What Are The Alternative Financing Channels For SMEs? (Amended Version)

The Singapore’s Government has for a long time been trying to cultivate a spirit of entrepreneurship among Singaporeans. But it recognises the difficulties SMEs may face in securing financial aid from banks; hence it has come up with a host of schemes to assist SMEs.

Government Assistance Schemes

There exists a number of loan and insurance schemes co-funded by the Government [specifically, IE (International Enterprise) Singapore and Spring Singapore] and administrated by participating financial institutions. For more information visit the EnterpriseOne website.

But here, we present you the gist of these schemes.

Spring Singapore

Micro Loan Programme (MLP)

Singapore-registered firm and at least 30% local shareholdings and maximum sale turnover is $1 million OR 0 – 10 employees
Further maximum group turnover is $100 million OR 0 – 200 employees
Maximum loan of $100,000
May be used for daily operations or automating and upgrading factory and equipment
Minimum interest of 5.50 % p.a. for loan tenure <=4 years

Local Enterprise Finance Scheme (LEFS)

At least 30% local shareholdings and maximum group sale turnover is $100 million OR 0 - 200 employees
Maximum loan of $15 million
Factory Loan
Machinery Term Loan / Machinery Hire Purchase
Min interest of 4.25% p.a. for loan tenure <=4 years and min interest of 4.75% p.a. for loan tenure >4 years

Loan Insurance Scheme (LIS) and Loan Insurance Scheme Plus (LIS+)

For both local and overseas facilities
LIS insures your loan against default risks. Insurance premiums co-shared between the government and your firm
For domestic trade: at least 30% local shareholdings and maximum group sale turnover is $100 million OR 0 – 200 employees
For overseas trade: Singapore-based, at least 3 strategic business functions in Singapore and maximum group turnover is $500 million ($300 million) for trading (non-trading) company.
For LIS, 50% of premium is payable
For LIS +, 1.5% p.a. of premium is payable

IE (International Enterprise) Singapore

Internationalisation Finance (IF) Scheme

Company’s size: for trading (non-trading) company’s maximum group turnover is $500 million ($300 million)
Maximum loan of $15 million
Asset-based financing: up to 90% loan quantum. Maximum loan duration of up to 15 years (Land/Factories/Buildings) and 6 years (Other fixed assets)
For raising working capital for secured overseas projects/confirmed overseas sales orders
Structured loan: loan duration and quantum up to 3 years and 90% respectively
Banker’s guarantee: loan duration and quantum up to 5 years and 100% respectively

Trade Credit Insurance Scheme (TCIS)

Singapore-based exporter
LIS insures your goods against non-payment from buyers. Insurance premiums co-shared between the government and your firm
Singapore-based, at least 3 strategic business functions in Singapore, maximum group turnover is $100 million, at least $50,000 paid-up capital, annual total business spending of at least S$250,000 over the past three years and at least three managerial staff who are Singapore citizens or PRs
50% co-sharing of insurance premiums between the Government (with a cap of $100,000) and your firm

Alternative Avenues

Still short of funding after applying for all the eligible loans? Try getting funding from business angels or venture capitalists through Dealflow Connection.

Established by Spring Singapore in 2007, Dealflow Connection (and now managed by DP Information Group) matches SMEs with individuals or entities that have funds to offer, such as business angels or venture capitalists.

Posted in Uncategorized | Comments Off

finance factory

According to the Merriam-Webster Online Dictionary, the word “work” has over 26 different meanings. The first ten meanings are:

“Main Entry: work

Pronunciation: ‘w&rk

Function: noun

Etymology: Middle English werk, work, from Old English werc, weorc; akin to Old High German werc work, Greek ergon, Avestan var&zem activity

1 : activity in which one exerts strength or faculties to do or perform something: a : sustained physical or mental effort to overcome obstacles and achieve an objective or result b : the labor, task, or duty that is one’s accustomed means of livelihood c : a specific task, duty, function, or assignment often being a part or phase of some larger activity

2 a : energy expended by natural phenomena b : the result of such energy c : the transference of energy that is produced by the motion of
the point of application of a force and is measured by multiplying the force and the displacement of its point of application in the line of action

