Expansion

Imagine you’re a manufacturing business looking to purchase $250,000 in new equipment. By using the equipment itself as collateral, you might secure a loan with interest rates 2-3 percentage points lower than an unsecured option, potentially saving tens of thousands over the loan’s lifecycle.

Potential Collateral Considerations

Your collateral could include:

  • Commercial real estate
  • Specialized equipment
  • Inventory
  • Accounts receivable
  • Investment securities

Unsecured Business Loans: Flexibility Meets Financial Innovation

Unsecured loans represent a more modern, relationship-driven approach to business financing. These loans are granted based on your business’s financial reputation, creditworthiness, and projected performance—no physical assets required as a guarantee.

Unsecured Loan Advantages
  1. Faster Approval Process: Without complicated collateral valuation, these loans typically close more quickly.
  2. Preserved Asset Protection: Your business assets remain unencumbered, maintaining maximum financial flexibility.
  3. Ideal for Different Business Stages: Particularly suitable for service-based businesses, startups, and companies with strong financial metrics.
Strategic Application Example

A technology startup with robust revenue projections but minimal tangible assets could leverage an unsecured loan to fund product development, hiring, or marketing initiatives without risking existing resources.

Comparative Analysis: Making Your Strategic Choice

Risk and Reward Balance

Secured Loans:

  • Lower risk for lenders
  • More competitive interest rates
  • Longer repayment terms
  • Potential for larger loan amounts

Unsecured Loans:

  • Faster approval
  • No collateral requirements
  • More flexible use of funds
  • Higher interest rates reflecting increased lender risk

Actionable Recommendations for Loan Selection

Evaluate Your Business Profile
  1. Financial Health Assessment
    • Review your credit score
    • Analyze cash flow consistency
    • Prepare comprehensive financial documentation
  2. Growth Objective Alignment
    • Match loan type with specific business goals
    • Consider short-term versus long-term financing needs
    • Calculate precise funding requirements
  3. Comparative Shopping Strategy
    • Request quotes from multiple lenders
    • Understand all associated fees
    • Negotiate terms based on your business’s strengths
Critical Decision Factors

Before committing to any loan, consider:

  • Total cost of borrowing
  • Repayment schedule flexibility
  • Potential prepayment penalties
  • Impact on future borrowing capacity
Pro Tip

Always view your loan as a strategic financial tool, not just a transactional necessity. The right financing can accelerate your business growth, while the wrong choice could create unnecessary financial constraints.

Final Insights: Your Financing Journey

Successful business financing isn’t about finding the cheapest loan—it’s about finding the most strategic financial partnership that propels your vision forward. Whether you choose a secured or unsecured business loan, approach the process with thorough preparation, clear objectives, and a forward-looking perspective.

Remember, in the world of business financing, knowledge isn’t just power—it’s your competitive advantage.

A Comprehensive Guide to Business Loans for New Companies in Singapore

Starting a new business is an exciting journey, but it often comes with financial challenges. For entrepreneurs in Singapore, securing a business loan can provide the necessary capital to kickstart operations or scale up. However, for new companies, accessing funding can be daunting, especially without a proven track record or collateral. This article explores various financing options for new businesses in Singapore, including term loans, working capital loans, and alternative solutions such as personal loans, project financing, and trade financing.



Why New Companies Face Challenges in Securing Loans

Lenders are cautious about granting loans to new businesses due to the perceived higher risk. A company with no established track record may struggle to demonstrate its ability to generate consistent revenue or repay debts.

For most business term loans or working capital loans in Singapore, funders require a minimum of 6 months of operational history. This period allows them to assess the business’s sustainability and repayment capacity. Without this track record, businesses may need to provide collateral or explore alternative financing options.



Option 1: Business Term Loans and Working Capital Loans

Eligibility Requirements

  1. Operational History: Most lenders require a company to be operating for at least 6 months.
  2. Financial Records: Applicants need to submit financial statements, such as bank account transaction histories and profit-and-loss statements, to prove cash flow stability.
  3. Creditworthiness: Lenders assess both the business and the owners’ credit history. A good credit score significantly increases approval chances.
When Collateral Helps

For companies with less than 6 months of operational history, providing collateral, such as property, can improve the likelihood of loan approval. Collateral gives lenders a safety net, reducing their risk in case of loan default.

Purpose of Business Term Loans

Business term loans are typically used for:

  • Purchasing Equipment: Acquiring essential tools or machinery.
  • Expanding Operations: Funding new offices, branches, or staff.
  • Covering Operational Costs: Managing day-to-day expenses like salaries and utilities.
Limitations for New Businesses

For companies without collateral or a sufficient operational history, accessing term loans can be difficult. This is where alternative financing options come into play.



