Financing For Start-Ups In Singapore

It is a well-known fact that in the first few years of establishment, the rate of failures with startups tends to be quite high. One of the most common reasons for such failures is that these companies have a limited working capital to execute business plans, conduct business activities, or fully expand. Thus, it is important for you to ensure the planning of a sound financial strategy before you incorporate a company in Singapore.

For those looking to register a private limited company in Singapore, there are several ways to ensure that your business will not suffer the same fate as many others due to limited access to capital. 

1. Bootstrapping
Self-financing or bootstrapping a startup stands as the foremost funding option that entrepreneurs have during the stage of making outlines for their business plans in Singapore. This is especially useful for business owners who are just getting started and are finding it hard to obtain funds from other sources due to a lack of comprehensive plans or evidence to show a good chance of future success.

Many entrepreneurs who choose to go this route to finance their business usually harness their personal savings or ask family members and friends to make donations. Bootstrapping is also an ideal choice for many start-ups in Singapore because it does not require much formality and compliance, and the process requires the lowest cost. It gives entrepreneurs more room to breathe after they have completed the process to incorporate a company in Singapore.

2. Crowdfunding
This is a great system for raising funds for companies or projects, and only requires a small amount of donations from a huge number of people. In Singapore, this financing method is a popular option with which diverse business owners can propose and promote business plans, ideas, and strategies online to inspire others. In turn, those they inspire then pledge to donate funds to support the business. Popular crowdfunding platforms include Indiegogo, Kickstarter, as well as other Funding Societies. These platforms are particularly suitable for small business startups.

3. Angel investor
An angel investor refers to an individual who usually not only invests capital in a startup but also contributes his business knowledge in the beginning stage of the business while getting a considerable share of the enterprise in return.

These usually entail affluent individuals and businessmen who are looking for viable start-ups that are riskier but have the potential to achieve a higher return on investment.

It is more difficult to secure an angel investor before you register a private limited company Singapore, as they are unsure of determining how successful your business can be. A tip is to prepare an investor pitch and product prototype or blueprint even before you start the process to incorporate a company in Singapore, so that you can quickly secure an investor.

4. Venture capitalist
Compared with other parts of the world, Singapore’s emerging venture capital industry is relatively small. Individuals of huge net worth, large companies, and government agencies usually put up venture capital funds because the government has formulated attractive incentives on tax for this procedure.

Venture capitalists usually entail investors whose specialty is to invest in startup companies. The condition is that they have a more practical role in the enterprise, and their major aim is to ensure the profitability of their customers.

Therefore, they not only provide financial support for entrepreneurs who register a private limited company in Singapore, but also provide valuable guidance with regards to matters of operation and corporate profitability. The venture capitalist also favors any Incorporated Company in Singapore with high growth potential, as well as other businesses that have a significant influence in the fields of IT and nanotechnology.

5. Incubators and accelerators
There is a difference between an “incubator” and an “accelerator”. An incubator entails a system of funding that can cooperate with companies in the beginning stage of the development process to develop basic business. An accelerator can help entrepreneurs who already completed the process to incorporate a company in Singapore and already have a thriving business. They can help the company expand its business, for example branching their business overseas or entering other markets and industries.

When dealing with incubators, you must not follow a fixed timetable, but accelerator-funded companies must work in proximity with the mentors, investors as well as other emerging companies for a certain period before they can be free to exit the platform.

6. Government funding
The government of Singapore has established a large amount of financing platforms and plans to complement its encouragements for entrepreneurial activities. These programs include the ACE start-up program, capacity development grants, and productivity and innovation credits. In addition to funding eligible startups, these programs also provide a range of benefits, including guidance and corporate tax refunds.

Furthermore, all these funding programs set up by the government are aimed at different industries or markets and are also feasible for all stages of business development. Many local or foreign entrepreneurs who seek to register a private limited company in Singapore will likely qualify for some funding or tax rebates.

7. Microloans
This entails small-dollar financing that can be used for every business type, including start-ups in Singapore. It can be harnessed for short-term expenditures, such as purchasing office equipment. Compared with unsecured loans, this financing option in Singapore usually has shorter loan maturity time, as well as minimal loan amounts, but their interest rates may also be higher. Be sure to check whether your company can sustain this form of financing before engaging in it.

8. Unsecured commercial loans
Unsecured commercial loans are great financing sources for start-ups in Singapore, which do not require collateral. Therefore, if you cannot repay the loan, you will not undergo the risk of losing your business assets. On the other hand, these loans are often stricter for startups and may not be always available.

9. Secured commercial loans
This loan is usually backed by the assets of the business owner. In Singapore, start-ups are more likely to obtain such loans and often receive more convenient interest rates. On the other hand, these start-ups should also beware regarding these loans, because late repayments can become very expensive.

10. Personal loans
Personal loans may be a good start-up financing option in Singapore if you’ve got good personal credit, as well as a stable income source. On the other hand, this loan type often have a maximum borrowing amount and may not meet the needs of your business

If you want your business to get started and grow quite fast in Singapore, you may need to opt for external funding, unless you’ve got the confidence that you can handle these from your personal funds. Although bootstrapping is a great option, it will not give you the opportunity to develop the business as much as you may desire.

There is a huge amount of money to be made as a start-up in Singapore, but do ensure that you engage in adequate research in order to get involved in a funding source that suits you best. There is a myriad of opportunities for entrepreneurs looking to register a Private Limited Company in Singapore, and finding financing for your company should be the first step to take. 

WLP group can help you in the process to incorporate a company in Singapore, by offering professional advice and services. Contact us today for a Free Singapore Company Registration consultation session!