3 a : something that results from a particular manner or method of working, operating, or devising b : something that results from the use or fashioning of a particular material

4 a : a fortified structure (as a fort, earthen barricade, or trench) b plural : structures in engineering (as docks, bridges, or embankments) or mining (as shafts or tunnels)

5 plural but singular or plural in construction : a place where industrial labor is carried on : PLANT, FACTORY

6 plural : the working or moving parts of a mechanism

7 a : something produced or accomplished by effort, exertion, or exercise of skill b : something produced by the exercise of creative talent or expenditure of creative effort : artistic production

8 plural : performance of moral or religious acts

9 a : effective operation : EFFECT, RESULT b : manner of working : WORKMANSHIP, EXECUTION

10 : the material or piece of material that is operated upon at any stage in the process of manufacture

11 plural a : everything possessed, available, or belonging b : subjection to drastic treatment : all possible abuse — usually used with get or give
- at work

1 : engaged in working : BUSY; especially : engaged in one’s regular occupation

2 : having effect : OPERATING, FUNCTIONING

- in the works : in process of preparation, development, or completion

- in work

1 : in process of being done

2 of a horse : in training

- out of work : without regular employment : JOBLESS

synonyms WORK, LABOR,TRAVAIL, TOIL, DRUGERY,GRIND mean activity involving effort or exertion. WORK may imply activity of body, of mind, of a machine, or of a natural force . LABOR applies to physical or intellectual work involving great and often strenuous exertion . TRAVAIL is bookish for labor involving pain or suffering . TOIL implies prolonged and fatiguing labor . DRUDGERY suggests dull and irksome labor . GRIND implies labor exhausting to mind or body .

synonyms WORK, EMPLOYEMENT, OCCUPATION, CALLING, PURSUIT, Métier, BUSINESS mean a specific sustained activity engaged in especially in earning one’s living. WORK may apply to any purposeful activity whether remunerative or not . EMPLOYMENT implies work for which one has been engaged and is being paid by an employer . OCCUPATION implies work in which one engages regularly especially as a result of training . CALLING applies to an occupation viewed as a vocation or profession . PURSUIT suggests a trade, profession, or avocation followed with zeal or steady interest . Métier implies a calling or pursuit for which one believes oneself to be especially fitted . BUSINESS suggests activity in commerce or the management of money and affairs .

As used in this article the word “work” is meant to convey all of these meanings. Think of it this way:

o When you work at your business you exert effort to accomplish your livelihood.

o When your business works your energy produces a result, a product or a service that people desire. This is because of the particular manner or methods you are using, or because of the particular materials you are using, making or assembling.

o Work is a place people go to earn their livelihood- the office, the factory, the medical clinic.

o Work always requires effort, skills and exertion.

o Work often involves creative expression.

o Work may be for a higher purpose than moneymaking; this may be moral, religious, or something to further a public purpose such as to combat global warming.

o Work is an effective operation; if the manner of working is not effective, the work will not succeed.

There is a distinction between working at your business and working on your business. It has been written that when you work at your business, you are developing business, inventing products or processes; you are working on the creative part of the enterprise. When you work on your business, you are dealing with more mundane albeit important matters: organizing; making a business plan; filing; getting a new location; hiring and managing employees; dealing with accounting, regulatory, taxation or legal matters.

Most businesses work at getting more work. All things being equal, the more work you get the more money you make. If you feel that your business is not work, you are probably happy with your choice of work. Work does not feel like work when you enjoy it. If you feel that your business is too much work, you probably need to do something about it; make some changes or get someone else to do some of the work.

Writing music is creative work. Once in a while it is also lucrative. In the field of jazz music, sometimes an instrumental song will be written that is so special, so compelling, that another musician will create lyrics for the song. A famous example of this is the “Work Song”.