Option 2: Project and Trade Financing

For companies involved in projects or trade-related activities, project financing and trade financing offer viable alternatives. These loans are specifically tailored to address the needs of businesses operating in these sectors.

What is Project Financing?

Project financing provides funds specifically for the completion of a project. Lenders evaluate the feasibility of the project and its potential to generate revenue rather than the company’s financial history.

  • Examples: Construction projects, IT system rollouts, or product launches.
  • Documents Required: Contracts with clients, project plans, and revenue forecasts.

What is Trade Financing?

Trade financing facilitates international or domestic trade transactions by providing working capital for importing or exporting goods.

  • Examples: Importing raw materials, exporting finished products, or fulfilling bulk orders.
  • Types of Trade Financing:
    • Letter of Credit: Guarantees payment to the supplier upon meeting specified conditions.
    • Invoice Financing: Provides cash upfront based on outstanding invoices.
    • Export Financing: Funds for fulfilling export orders.
Alternative Financing Options for New Companies

If traditional loans are out of reach, consider these alternatives:

1. Personal Loan

For business owners who are just starting, a personal loan can be a practical option. Personal loans are unsecured and often have less stringent eligibility requirements than business loans.

  • Advantages:
    • Quick approval process.
    • No need for an operational business history.
    • Can be used flexibly for business-related expenses.
  • Disadvantages:
    • Lower loan limits compared to business loans.
    • The loan is tied to your personal credit score, and failure to repay could affect your financial standing.
2. Angel Investors or Venture Capital

For startups with innovative ideas, seeking equity financing from angel investors or venture capitalists can provide the required capital without taking on debt.

3. Crowdfunding

Platforms like FundedHere and Kickstarter allow businesses to raise funds from a community of backers.

4. Private Funding

Some private lenders offer short-term loans to new businesses with flexible terms, though these often come with higher interest rates.

How to Choose the Right Loan for Your New Business

1. Evaluate Your Business Model

Consider your industry, revenue generation timeline, and operational needs. If your business relies on long-term projects, project financing may be ideal. If you’re involved in import/export, trade financing might suit you better.

2. Assess Your Eligibility

Check if you meet the minimum requirements for business term loans or working capital loans. If not, explore collateral-backed loans or alternative financing options.

3. Compare Lenders

Different banks and financial institutions have varying criteria, interest rates, and repayment terms. It’s important to compare these factors to secure the best deal.

4. Prepare Comprehensive Documentation

Lenders need to see evidence of your business’s potential for success. Be ready to provide:

  • A solid business plan.
  • Financial projections.
  • Evidence of contracts or purchase orders for project or trade financing.
Tips to Improve Your Loan Approval Chances
1. Build a Strong Credit Profile

Maintain a good personal and business credit score by paying bills on time and avoiding excessive debt.

2. Showcase Stability

Even if your company is less than 6 months old, demonstrate stability through consistent cash flow, signed client contracts, or positive revenue trends.

3. Offer Collateral

Property or other tangible assets can make your application more attractive to lenders.

4. Work with a Loan Consultant

A professional loan consultant can help match your business with the most suitable financing options and streamline the application process.

Conclusion

Securing a business loan as a new company in Singapore can be challenging, but it’s not impossible. Understanding the requirements for business term loans and working capital loans, along with exploring alternatives like personal loans, project financing, and trade financing, can significantly improve your chances of obtaining funding.

By evaluating your business needs, preparing comprehensive documentation, and leveraging government schemes or private funding, you can find the right financial solution to support your entrepreneurial journey.

For expert assistance in navigating the financing landscape, consider consulting a professional loan broker to ensure you make informed decisions and secure the funds you need to grow your business.

a BIG idea : How To Come Up With The Big Idea

big idea, unique mechanism, marketing strategy.

A lot of companies experienced tremendous growth because of one thing :

Marketing.

And in their marketing strategy, it is not about creating creatives or hired a super copywriter to craft the headlines and chunk of text in your marketing message.

Yes, the creatives, videos, editing or even copy helps a lot. But the crux of today’s company that is different is their BIG IDEA

If your company do not have one big idea, the likelyhood of thriving in today’s market will be difficult. But once you nail that idea, you will be able to standout from your competitors and conquer your own market share.

