If money were out of the question, more small businesses would pop up and proceed to succeed. But the reality is that according to the Small Business Administration (SBA), a lot of businesses fail within the first 18 months of operation. The reason? Nearly half of entrepreneurs blame a lack of working capital or funding for the failure of their small business. If you have this great idea and you want to bring it to the public, the first thing you have to do is to secure funding. No funding, no success. You can do so using these four effective capital-raising options:
If your business requires little capital, self-funding or bootstrapping makes the most sense. Maybe you have savings, or maybe your family and friends can pitch in. This option is the easiest because there is less formality, therefore less paperwork. However, if your business idea needs a big capital, you’ll need to consider other options such as getting a business loan.
2. Business Loan
Getting a business loan in Singapore can get your business off the ground pretty quickly. A lot of banks and lending companies offer business loans, but you have to choose the ones with the most favourable terms.
There are two kinds of bank financing for businesses: working capital loan and term loan. A working capital loan is a short-term loan used to finance the daily costs of operations of a company such as rent, wages, accounts payable, and so on. It is not used when buying investments or long-term assets. A term loan, on the other hand, is a long-term loan used for major investments and payable within one to five years. This kind of loan is more difficult to secure and requires sharing of business plans and valuation details, among other stringent requirements.
3. Equity Crowdfunding
Thanks to the digital age, startup companies now have another way of securing capital. Equity crowdfunding is where startup companies advertise their company on crowdfunding websites, and interested investors can directly invest in shares sold by the company. They, in turn, receive a share of the profits through distributions or dividends. Crowdfunding is popular because it makes investing in ventures people believe in more accessible than ever before. Here are some popular crowdfunding sites:
- Kickstarter – for tech or creative ventures
- GoFundMe – for personal ventures/reasons
- Fundnel – for startups
- Indiegogo – for tech or creative ventures
- FundedHere – for startups
4. Government Programmes
Singapore places 12th in overall startup ecosystem rankings according to the Global Startup Ecosystem Report 2018 by Startup Genome. This is in part thanks to the various ways the Singaporean government is encouraging startup companies, including its offers of government grants and equity financing. There are grants that offer funding and mentorship to first-time entrepreneurs, equity financing options for startups in the tech space, and even funding options for tourism-focused businesses.
The saying, “If there’s a will, there’s a way,” may be a cliché, but it rings true in the case of entrepreneurs. With the available options for raising business capital in Singapore, it’s just a matter of choosing the right one for your needs.