According to the Accounting and Corporate Regulatory Authority, over 3000 food and beverage (F&B) businesses shut down in 2024—the highest number since 2005.
Some industry experts suggest that the closures are part of the market’s natural cycle. And that the current wave of closures reflect the over zealous expansions that took place in previous years. And with the industry’s notoriously thin margins, ongoing labour shortages and an increasingly price-sensitive consumer base, it’s no surprise that many businesses had to reassess their viability in 2024.
The good news is by learning from competitors, embracing innovation, and adapting to changing market conditions, F&B businesses can position themselves for success. Of course, it goes without saying that this may require additional funding. In this article, we’ll share five best small business loans in Singapore for F&B business.
A business line of credit is a good form of financing for smaller F&B businesses, chiefly because it provides instant access to funds conveniently. With this type of loan, businesses can draw down any amount of funds below a certain credit limit and make repayments of this amount (and its interests) in instalments for up to a year. This draw down can be done at any time within the contract period signed with a provider, which usually extends to around 5 to 10 years.
F&B businesses who find that their incomes fluctuate, making their cash flow uncertain may benefit from this type of loan. It provides a flexible source of funds which can ease operational costs and the day to day running of your business.
A merchant cash advance is particularly suited to businesses that derive majority of their sales from credit and debit card sales. . Your business will receive a lump sum in financing upfront, and in the subsequent months, the loan provider will receive a portion of all the credit (and sometimes also debit) card payments made at your business premises as loan repayments, including interest.
Most conventional loans offered by providers take on the form of term loans, where a fixed sum is disbursed to you, the borrower. Other aspects of a term loan are also usually predetermined, such as the repayment tenor and interest rate, but can be negotiated, depending on the lender.
Term loans are suitable for F&B entrepreneurs who have specific projects or plans that they need to fund, and know, beforehand, how much they need to put these plans into motion.
These loan products are specifically meant for entrepreneurs who have not yet begun their F&B enterprises, or are less than a couple of years into operations. Lenders sometimes require a business proposal or business plan to be submitted alongside the usual application documents.
Startup financing providers often have special features to their loan that make circumstances easy for new entrepreneurs. You should check with your loan provider if they have a government assisted programme where you can enjoy perks such as discounts on processing fees.
This model of financing involves either a single entity or a group of investors who finance your business through an equity model. Rather than lending you a lump sum of money and expecting repayments of the principal and interests, these equity investors become shareholders in your business, and take a portion of your profits regularly in return for the financing they provide.
However, it’s worth noting that venture capitalists and private equity firms tend to favour businesses that can scale quickly and offer high returns. Which is why they tend to invest in brands that are rapidly expanding or possess a significant competitive advantage, such as a technology-driven concept.
Lendingpot offers access to more than 45 lending partners, each offering a variety of loan products suitable for the F&B industry. Sign up using your Singpass account to receive tailored offers designed to accommodate your unique 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.