A BIG IDEA, also known as:
– Hook
– Unique Mechanism
– Big Promise

Whatever name you named it, and this is for sure: When you sit down and brain storm your big idea, your business will be set. Set For Life.

So, what is a big idea that I’m talking about ? A big idea is an offer that allows you to stand out from the rest of your competitors. It is something your group of target audience has not heard before. It is commonly being referred to as – Unique Mechanism.

Without a big idea, your marketing strategy can still work, however, it will be lacklustre and would never go viral or hit a home run because you will sound the same like the rest of the offers that are fighting for the same attention from the same group.

Want to know what are some of the commonly seen big idea that are floating in the weight loss industry ?

“Keto Diet”
“Mediterranean Diet”

I bet you have heard of these fanciful diet. Those that come up with these make money initially. But if you try the same idea today, it won’t have work well.

Let me share with you this ONE method that I’ve been learning from Evaldo Albuquerque 16-word sales letter and is currently implementing it in the business.

Even though it is more inclined towards copywriting, but it is practical in your big idea ideation.

and this is his 16 word sales letter. ” The secret to converting copy is to define the one belief, then answer these ten questions “

The formula is the following : This NEW OPPORTUNITY is the key to THEIR DESIRE and it’s only attainable through my NEW MECHANISM.

Back to the ten questions, these are the ten questions you should asked yourself when you are planning your marketing strategy.

1. How is my product/service different from everything else I’ve seen ?
2. What’s in it for the customer ?
3. How do the customer know what you said is real?
4. What’s holding your customer back from the buy button?
5. Who/what is to blame ?
6. Why should your customer buy now ?
7. Why should your customer trust you ?
8. How does your product/service work ?
9. How can your customer get started ?
10. What are the risk that your customer will faced (What do they have to lose) ?

Using the weight loss example above, this is how one can market their service if they are in this industry.

“Studies shows if you go to bed stressed, your body will produce more fat cells and if you go to bed without stress, your body will burn fat”

With this marketing big idea, I can sell a product or promote a service that helps to alleviates stress (new mechanism) for the target audience to get their desire (lose fat).

Got the idea now ?

If you would like to discuss more on big ideas and unique mechanism while tapping on branding and marketing grants to scale your business, contact us here.

Revolving and Non-Revolving Facilities : Which To Choose ?

Revolving

As a business owners, the term revolving credits or non revolving credits should be familiar to you. Whether you heard from it through a banker or from fellow friends, you might wondering how it works and under which circumstances you should choose the one over the other.

Revolving Credit Facility

Think of it as “revolving”, borrowers can borrow and payback multiple times through a use of credit line issued by financial institutions. It is not consider a term loan because during the allocated period of time, this revolving credits facilities allows the borrower to borrow, repay and repeat. However, for term loan, borrowers will get a certain amount of funds with fixed repayment schedule.

How Business Can Apply For Revolving Credit Facility and Use It ?

A revolving credit facility is usually issued by banks or funders. It is typically a line of credits used by private business and the criteria for approving the amount depends on the stage, size and industry that the business is it. Banks or funders would usually examine the financial statements such as income statement, balance sheet etc. to determined if the business will be able to repay the debt.

Should a company have good credit rating, steady income and strong cash reserves, the odds of getting a higher credits and approval will be higher.

Example Of How a Business Can Use The Facility

XZY Packaging company secures a revolving credit facility line of $500,000 and the company uses the line to cover payroll and other overhead while waiting for their account receivables (money to be paid to XZY) payment. XZY company uses $300,000 of the revolving credits on a monthly basis and pay it off to the banks once their account receivables is received.

One day, ABC company engaged XZY for packaging service for the next 3 years with a contract size of $500,000. With the secured contract, XZY is able to use $200,000 of it’s revolving credit facility to purchase the required machinery for the contract.

Non-Revolving Credit Facility

Non-revolving credit is the opposite of revolving credit facility. Instead of having access to the funds whenever the business needs it, non-revolving credit cannot be used once it is paid off.

The credit facility is granted on a one-time basis and it will be disbursed fully with the business owner agreeing on the interest rates and repayment schedule, usually with monthly payments. The common non-revolving credit that is on the market is the business term loans.

Example Of How a Business Can Use The Non-Revolving Credit Facility

123 Company has decided to scale up it’s operations and expansion to a larger manufacturing space. By securing a non-revolving credit facility of $500,000, 123 Company owner get to decide how the funds can be use in their future operations. Whether is it for manpower, purchasing of goods.. it boils down to the business owner needs and forecast.

Which Credit Facility Should SME Owner Choose ?

