Singapore’s economy is enjoying a better than predicted outlook, with the Ministry of Trade and Industry upgrading our full-year economic growth projection from 1-3% to 2-3%, on the back of a strong showing in the wholesale trade, finance and ICT sectors.
If you’re planning on leveraging this growth to grow your business, then project financing is one of the best ways to go. Unfortunately project financing loans can be difficult to secure due to their perceived risks. Thankfully, there are other alternatives to project financing that businesses can use to grow their operations, whether it’s expanding into new markets, constructing new buildings or launching new projects.
In this article, we’ll delve into exactly what project financing entails, before exploring potential alternatives suited to financing large projects.
Project financing involves raising funds to accomplish certain planned projects. These projects may take place overseas or domestically, and may be carried out independently or in collaboration with another business or government entity.
Project financing, like other forms of loans, depends very much on the creditworthiness of a company, as well as the revenue potential of their planned projects. Generally, it is used to fund capital intensive, larger full scale projects.
In Singapore, one of the most accessible project financing comes from the Enterprise Financing Scheme-Project Loan, an initiative launched by the government to support enterprises in their internationalisation efforts.. Alongside this government support, various banks and financial institutions in Singapore offer project financing solutions tailored to sectors such as infrastructure, construction, and energy.
However, in this article, we will be looking at alternatives to project financing that you can consider for your business venture.
Companies can consider other forms of financing apart from banks to fund their projects. There are several legal and legitimate options available for businesses who want to pursue non-bank loan providers. Here are three of them.
P2P lending is a unique platform in which not one, but a pool of investors gather their available funds and gain access to borrowers. These platforms or apps will match borrowers to lenders, and each individual lender earns from the interests charged, in proportion to their loan contribution. For instance if lenders A,B and C contributed 30%, 25% and 45% to the funding pool respectively, they would then earn that proportion of the interest charged. The P2P platform itself earns by charging an administrative or processing fee to borrowers. Examples of P2P lenders include Fundaztic and Funding Societies.
While P2P lenders typically offer higher interest rates than traditional banks due to the high risk involved, they can be competitive or even lower for those with strong credit. As these lenders are often individuals or small firms, they do not need to bear the same overhead costs as banks and other larger financing companies.
These private business to business lenders are companies that start out with a large capital, and profit from lending funds to other businesses. They usually service SMEs who do not need a high quantum of funding, by providing terms and conditions that are more flexible than banks. Examples include Capitall and Affinity Financial Services
B2B lenders offer companies the advantage of more flexible and easier approval processes. As they lack the complex hierarchical structures and stringent operating procedures of banks, they will be able to offer borrower requirement flexibilities for your project loan.
Revenue-based lenders like Jenfi and Choco Up are particularly suitable for project financing, even for businesses with current low revenue, because they evaluate funding eligibility based on forecasted revenue rather than just historical performance. This forward-looking approach allows businesses with strong growth potential to secure financing to drive projects that can generate future revenue streams.
While the application process can be time-consuming, often requiring detailed financial projections, forecasted statements, and the setup of control accounts, the effort may be worthwhile. These lenders can potentially match the required funding quantum, providing the necessary capital to scale your project effectively and achieve anticipated growth.
The success of project financing applications are often driven mainly by the strength of the business proposals submitted, as well as its revenue generation potential. Fortunately, the option for funding remains wide and diverse.
Lendingpot is an easy to use business loan comparison platform featuring a diverse range of more than 45 lenders, comprising banks and private institutions. Register with your business Singpass Myinfo today and begin receiving business loan offers. All these offers can be compared within minutes and you can then identify the best one that fits your business project needs.
Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.
