Invoice Financing in Singapore

According to government data, as of the end of 2020, Singapore had about 280,000 SMEs. SMEs account for 70% of employment and represent 99% of all enterprises in 2020. With the SMEs Go Digital programme launched in 2017, more than 78,000 small and medium-sized enterprises (SMEs), with more than half, or 40,000, came on board in 2020 alone.

With the consistent boom of SMEs and the industry, we must think about what defines a successful business venture. Simply said, that would be maintaining a lucrative business with a steady cash flow.

Why do you need good cash flow to keep a successful business?

1. You’d be able to make plans and decisions for your business

With an accurate cash flow statement, you’ll know the exact amount of funds you have available at any given moment. This is vital because any plans and decisions you make must be supported by accurate information. Primarily if your invoices aren’t issued in time or paid by your client’s regularly, this causes you a cash crunch.

2. Expand your business at the right time

Growing and expanding your business is a sign of good cash flow. It could bring your business to new opportunities, new markets, new staff members, and increase revenue. But, a word of caution. For any level of growth, cash and steady income are required. Before you begin seeing more revenue, purchasing stock, renting buildings, hiring employees, and acquiring computers all take place.

3. Protect Business Relationships

Most businesses depend on their vendors and suppliers. If there are cash flow problems, you will face difficulty maintaining a good relationship with them as you’d not be able to pay them off in time. This can harm the business relationship with them and damage your overall reputation.

What can SMEs do to improve their cash flow?

Most SMEs facing cash flow issues or cash crunch can apply for financing to help relieve their problems.

The numerous lending choices open to business people include Non-Banking Financial Corporations, traditional banks, government agencies, and even crowd-funding.
Applying for a business loan is one standard option to manage cash flow volatility, and many often consider short-term loans such as Invoice Financing.

What is invoice financing?

Invoice financing is a form of short-term borrowing in which your business borrows money against the amount due on invoices you’ve issued to your customers. These trade receivables are then used as collateral. Invoice financing is used regularly in various sectors and industries, such as construction, retail, logistics, printing and publishing, transportation, and consumer goods.

If a significant amount of your company’s assets is locked up in receivables, and if those receivables make up a very high percentage of your current assets, invoice financing could help you avoid working capital issues. This can make invoice financing for small businesses an attractive option.

To complement the invoice finance definition, know that invoice financing is sometimes referred to as “accounts receivable financing”, “receivables financing”, or “invoice discounting”. But it is not exactly the same thing as “invoice factoring”.

Invoice Financing in Singapore:

Before applying for a loan, an SME have to check if they are eligible for the type of short term loan there are looking for:

Invoice Financing

– Loan amount: 70 – 90% of the total invoice
– Interest rate: From 0.5% – 3% per month*
– Eligibility requirement: Singapore registered business
– Minimum 30% shareholding by a Singaporean Citizen or Permanent Resident Director
6 months minimum operating history
– Business revenue will need to be at least S$100,000 – S$500,000 a year.

Loan disbursement period

– 3 days to 1-month
– Repayment duration: Depends on the amount of your invoice.

What are the advantages of getting Invoice Financing for your business?

As mentioned earlier, invoice financing provides you with quick access to capital without disrupting your cash flow.

Additionally, it helps with:

– Funding: It allows companies to access cash as soon as an invoice is raised.
– Cash flow: Helps to maintain cash flow and reduce cash crunch from affecting your business
– Growth: The amount you can borrow increases with the number of your invoices.
– Good customer relationships: In most cases, your customers can be unaware that their invoices have been financed, preserving your relationship with them.
– Flexibility: it is easy to qualify for the loan as long as you fit the criteria.

Finally, if your business needs a quick cash flow to boost your business or unpaid invoices are dragging your business down, it is time for you to consider short term loans such as Invoice Financing to keep your business running and increase profits. Many people often think about only traditional loans when it comes to business. With Invoice Financing, there is a safe and alternative option for you to consider even if you don’t qualify for the traditional loans.

Sources:

https://eulerhermes.com
https://capitall.com.sg
https://rikvin.com
https://www.merchantmaverick.com
https://www.ocbc
https://valuechampion.sg

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