This depends on the financing requirements that the SME is looking for.

Typically, if it is a short term funding needs such as payroll, SME owner can look into revolving credit as a “Back Up Facility” to deal with sudden and short term working capital emergencies and without affecting the operations of the business and ensure cash flow is healthy.

And for long term funding such as expansion, buying more machineries or getting more stocks/supply, SME owner can venture into non-revolving credit where it will take years before the returns will be materialize.

Make an appointment with us and our consultants will be able to advise which facilities would be fit your upcoming project or uses.

Pay Supplier On Time Without Stressing Over Cash Flow

Empower SME with flexible financing solutions

With global monetary conditions tightening, small- and medium-sized enterprises (SMEs) operating in Singapore may encounter greater challenges when seeking traditional bank loans. This is especially true for newly established SMEs with limited or no credit history, as meeting the eligibility requirements for bank loans can prove more difficult, leading to extended approval processes.

 

To mitigate cash flow constrains and broaden their access to essential funds to expand their operations, SMEs owners can seek for brokerage help. With the wide network of partnership a brokerage has with different banks and funders, a brokerage is able to help SMEs owners bridge the gap and secure the necessary financing needed.

 

Despite the high criteria set by local banks to new SMEs, our partners will be able to customise flexible solutions by understanding SMEs owners business models and the requirement needed to grow. One problem that SMEs owner faced is maintaining a balance between prompts payment from customers so that they could meet the obligation to suppliers to buy new inventory.

 

When customer delay the payment to SMEs, SMEs are compelled to dip into their available cash flow which usually is used to pay off their overheads such as rentals and salaries, in order to fulfilled the obligations to their suppliers payments. This eventually creates a cashflow issue when the input is less than the output.

 

To fixed this issue, Beez Rev has partner up with funders that will be able to extend credits to SMEs suppliers. This will help to alleviates the burden of handling overdue payments from customers. With our funders offering up to $500,000 credit limit, SMEs is able to make purchase orders from suppliers and our funders will pay the supplier invoices often within a span of 3 days  and the SMEs owners has up to 90 days to reimbursed back to the funder.

This way, SMEs can unlock additional cash for their business while adhering to the timeline given by their suppliers and nurture a close relationship with suppliers while enhancing their future bargaining power in future transactions.

 

Government Supported Loans For SME’s Going Green

Green Financing Singapore

As the world grapples with the pressing challenges of climate change and environmental degradation, there has never been a more crucial time than today to embrace sustainable practices in your business practise. For businesses, both large and small, transitioning to a green and environmentally responsible approach is not just a moral obligation but also a smart economic choice.

The government’s role in facilitating this transition for SME owners is pivotal, and the Enterprise Financing Scheme – Green (EFS-G) is a shining example to enable better access to green financing for this 3 types of enterprises : Project Developers, System Integrators and Technology & Solution Enablers. The 3 types of enterprises will develop, manufacture and enable technologies and solutions to reduce waste, resource use or greenhouse gas emissions which will results in a position environmental impact.

 

The Imperative of Going Green

The urgency of going green cannot be overstated. Our planet is facing an environmental crisis, with climate change, air and water pollution, and resource depletion threatening not only the environment but also human health and well-being. Recognizing this, businesses of all sizes are increasingly taking steps to reduce their environmental footprint. This transition is crucial for several reasons:

  1. Environmental Responsibility: Businesses have a role to play in preserving our planet’s health. By adopting sustainable practices, they can reduce their carbon emissions, minimize waste, and protect biodiversity.
  2. Competitive Advantage: Going green is more than just a moral obligation; it’s also a business strategy. Consumers are increasingly conscious of a company’s environmental impact and often favor eco-friendly products and services.
  3. Cost Savings: Sustainability practices can lead to significant cost reductions. Energy-efficient operations, waste reduction, and resource optimization can improve a company’s bottom line.
  4. Regulatory Compliance: Many countries are implementing stricter environmental regulations. By proactively adopting green practices, businesses can stay ahead of compliance requirements.

The Enterprise Financing Scheme – Green (EFS-G) By Enterprise Singapore

Recognizing the importance of supporting businesses in their sustainability efforts, the government plays a critical role in facilitating the transition. The Enterprise Financing Scheme – Green (EFS-G) by Enterprise Singapore is one scheme that focuses on providing financial support to SMEs pursuing green growth projects such as Clean Energy, Circular Economy, Green Infrastructure and Clean Transportation. It is an integral part of the broader ecosystem that encourages businesses to adopt eco-friendly practices.

