Business Loans

5 Alternative Business Financing Apart from Banks

Lina Tay
March 5, 2024

Starting and managing a business comes with unique challenges, some of which are stressful enough to keep any entrepreneur up at night. Financing and maintaining a positive cash flow is one of them. In fact, a study has found that up to 83% of Singaporean small businesses have experienced cash flow problems between 2022 and 2023.

Loans are one way to bridge cash flow gaps, ensuring that operations are not disrupted. However, applying for a loan is easier said than done. Banks in Singapore are well-known for having stringent eligibility criteria. For many businesses, this is not ideal especially if they do not qualify or if they are in need of urgent financing.

In response to this challenge, we’ll explore alternative business financing apart from banks to consider for financial assistance.

1. Government Grants

Through Enterprise Singapore, the government also offers corporate grants to SME businesses. Unlike the risk-share loan scheme, grants do not need to be repaid. The only drawback is that these grants have a limited scope of use, and are meant to upgrade operations or help your business achieve specific goals.

For instance, the Market Readiness Assistance Grant is meant to help businesses who want to penetrate new, overseas markets. The grant can be used for promotions, market set-up and business development.

Other grants available include the Productivity Solutions Grant, Energy Efficient Grant and Enterprise Development Grant. Go for the PSG grants where the grant amount is taken off directly from the service fee and not on a claim basis which could delay the claims for more than 3 months.

2. Private Lenders

You may have some reservations about private lenders, especially given the gruesome stories of unscrupulous ‘Ah Longs’ over the years. However, the private lending market here has come a long way and is now highly regulated.

Private lenders tend to be more lenient than banks when it comes to evaluating borrowers, and are known to accept applicants rejected by the banks. Since they are, in general, smaller operations, they have more autonomy in making decisions.

Lendingpot aggregates the best private lenders in Singapore on one convenient platform. Among our lending partners are several private lenders, such as Affinity Financial Services, Airguide Capital, and Gold Crest Capital. Sign up and begin comparing loan offers from these institutions, who offer competitive interest rates.

3. Venture Capital or Angel Investors

Venture capitalists or angel investors provide financing to your company in the form of investment, hoping that your company will grow and bring a greater return on their investment. The main difference between a venture capitalist and an angel investor is that venture capitalists provide money from a fund managed by a firm, whereas angel investors will contribute funds from their own personal wealth.

The benefits of having venture capital or angel investors place money in your establishment is that you will benefit from mentoring, as well as their experience and expertise. Investors such as these are usually seasoned entrepreneurs who want to invest in start-ups or early stage companies they believe in.

4. Peer to Peer Lending

Peer to peer lending, often abbreviated as P2P, is a form of financing whereby individuals or firms lend money to a business without the need to go through a bank. It is sometimes referred to as ‘crowdlending’ or ‘social lending’. With this model, a business owner is able to leverage loans from more than one individual or establishment.

P2P lending is moderated and managed by fintech platforms, such as Fundaztic and Funding Societies, all of whom are registered partners on our site (in case you are wondering). Essentially, how it works is that individuals or establishments contribute to a pool of money, which is disbursed to borrowers at the platform’s discretion. These lenders then earn from the interests paid by the borrowers that have leveraged the platform for funds.

5. Your Own Savings

This may not appear as a viable first choice. However, turning to your own savings or liquidating your assets to fund your business is also an option. The benefit of choosing this method is that you will not need to repay loans and their costly interest, or share the profits from your venture.

Some entrepreneurs turn to their family members for help, as is often the case in difficult situations. Many successful business owners have turned to this strategy to keep them afloat until they achieve an improved financial outlook. This in turn allows them to access conventional forms of financing after achieving a certain level of growth.

The Bottom Line

As a business owner, being rejected by the banks when you apply for funding can be discouraging. However, hope is not lost as there will always be alternatives to help your business grow and thrive.

At Lendingpot, we pride ourselves as the perfect platform for entrepreneurs looking for non-bank financing. Our partners offer a plethora of financing models and have flexible requirements. Talk to our expert to find out how your business can leverage alternative financing methods.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.

business loan
private lenders
Venture Capital
peer-to-peer lenders

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