Alternative Lending in Singapore
What is Crowdfunding?
Crowdfunding is a method of raising capital to fund a project or venture by raising small amounts through a large number of individuals, usually via an online platform.
How Do I Qualify?
- 6 months in business
- 30% local shareholding
- Business registered and operating in Singapore
Disclaimer: These are general qualifications. Other information might be considered during your application.
How Do I Apply?
Crowdfunding in Singapore is usually applied through the online platforms of peer-to-peer lenders. Similar to business loans, all relevant documents have to be prepared for submissions in order to get an approval.
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Crowdfunding at a Glance
Crowdfunding is a form of crowdsourcing or alternative finance, mainly for startup or smaller businesses.
It was started with the idea of encouraging entrepreneurship, by pairing investors with entrepreneurs who have a great business idea.
Bringing the concepts of crowdsourcing and microfinance together, crowdfunding gathers a pool of individual entities who commit money to projects and companies, in return for interests earned.
Despite its freshness, crowdfunding is a fast growing market that is catching on around the world. People are starting to realize the need for innovative ways of raising capital.
While there seems to be a wildfire spread of crowdfunding across continents, crowdfunding is still in its teething stages — where the industry is expected to continue growing exponentially.
Crowdfunding Types in Singapore
Equity-based crowdfunding allows investors to contribute to a crowdfunding campaign in return for a percentage ownership of the business in the form of equity. Similar to holding shares on a stock exchange, as the business continues to grow so does the value of the ownership.
Reward-based crowdfunding works by rewarding contributors and investors in many ways excluding ownership or equity. Often the rewards are divided into tiers, the most exclusive reward going out to the top contributor. The rewards can be early access to the product, or a limited-edition release, or invites to exclusive events.
Peer-to-Peer (P2P) lending enables borrowers to raise capital outside of the traditional banks. Retail investors get to fund projects in exchange for a return of interest rates, and are able to monitor their loan portfolios via online platforms in just a few clicks.
With donation-based crowdfunding (usually used by charity organizations), you are able to raise donations from individuals via an online platform. The online crowdfunding platform is used to feature the project or cause that the donations are used for, and also to facilitate the transactions of money. Through donation-based crowdfunding, donors are able to see exactly where their donations are channeled to with much transparency.
Maximum Loan Amount
The Pros and Cons
Fast approval time
Higher interest rates
Short repayment terms
See What Loans You Qualify For
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2 – 3 weeks
3.2 – 4.5% per annum
Personal Loan for Business
3 – 7 days
4.4 – 6.88% per annum
1 – 2 weeks
7.8 – 12% per annum
Working Capital Loan
2 – 3 weeks
3.2- 4.5% per annum
2 – 4 weeks
2.3 – 2.8% per annum
2 – 3 weeks
2.8 – 3.2% per annum
Business Term Loan
2 – 3 weeks
5 – 7% per annum
Crowdfunding for Growing SMEs and Start-ups in Singapore
Crowdfunded financing for businesses is a fairly new product offered by various crowdfunding platforms and is quickly gaining traction in Singapore, with many local crowdfunding platforms being developed and launching.
How Does Crowdfunding Work?
Before the introduction of crowdfunding, there was crowdsourcing. Crowdsourcing (portmanteau of crowd + outsourcing) allows companies to outsource services such as simple data entry, transcribing, etcetera to large groups of people. Crowdfunding turns it around and allows individuals to invest in or finance loans, projects, and other business ventures as a group.
Many entrepreneurs and start-ups in Singapore often struggle to find a willing venture capitalist (VC) or angel investors. Crowdfunding platforms gives the start-ups the ability to reach out to an international audience and potentially attract a large pool of investors. Many crowdfunding platforms incorporate social media and other online communities for a greater outreach, especially for niche ideas.
What Documents Do I Need to Apply?
Profit & Loss Statements
Income Tax Returns
Identification Card (NRIC) / Copy of Passport
“Crowdfunding will see many different faces as the future of business finance evolves. We’re just at the beginning.”
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Crowdfunding can have other benefits apart from financing your business. This can make crowdfunding extremely beneficial to expanding SMEs or start-ups, as you can get valuable information and feedback that you can capitalise on:
- While reaching out to potential investors through a crowdfunding platform, you are also advertising your business internationally. It is also a great start to word-of-mouth marketing, as investors discuss amongst themselves about the crowdfunding campaign.
- Investor will only contribute to a crowdfunding campaign when they believe the business is viable and have good growth potential. Since the investors are individuals contributing small amounts –like a consumer would when purchasing a product–, you can gauge market interest and estimate volume depending on the feedback and outcome of the crowdfunding campaign.
- Some businesses offer rewards to contributors, such as early access to a product prototype or a free service trial. You can then form a line of communication with the contributors to collect trust-worthy, constructive consumer feedback and start product testing.
Crowdfunding Financing for SMEs
Crowdfunding platforms are also used by businesses to acquire financing, much like getting a business loan from a bank. A large pool of investors will contribute to financing a business loan, and get returns based on the interest rates. Usually the crowdfunding firms will have less stringent checks, much faster processing times, bigger loan quantum, as well as quicker funds disbursement. All of the benefits listed so far makes it a viable financing solution for SMEs and Start-ups.
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Other Types of Crowdfunding...
Real Estate Crowdfunding
Most real estate crowdfunding platforms function to crowdfund for loans to buy property or to pool and provide mortgage loans to individuals wanting to purchase real estate.
Human Capital Crowdfunding
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