 

Eligibility Criteria for EFS-Green

The 3 types of eligible enterprises must:

    • be a business entity that is registered and physically present in Singapore,
    • have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership,
    • have group annual sales turnover of not more than S$500 million,
    • and meet the four qualifying sector below.
    1. Clean Energy & Decarbonisation
    2. Circular Economy & Resource Optimisation
    3. Green Infrastructure
    4. Clean Transportation (Land, Sea and Air)

Benefits of EFS-G for SMEs

The EFS-G offers several advantages to SMEs that are committed to adopting environmentally friendly practices:

  1. Affordable Financing: SMEs can access green loans at preferential interest rates, reducing the overall cost of their green projects.
  2. Extended Tenures: Longer repayment periods allow SMEs to manage their cash flows more effectively and reduce the financial burden associated with green initiatives.
  3. Enhanced Market Competitiveness: With green certification and sustainable practices, SMEs can differentiate themselves in the market, attract environmentally conscious consumers, and gain a competitive edge.
  4. Regulatory Compliance: SMEs can meet and exceed environmental regulations, avoiding potential fines and penalties.
  5. Sustainability for the Future: Investing in green projects today ensures a sustainable and environmentally responsible future for SMEs and society as a whole.

Conclusion

The importance of going green cannot be overstated in a world where environmental challenges are becoming increasingly pressing. SMEs play a vital role in this transition, and government support through initiatives like the Enterprise Financing Scheme – Green (EFS-G) is instrumental in facilitating this change. The EFS-G offers affordable financing, encourages sustainable practices, and ensures that SMEs can thrive in a future where environmental responsibility is not just a choice but a necessity. Embracing the green wave is not only a moral obligation but a sound business strategy for SMEs seeking to remain competitive and resilient in a rapidly changing world. If you would like to know whether your upcoming projects is suitable for this, do contact us and we will advise you accordingly.

How Invoice Financing Can Help SME’s In Solving Their Cash Flow

As SME business owners are aware, the consistent flow of cash is the lifeblood that sustains any business. The absence of adequate cash flow can lead even profitable businesses to insolvency.

 

Why is why, in addition to sales and marketing products and services that can delight customers or customer success to ensure customers would be satisfied, business owners must also prioritize managing cash flow. Cash flow isn’t merely essential for the ongoing operation of our company but is also crucial for realizing our business scaling ambitions.

 

As business owners, there are various strategies to enhance the business cash flow. Business owners should vigilantly monitor both incoming and outgoing cash to anticipate any potential gaps in cash flow that might emerge in the future. This entails staying informed about customer receivables, particularly if they begin to take longer to be settled, and being aware of upcoming bills and expenditures, including their supplier payment due dates. Utilizing a financial forecasting softwares or a business financial management tools can be immensely helpful in this regard.

 

To assist business owners with more cash in the bank, business owners can leverage government-supported loans such as SME Working Capital Loan. These loan options enable us to expand our business in the specific areas we desire while simultaneously strengthening our financial foundation.

 

Aside from taking bank loans as the common avenues, this is not the only options in the market. Another alternatives that business owners can tap into is invoice financing.

 

How Invoice Financing Works ?

There are basically 2 main types of invoice financing in the market.

Invoice Financing Purchase 

Invoice financing purchase allows business owners to use banks funds to pay the supplier based on the invoices provided by the supplier. This allows business owners to hold on to their current cash flow and utilise 3rd party (bank) monies to pay supplier immediately and avoid late payment fees.

For Example : ABC Company purchase equipment from 123 Supplier for business operation. ABC company can apply for invoice financing from the bank and the bank will pay the invoice of the equipment to 123 Supplier. Prior to the due date of the invoice, ABC Company pay back to the bank will do.

Invoice Financing Purchase
Explanation of invoice financing (purchase)

 

Invoice Financing Sales

Invoice financing sales is the opposite of invoice financing purchase. It allows business owners to use banks funds to pay the the company first accordingly to the invoices given by the company to the customer. This allows business owners to collect immediate “payment” from the bank.

Think of it as bank paying the invoice on behalf of the customer to the company first.

For Example : Client ABC purchase product from company 123. Company123 can apply for invoice financing from the bank and the bank will pay the invoice fee on behalf of Client ABC, ABC Client will pay back to the bank.

Invoice Financing Sales
Explanation of invoice financing (sales)

 

It is important to know that both invoice financing purchase and invoice financing sales are two different kinds of invoicing financing. If you are looking to borrow money to purchase goods from your suppliers, you will need to use invoice financing purchase. If you want an advance payment on the invoices that you have sent to your customers, you will use invoice financing sales.

