Building The Bridge Between SMEs And Financing

Published : Friday, July 19, 2019, 2:35 pm
ACROFAN=PRNewswire | | SNS

SINGAPORE, July 19, 2019 /PRNewswire/ -- As the most well-funded peer-to-peer lending platform in SEA, Funding Societies provides business financing to small and medium-sized enterprises (SMEs) which is crowdfunded by retail and institutional investors, as well as high-net-worth individuals.

Since being founded in 2015, they currently operate in Singapore, Malaysia and Indonesia (under the name Modalku) and have raised over $600 million in loan amount for more than 500,000 businesses (as of May 2019).

Funding Societies have a USD 25 million Series B funding round led by SoftBank Ventures Asia and are supported by Sequoia India and other investors. Their vision is to fund underserved SMEs and make a positive impact in society by providing financial support with alternative financing solutions.

They are able to recognise that, unfortunately, some SMEs are facing survival challenges during their first year of operation in SEA. These businesses are hungry for quick and accessible financing as they are determined to strive. But, due to weak financial support, such efforts quite often become futile.

In light of this, the demand for specific financial needs has motivated platforms to work with local SMEs in helping them survive and support our economy.

How Can A Business Overcome Cash Flow Issues? - When a business is in need of financing that is not yet available to them, bridging loans can fill that void. The challenges created by clients paying late often includes a cycle of frustration and restricted movement - the cashflow problem. Products like Invoice Financing offered by Funding Societies helps strengthen cashflow, filling the 'financial gap' with tailored payment terms and pro-rated interest.

At Funding Societies, Invoice Financing is a funding method that allows businesses to offer their unpaid invoices in exchange for a quick loan (up to 80% of the invoice value), helping to improve cash flow as well as increasing working capital. The business can then "sell" some of the outstanding invoices issued to their customers at a small discount for a loan. Evidently, this can relieve a substantial amount of financial constraints.

What If An SME/Startup Is Unable To Obtain The Full Loan Amount Requested From Banks Due To Lack Of Collateral/Weak Profile? - Conventional loans can be demanding in terms of what requirements need to be met during the application process. The flexibility of bridge loans via alternative financing channels, in our view, offers a more hassle free solution for SMEs and startups, in particular those that are unable to meet the criteria for bank loans.

Lending platforms are able to fill the gap for businesses that traditional financing institutions are not able to. A solution for this is unsecured bridging loans where collateral is not the deciding factor when offering finance. Products like Business Term Loans offer unsecured loans (of up to $1.5 million) with customisable financing options and a variable tenor.

Are Businesses Able To Get Loans On A Shorter Time Scale Through P2P Platforms, As Opposed To The Tenors Offered By Banks? - Obtaining a bridge loan can cover a businesses costs and finances in the interim. While the interest may be high, with fast application, approval and funding process time (in comparison to traditional methods) bridge loans become unified with short term financial needs. Not only is there flexibility in the loans having a short tenor (from as little as 1 month), alternative financing channels also offer the flexibility of loans where collateral or assets are not required.

How Can Businesses Get Fast But Small Financing? - In some instances, a business may only require a "top-up" (rather than a large sum of financing) but fast. While banks cannot commit to funding on a smaller scale, in terms of tenor and amount, modern financing creates a synergy with what can be offered and what an SME specifically needs. For example, Funding Societies offers the FS Bolt where applicants can complete their application within 2 minutes, receive approval within 2 hours and ultimately have the funds available to them in 24 hours. To add to this, this loan offer can be from anything up to $50,000 - ideal for smaller enterprises in need of small funding.

Why Should Business Turn Towards Technology When Searching For Financial Support? - Mobile technology is a growing industry where day to day activities are now carried out via online apps/platforms. More specifically to FinTech, with all the mobile tech innovations available, more and more SMEs have increased accessibility to financial support, especially with the push for businesses in Singapore to adopt digitalisation.

Loans provided via online platforms provide an alternative solution to underserved businesses that are in need of quick unburdensome financing. Traditional loans can very often be rather time consuming, and so businesses that are already feeling the constraints of cashflow (but don't have the luxury of time when applying for funding) mobile and technology have added value. The practicality of digital funding platforms fulfill financial needs in a shorter period of time including the application process and release of funds.

Many SMEs feel the absence of financial support. By creating awareness of alternative financing, businesses are given the hope and support they are searching for in helping their businesses prosper.

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