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Uprise - Business Insights - Business Financing Tips for Start-ups and Small Business

Business Financing Tips for Start-ups and Small Business

Uprise - 2020/04/27


Most companies require funding to aid or grow their businesses. If you do not have deep pockets to get the enterprises off the ground, there are various places to get additional funding. In this article, we are examining where to look for loan money, which type might be right for you, as well as best tips you shall know before making any borrowing decisions.

1. Find the right type of funding

Generally speaking, using the money you have instead of borrowing or raising is ideal for any business because it means you will not have extensive loans that bog you down. However, outside sources of funding are needed in many cases. Apart from asking your family and friends for money, there are some alternatives you may think fit.

i. Money offered by government / private enterprises

To stimulate the economy and grow the job markets, or help out in urgent occasions, governments and some private enterprises provide a dozen of financial injections to start-ups and small owners. For instance, the Monetary Authority of Singapore has announced a S$125 Million support package for the financial and FinTech sectors to deal with the immediate challenges from COVID-19 and position strongly for the recovery and future growth ( click for more details). Numerous organizations in the United States, such as Small Business Innovation Research ( click for more details ) and the National Association for the Self-Employed ( click for more details ) support start-ups to explore their business potential. Social network company, Facebook, announced it will spend $100 million on grants to support over 30,000 small businesses in 30 countries covering operational expenses( click for more details). However, one significant drawback of these cash grants is that the application process could be time consuming.

ii. Crowdfund

A successful crowdfunding campaign can raise capital for your business. The utmost advantage of crowdfunding is it gives you the opportunity to connect with investors who are really interested in and understand your innovations or products. There are many notable crowdfunding sites such as Kicksatrter, Indiegogo and Crowdfunder that can turn your idea into reality.

iii. Angel investors

There are many angel investment networks, as well as local investor groups, provide capital for startup or expansion. What you have to do is search for the right angel investor, submit your pitches and convince them you are worthy for their investment.

iv. Business loans

Although there are a range of business funding options available, business loans and lines of credit remain the most popular way for new firms and small businesses raising capital for their operations. Small business loans from traditional banks usually have the most favourable rates and terms. To get approved, you need to have a good credit and your firm needs to have been in business for a certain period of time, usually 2 years or more. If you don’t qualify for a conventional bank loan, don’t give up though. Read on to find out other possibilities.

2. Search for your lender

Start-ups and small firms are usually hard to obtain conventional bank loans due to tight lending standards. Traditional lenders are reluctant to take a chance on you as there is no past history showing your skill at running a business. You, therefore, need to do necessary research to discover the best alternate financing options.

If your company needs immediate cash flow, the best option is going to be online. Owing to technology advancement, online lending platforms allow applicants to complete an online application within minutes and provide funding in 24 hours after reviewing your business performance.

👉Check out Uprise SME Business Loan: https://uprise.sg/financing/business-loan

3. Shop around

There are pros and cons that come along with every lending institution. Once you determine which type of financing vehicle and lender are right for you, it is advised to compare, at least, two or three similar options based on annual percentage rate and loan terms.

4. Convince the lender

To ace a business loan application, either from banks or elsewhere, you should always try to put yourself in the lenders’ shoes. Sell your dream by telling a good story. Convey the main reasons why you are worth getting the money.

i. Explain why you need the money

As a business owner, you must be able to answer how the additional fund will benefit your company. Get to your company’s story, detail the innovation, lay out the business opportunity. It is always a plus if you can Identify key risks involved and solutions.

ii. Be accurate on how much you need

After identifying the reason, you are advised to write out a budget for what you are going to do with the money. Remember, there are always unforeseen expenses arising in daily business operations, make sure you have applied for sufficient funds to meet unexpected needs.

iii. Know your affordability: collateral and repayment methods

All lenders want you to pay back the loan on time. If you have collateral to pledge, it can assure the lenders that you have an additional source of loan repayment. Therefore, most traditional lending institutions have specific collateral requirements. Some may require a specific form of security, while others may require a personal guarantee. New lending providers, such as Uprise, do not need the borrower provider any kind of collateral. The approval decision is completely based on the company performance.

Don’t over commit yourself; otherwise, you may need to face additional late charges. Below are examples of the most commonly used repayment methods and Uprise’s innovation mechanism. Check out which one matches your loan affordability the most:

  • Reducing Balance Method: This is the most typical way of eliminating your loan. Each instalment repays a certain proportion of the interests and the balance.
  • Interest-only Method: This allows loaners to repay only the interests, until the last instalment when they have to repay the loan balance in lump sum. The interest-only method in general requires loaners to pay a slightly larger amount of interest, resulting in a larger repayment total.
  • Uprise’s method: This enables repayment to align with your business performance. Without rigid repayment schedules, we only receive a fixed percentage of your revenue each month. This unorthodox repayment mechanism also incorporated features of instant auto-payment and social media data, you may click here to find out more. Use Uprise’s SME business loan calculator to calculate your loan’s affordability.

5. Keep documents needed for business loan application

To smoothen the application process, transparency into the financial state of your business is a must. Make sure you have taken time to keep your financial, accounting and tax records up-to-date and accurate. Have a quick look to some commonly required documents for financing, you’d better have a system in place to keep everything organised:

  • Financials (including income statement, balance sheets, cash flow statements, tax records, etc);
  • Bank statements for at least past 6 months;
  • Entity Proof (such as articles of incorporation, establishment certificate, partnership deed, etc).

6. Look professional

Last but not least, don’t forget to review your company’s website, LinkedIn, Facebook, Twitter and other social media sites. Ensure they are up to date and professional looking.

Conclusion

Running a business is all about risk-taking and decision-making, so does borrowing. We sincerely hope that you will be able to get a suitable credit plan which will be the booster of your business. If you are interested in knowing more details of our financial services, send us an email or call us at +65 3138 4088.

Read Further:

👉How Singapore SMEs survive Coronavirus COVID19

👉Other SMEs are planning do these in 2020, how to get ahead of them?

👉3 simple ways to boost your Google Search Rankings


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