 

Whether it’s invoice financing purchase or invoice financing sales, the amount you get would from the bank would be considered a loan. Therefore, there will be interest charge and a fee attached to it. Your company has to repay the amount borrowed back to the bank upon the loan maturity (Invoice due date).

Alteratively, business owners can also choose to draw down a lower amount than what is stated on the invoice if you do not need to borrow that much. This way, you do not have to pay unnecessary interest charges and fees.

 

Why business owners choose invoice financing (as opposed to other business loans) is that it gives you access to funds when you need it the most. So, if you have to pay your suppliers first, you can use invoice financing purchase. If you already sold products to your customers and are waiting for payment, you can use invoice financing sales to receive your money first allowing you to give your customers a longer credit term.

 

As SME business owners, you should keep a close watch over your company’s cash flow, and to identify possible bottleneck points where you may encounter cash flow . Once you are aware that you may face a cash flow crunch, you can consider the various financing tools available to tap on if you wish to, whether it’s invoice financing purchase or invoice financing sales.

 

Need Financing ?

Enjoy complimentary consultantation with our consultants and get access to funds and receive your loan approval in the shortest amount of time by making an appointment with Beez Rev.

The Critical Difference Between Growing and Scaling Your Business

In the dynamic world of entrepreneurship, the terms “growing” and “scaling” are often used interchangeably, leading to a misconception that they mean the same thing. However, in reality, they represent two distinct strategies, each with its unique objectives, approaches, and implications. Understanding the difference between growing and scaling is crucial for entrepreneurs seeking to chart a successful course for their businesses.

scaling vs growing

  1. Goal:

Growing: Growing a business primarily revolves around the process of increasing its size, revenue, or market share. It often involves expanding product lines, entering new markets, or attracting more customers. The key focus here is on expansion and increasing the company’s resources and capabilities.

Scaling: Scaling, on the other hand, concentrates on boosting revenue and profitability while maintaining or even reducing costs in proportion to that growth. The goal is to achieve exponential growth without a linear increase in resources or expenses.

  1. Strategy:

Growing: Growing a business typically involves incremental changes and a linear relationship between effort and results. This might include hiring more employees, opening new locations, or diversifying product offerings.

Scaling: Scaling, in contrast, necessitates finding ways to achieve exponential growth without a proportional increase in resources. This often requires leveraging technology, automation, and streamlined processes to handle increased demand without significantly increasing costs.

With the support from government to SME owners, business owners looking to scale their business can tap into various grants to help with lowering their cost when it comes to implementing their strategy.

  1. Resource Allocation:

Growing: Businesses that are growing may need to allocate more resources, such as capital and manpower, to support their expansion. This can lead to increased overhead and operational complexities.

 

Scaling: Scaling businesses focus on optimizing their current resources and finding efficiencies to streamline their process and assist in growth. The emphasis is on maximizing output with minimal additional investment.

 

  1. Profitability:

Growing: Growing a business often prioritize top-line revenue growth over immediate profit margins. The willingness to invest in expansion activities, even if they don’t yield immediate returns, can lead to a wrong focus on the business.

 

Scaling: Scaling businesses often aim to increase profitability while growing. They seek ways to expand without sacrificing profitability, which can involve innovative pricing models, cost control, and efficient operations.

 

  1. Risk and Sustainability:

Growing: Linear quick growth can be riskier, as it often requires taking on large debt or seeking external funding to support it’s expansion. How a business is able to sustain may become a concern if growth outpaces the ability to generate profits causing company to dip into their bank accounts to support the growth.

 

Scaling: Scaling aims for sustainable, long-term growth. It’s often seen as a more measured and controlled approach, with a focus on maintaining financial stability and minimizing risks.

 

Examples:

A local call centre mass hiring telemarketer is an example of growing a business. They are increasing their outreach and customer base which requires more resources and operational efforts.

 

A F&B outlet with multiple stores using central kitchens without significantly expanding their back end team such as chefs is an example of scaling a business. By leveraging on a central location and a single distribution line, they can efficient their processes while achieving exponential growth without huge increase in their costing.\

 

Conclusion:

Understanding the difference between growing and scaling is essential for entrepreneurs to make informed decisions about their business strategies. While both approaches have their merits, the choice between them should align with the company’s goals, resources, and risk tolerance. By grasping the nuances of these strategies, entrepreneurs can better navigate the path to business success.