It's no secret that access to funds from banks and some other financial institutions are cheaper and preferred for most companies in Singapore. What's often a misconception is that we are competing with banks.
We're here to complement them in areas that may not be their strong suit, or where it's not lucrative enough for them to focus on.
Banks require collateral, especially for large loans.
Many SMEs do not have many assets to pledge, but are very cash flow positive. Unfortunately for these companies, or if they've already reached the maximum limit on their bank facilities with no more assets to pledge, securing funding can be a difficult ride.
If you've noticed some really short tenor notes on our platforms, that's because we're filling the gap for the company between the time they need the funds, to the time the bank will approve and disburse their funds (especially if collateral is involved!). For high margin earners, they don't mind paying higher interest to get their funds fast, than wait and miss out on a potential business opportunity. We disburse their funds in about a week or less, compared to a few months that it takes for banks to do so.
Some companies don't like to take on debt for more than 1 year.
Business, like life, is unpredictable. There's no knowing how the company will perform in 2 or 3 years' time, just like there's no telling if you'll be in the same job in a few years. That's why some businesses prefer taking short term financing of anywhere between 1 and 12 months, especially if they have consistent cash flow.
Why dilute shares for a couple million bucks?
Some bigger SMEs, whose holdings companies are listed entities, have access to public funds. Especially true for certain project-based industries such as construction and engineering who win major tenders and need a quick injection of funds to tide over expenses for a while, its strategically not worth turning to the stock market.
Sometimes, they just need $50,000 and it goes a long way for some SMEs.
Don't take our word for it, hear it from the SMEs themselves.