I believe that the business loan is one of the most important aspects, facility, and tool of the commercial world. And at the risk of sounding melodramatic, metaphorically speaking it is not unlike a spark that starts a fire, fertilizer to grow a plant quickly, or a catalyst for an explosion. All the above scenarios apply to most companies, and it is the small business loan that plays a fundamental role here.
You’re probably aware that the small business loan has been in existence for ages in the business world and is vital to help businesses to start-up, operate and grow, jump-start, bridge cash-flow gaps, weather financial storms and economic downturns, establish financial relationships, and expand the company, etc. I find that the small business loan is also best described by the analogy of it being an egg, where the egg white and egg yolk feed and grow the embryo while the eggshell helps by giving shelter and protection till the embryo grows healthy and becomes a chick ready to hatch and survive on its own. Likewise, the small business loan can help nurture a fledgling company and make it strong to reach another level.
All through man’s financial history, the small business loan has had a significant impact on most if not all businesses whether small or medium or large or even in the larger multi-national corporations. For at one time, I believe, any given company may have taken at least one or more small business loans in its lifespan. Without the small business loan, there might be fewer companies in existence today which means economies of countries would be rather slow if not backward and most certainly not so wealthy. You may already understand that the small business loan more often than not is the first step in the journey of a thousand miles for a firm. It is also often a lifesaver for companies going through financial turmoil.
The small business loan can come in many forms. In Singapore, it can be a Spring Micro Loan, SME small loan, typical small loan, bursary, grant, investment sum, peer to peer (P2P) loan, and others. The bodies that disburse these loans can be the:
(a) Traditional lenders such as banks and licensed money lenders,
(b) Non-traditional lenders like government agencies,
(c) Semi-government agencies, special institutions, and non-government organizations (NGOs)
(d) Investment firms, societies
(e) P2P crowdfunding platforms or websites over the internet
(f) Private lenders such as friends and family
(g) Extreme cases the loan shark or ‘Ah Long.’
The size of the small business loans can vary between $50,000 (or even less) to $300,000 (or more) and may even go up to $1,000,000 in Singapore. The fact is that different lenders might have differing maximum amounts for what they would consider still within the range of a small business loan. In the US, the Small Business Administration (SBA) loan can have a maximum ceiling of up to USD$ 5 Million.
You may be wondering how useful a small business loan is or how it can be used to help a company achieve success. Well then do read the following success stories in Singapore of how a small business loan has saved the day or how it has helped a company reach its goal or goals.
- Olive Green, a company that designs and creates environmental friendly or green packaging – loan obtained through a P2P loan/investment crowdfunding platform
From my research from news sources, I understand the 8 plus-year-old business needed $110,000 in September of 2015 to extend one of its products range. Aloysius Cheong, 39, the managing director, decided to approach a popular P2P platform to get a small business loan instead of a traditional lender like a bank. His application took only three days for the company’s financial details to be vetted by the platform for risk of default, approved, and for them to send out the loan and investment information to over 2,500 investors. Within 12 days of sending out the details on September 9, the loan request was fully funded. Cheong paid the loan back with added 17.9 percent interest over three months to 33 investors.
He said, “Even though I was charged a slightly higher interest rate than what the banks were offering, it still made sense to make use of a P2P site because it works faster and I was more likely to get the loan processed.” He was happy with the outcome of the first loan, and in December he applied for another loan of the same amount. This time 39 investors took on the deal within 140 minutes most probably because of his company and his reputation for prompt payment. So the small investment loan from the P2P crowdfunding platform has helped this firm achieve further success and grow.
