Financing difficulties faced by SMEs today

Here’s a stark truth about being a Small and Medium Enterprise (SME) in Singapore: it is difficult to attain financing for your business needs. With SMEs forming the backbone of Singapore’s economy (99% of Singapore’s enterprises are SMEs while 70% of the workforce is employed by SMEs), it is reasonable for one to expect for SMEs to have easy access to financing options. Yet, despite Singapore’s Government utilising various means and ways to help SMEs grow, it is clear that SMEs face significant difficulties in securing financial aid.


Here’s a stark truth about being a Small and Medium Enterprise (SME) in Singapore: it is difficult to attain financing for your business needs. With SMEs forming the backbone of Singapore’s economy (99% of Singapore’s enterprises are SMEs while 70% of the workforce is employed by SMEs), it is reasonable for one to expect for SMEs to have easy access to financing options. Yet, despite Singapore’s Government utilising various means and ways to help SMEs grow, it is clear that SMEs face significant difficulties in securing financial aid.

Companies usually look for financial institutions such as banks and finance companies when in need of funds for their business needs; yet, as a result of regulations and legislation, these companies often find it difficult to obtain the funds they need. The Monetary Authority of Singapore had also recently revealed that total bank lending had decreased over the last few months which shows it will be tougher for SMEs to secure the funds that they require. So how does P2P lending help solve this issue?

Credit worthy SMEs get funds for growth

With an economic downturn looming and financial institutions tightening their lending criteria and reducing the number of loans, SMEs will find it hard to get the loans they need to finance their business needs. The impending implementation of Basel III will not help the situation either; as banks will be looking to hold additional capital against loans to SMEs, which ultimately means less lending to SME.

P2P lending then comes into play to solve SME’s financing issues, providing an alternative financing solution to assist these credit worthy SMEs. P2P lending works by linking up SME borrowers with investors/lenders who crowdfund into these loans and earn returns from the interest paid by the borrowers. The process can be broken down into the following steps:

1.    SME looking for financing applies with P2P lender

2.    SME is then subjected to credit assessments, to ensure they have the financial strength and repayment ability to service the loan

3.    Once approved, loan is put up on platform for investors/lenders to crowdfund into

4.    Once crowdfunded, P2P platform will facilitate the underwriting of the loan contract

5.    Funds are then disbursed to the SMEs as a loan

With the application and approval process estimated at around 4-5 days, P2P as a financing option can be obtained much faster than typical loans from banks and financial institutions, which can possibly take weeks.

What does this mean for investors?

For investors, this is an excellent alternative source of income. With attractive interest rates much higher than bank or fixed deposits, investors will be wise to start exploring P2P lending as an alternative investment opportunity. Take for example, Funding Societies, which uses an escrow account to manage investors’ funds (to ensure their safety). The average rate of return ranges between 10% to 15% for the loans crowdfunded so far and they have had no defaults to date, indicating the astuteness of their credit assessment process.

Since investors are not only able to earn solid returns through P2P lending and are able to provide much needed assistance to underfunded SMEs, they should definitely consider having P2P lending as part of their investment portfolio.



November 02, 2016    Funding Gap: SMEs in Malaysia
July 01, 2016    Insuring Your Future




11 Collyer Quay, The Arcade, #17-00
Singapore S049317

Tel : +65 6221 0958
Email : info@fundingsocieties.com
*To contact our Personal Data Protection Officer,
Please include "Re: PDPA" in the Email Subject title.
Tel : +65 6221 0958
Email : info@fundingsocieties.com
Capital Markets Services License No: CMS100572-1 issued by Monetary Authority of Singapore (2016)

© 2015 Funding Societies Pte Ltd. All rights reserved.
SSL Secure Site