SME Financing in Singapore

Introduction

Small business enterprises are an integral part of the Singapore economy. But the recent surveys show that most of the SMEs face a cash flow problem which largely affects their business. Most of them arise from the late payments from their existing customers. The first option SMEs opt for in such conditions are the traditional bank loans which are not easy to achieve within the desired time. Additionally, the following factors also challenge SMEs for qualifying or a bank loan: 

  • Low operational cash flow
  • Lack of Collateral

To face these cash flow gaps, SMEs are turning more into invoice financing. Invoice financing is gaining a lot of attention to their financial services in Singapore. The quick funding, low-interest rates, and simple application procedure provide steady cash flow for the small business enterprises.

What Is Invoice Financing?

Invoice financing is a financial method where you finance your accounts receivables to a third party or a financial institution. There are two commonly used practices in Invoice financing. They are Invoice Factoring and Invoice Discounting. In both cases, the invoices are sold to a company or a third party, who is commonly known as the “factor”.

In Invoice Factoring, the factoring company credits the business with an upfront payment of 70-90% of your invoice amount. The factoring company then collects the payment directly from your customers. You’ll be paid the rest of the 30-10 % pending of the invoiced amount minus a factoring fee once the customer pays off the invoices.

SME Financing in Singapore

In Invoice Discounting, the factoring company credits you with a larger percentage of the invoiced amount but the collection end is managed by the business owner. He/She pays the factoring company when the customer clears the invoices receives the rest of the percentage of invoiced amount minus the factoring charges.

Since Invoice factoring is the most common practice, the term “invoice factoring” is used interchangeably with “Invoice financing”.

How Does Invoice Financing work for SMEs?

SMEs can get funding from the factoring companies by selling their unpaid invoices. These invoices are treated as collateral and the upfront payment is done like the traditional loans. Once the customer pays off the invoices directly to the factoring company, the rest of the amount is also credited to you deducing a factoring fee.

This is how invoice financing can save you in times of cash crunch due to delayed payments. It can assure a steady cash flow. Also, the time taken by your customer to pay invoices doesn’t interfere with meeting business needs.

Since invoice financing comes at a lower fee than the interest rate of a bank loan, SMEs will be getting debt-free funding from the factoring companies.

Invoice Financing In Singapore

Invoice financing, with the help of technological advancement, is now an easier and faster process. Starting with the application process, everything is made online. The assessment of the invoices is also done by going through the digital version of documents (mostly). This is made possible by the integration of accounting software during the application documentation process.

Finaxar Is Singapore’s Trusted Financing Companies Chosen By SMEs

We are a factoring company in Singapore which provides invoice factoring and line of credit services to small and medium enterprises. We have been named the best factoring company in Singapore by Visa. We follow a paperless, online application process. 

Our application process is simple, you can start your account by signing up here. The next step is to connect your online accounting software like QuickBooks, Stripe, or Lazada to verify the invoices submitted by you. There will be a manual check on invoices by our cash flow expert team to assess the credits. 

Once your application is approved, we will credit your account with 80% of the invoice amount. You can make use of this account to meet your needs of the company or business. From there on we will keep up with your customers’ invoice payments. We will collect the invoice payments directly from your customer on the scheduled time.

Once we receive the invoice amount from your customer, we will credit you with the rest of the 20 % of the invoice amount. At this stage, we will reduce a small finance fee for our services.  If you are looking for a financing solution for your business, you can get started right here.