As an aside, it is interesting for you to note that P2P loans are becoming a fast-growing and hot news item as well as the phenomenon that has taken the business world in Singapore by storm the last 5 to 6 years. It helps match investors with small businesses that need financing. Because the banks are left out of the picture, the borrowers can access funds promptly, and the investors can make significant returns on their money at attractive interest rates. The situation benefits all parties involved, and the borrowers can access cash as promptly as within three days. Lenders themselves can have returns ranging from 9% to 24%. There are a handful of P2P crowdfunding platforms already in Singapore and are fast increasing each year. The relatively new but well-known ones are Funding Societies, Moolah–Sense, Capital Match, FundedHere, and New Union, etc.
For Li Yanyan, 32, a young entrepreneur, the loan through OCBC, in partnership with the Spring Program, came as a lifesaver when the bank offered her a small business loan of $25,000, which she used to pay her staff’s wages and other operating costs in February 2015. Because her business was hardly a year old, Li initially could not get a business loan when she realized her $50,000 capital was quite depleted in January.
“I was quite demoralized. Most of my capital was spent on developing a mobile application for the business. I would have had to cease my operation if I could not get any funding,” said Li.
Li, who formerly worked in a market research company, started her firm called Meggnify Pte.Ltd., last January, to develop for market research, a mobile phone application that collects quick data for businesses. So the small business loan was able to help bridge a cash-flow gap in Li’s business. Since then Meggnify has become one of the fastest growing Singapore-based data acquisition start-ups that direct the demand of market data to organizations for efficiency to measure and control marketing executions and processes. Rated as a Top 100 start-up by Echelon Asia 2015 and a Top 40 Global Start-up by SLUSH, Meggnify now proudly serves a mixed of corporate clients worldwide.
Thousands of small business loans have been loaned out under the Enhanced Micro Loan Program in the first 22 to 25 months since it was introduced in 2014. It is certainly a blessing to start-ups that have commonly struggled to get start-up bank loans. The loans of up to $100,000 are mainly taken up by young companies that are usually less than three years old, said Spring Singapore, an agency responsible for and dedicated to helping Singapore enterprises grow. OCBC Bank works with Spring Singapore to help small enterprises to tap into the Enhanced Micro Loan Program by contributing more than 50 percent of the number of loans under this program.
- Borrower (remains anonymous for confidential reasons) with loan ID SB -1512005 – loan obtained from a new mobile app called FS Bolt)
From what I understood, the company borrowing the money needed a small business loan of $100,000 for a $780,000 project. Although the interest rate for the loan through the Funding Societies platform (with its mobile app) was higher than banks, the potential returns of the money to be used to help their business and the quickness and convenience of the loan process was what prompted them to go ahead with the application. The loan period was for 6 months and was quickly approved and taken up by a handful of investors. In the end, the borrower paid back the loan over the 6 months as scheduled with added interest. It was a successful deal and win-win situation for all parties involved. The borrower was able to make use of the loan to help their business successfully, and the investors got good returns for their money invested. This, of course, is a great encouragement to you, I’m sure, whether you are a potential borrower or even an eager investor.
As for me, it’s interesting to know that there are many opportunities for companies in Singapore to take up affordable and quick small business loans and for investors to make good money from short-term and risk manageable investments. Click http://bolt.fundingsocieties.com/ for more information on a unique crowdfunding mobile app.
We all know that in business there is always an element of risk when taking up a business loan whether big or small. But the benefits and potential success of the project funded by these loans combined with the dangers of being short of funds or not taking the opportunities available to advance the company with the added injection of cash far outweigh these risks. These situations, without the aid of a loan, can lead to a firm’s failure or at least to its ‘stagnating,’ due to lack of growth. As clearly stated above, there are plenty of ways to obtain a small business loan with a myriad of sources to choose from. Whether it is a bank or a government-sponsored program or a P2P platform or any other organization, the chances for success is strong if not realistic when the cash from a small business loan comes into the picture. Yes, metaphorically speaking or analogously again, I say, the chick or hatchling can one day become a strong and splendid rooster.
Funding Societies has a Capital Market Services License issued by the Monetary Authority of Singapore. Capital Markets Services License No: CMS100572-1 issued by Monetary Authority of Singapore (2016)