Article was published on the Strait Times newspaper on the 4th of February 2016
SMEs unable to get bank loans find financiers in investors after better returns or income yield
Financial markets are all in a twist, leaving few options for investors looking for good returns or a solid income yield.
In the meantime, with the economy slowing, banks are becoming more conservative about who they lend money to and how much, making it tougher for small and medium-sized enterprises (SMEs) seeking funds to expand.
Enter the crowdfunding platform, which seeks to solve both problems at one go.
While market watchers and economists are predicting doom and gloom for 2016, the young, innovative players on the platform look set to come out of this tough year as winners – though they are also clear- eyed about the challenges.
Investors are increasingly turning to them as a means of earning better returns for their money, and more SMEs are gaining awareness of this source of alternative financing, seeking them out for loans.
One platform already offering this is InvoiceInterchange, which allows SMEs to put up their unpaid invoices for auction.
Take a supplier of goods to major supermarkets: It has an invoice which says one of its big clients will pay it $50,000 in 60 days but it needs funds now to pay salaries, buy more goods or for daily operational expenses. It could offer to pay, for example, up to 2 per cent of that amount to investors who can buy all or part of that $50,000 invoice today.
Through InvoiceInterchange, an investor can then offer to contribute, say, $5,000 towards that upfront cash disbursement, and ask for up to 2 per cent interest payment in return, over 60 days.
Since launching last May, the company has helped raise around $800,000 for its seven SME clients, six of which have done repeat transactions on the platform.
There are 38 investors on the platform, which is for registered members. (The firm screens not only borrowers but also investors before letting them join.)
Still, demand is substantial enough that director Brian Teng has ambitious targets.
“We hope to have 100 SME clients by the end of this year, and 291 investors,” he said. “What we’re hearing from SMEs is that bank overdrafts and loans are just not being approved as quickly and are not as easily available as before. In some cases, credit lines are being reduced or even pulled. We want to help SMEs finance their growth.”
But even as the crowdfunding scene looks like it has the potential to grow exponentially this year, the players are still maintaining a sober perspective on things.
Read the entire article here
Leave A Comment