The Work Song was written and recorded by Nat Adderley for the Riverside label in January, 1960 with a band which featured guitarist Wes Montgomery. Nat played the cornet, which is an instrument similar to a trumpet. Nat was the brother of the famous American saxophonist Julian Cannonball Adderley. Lyrics to the Work Song were written by Oscar Brown, Jr., who was a singer, songwriter, playwright, poet and civil rights activist. The lyrics to the Work Song are:

Posted in Uncategorized | Comments Off

Purchase Order Financing- The China Advantage

As of July, 2007, the Central Intelligence Agency for the United States government estimated that the population of China is over one billion three hundred twenty one million people. In contrast, the population of the United States is estimated to be a little over three hundred two million people. That’s 1,321,000,000 versus 302,000,000 people; China has over four times the population of the U.S.

In the past two decades China has completed and put into operation over 2000 large and medium-sized industrial projects; these include railways, atomic power stations and completely new cities. There has been ginormous investments in other fixed assets such as basic industries, 100,000 new reservoirs for water storage, irrigated land, coal mining, oil-drilling, steel-making, power generation, highway construction, and newly constructed and extended ports.

China has the world’s largest manufacturing workforce- over 100 million people. In comparison, there are about 14 million manufacturing workers in the United States. China’s labor costs are low compared to the United States and many other parts of the world. As of 2002 statistics indicate that employees in China’s city manufacturing enterprises received about $0.95 per hour; rural workers average about half this amount: $0.41 per hour. A large majority of manufacturing employees work outside the cities. They earn about 3% of the average hourly compensation of factory workers in the U.S. and many other developed countries. With low land costs and low labor costs it is no wonder that the cost advantage to manufacturing in China is extremely attractive to American entrepreneurs. When their products are manufactured with sufficient quality controls, the cheaper costs and effective delivery systems create a win-win situation for those who are able to participate.

Manufacturing is a basic Chinese industry. When you take raw materials and labor and produce products that can be sold in high quantities at a lower cost than U.S. competitors, and successfully import to them to the U.S. and it is possible to have excellent returns on your investment. And China’s political and economic system is relatively stable compared to other developing nations such as many countries in Africa.

What is the approximate size of the trade in goods from China? According the U.S. Census bureau, Foreign Trade Division, imports from China in 2006 were over $287 Billion dollars; for the first five months of 2007 imports from China were over $120 Billion dollars.

What are the main categories of products imported into the U.S. from China? This includes iron and steel products, specialized industrial machinery, office machines and computer, telecommunications and sound equipment, electrical machinery and parts, road motor vehicles, building and lighting products, furniture, travel goods and handbags, footwear, professional, scientific and controlling instruments, photographic and optical equipment, timepieces, personal care products, and food products such as tea. According to the American Electronics Association, high-tech imports from China are on the rise.

What are some of the main risks associated with doing business with a manufacturer in China? We do not speak the same language, so a good interpreter is necessary. Our legal systems are completely different and the Chinese legal system is complicated and weak. Therefore it is vital to develop good relationships with the proper trading partners. It is also important to have excellent international legal counsel to comply with the complexities of contract law, local Chinese law and relevant U.S. law. Protecting intellectual property is a challenge in China.

What does this all have to do with purchase order financing? International purchase order financing is complicated and complex in details, but the concept is simple. If you have a product that can be manufactured in China, and you have made the proper arrangements for production and shipping but lack sufficient capital to finance the transaction- with a large purchase order from a creditworthy customer a commercial finance company will agree to have their bank issue a Letter of Credit to guarantee that the Chinese factory producing the product will be paid. When the goods are shipped and delivered to your customer the commercial finance company pays the Chinese factory. Between 70% and 100% of the product’s cost may be financed depending on the product’s gross margins and the risks involved. Purchase order financing may facilitate your exponential growth and profits for all concerned.

When your customer is invoiced for the product an account receivable is created which will be paid to the commercial financing company. Purchase order financing with an international letter of credit can make the deal possible. Accounts receivable financing, or factoring, is the back end financing that guarantees payment to all concerned. The expertise of the commercial finance company can be invaluable with regard to helping you succeed in this challenging marketplace.
A wise man once said if you put a flea in a jar with a lid, the flea would keep jumping into the lid time after time. After a while if you take the lid off, the flea will only jump as high as the lid. Why limit your potential when it is just as easy to set your expectations higher? For businesses that sell manufactured products to other businesses, purchase order financing may be the way to reap the benefits of the China advantage.
Copyright © 2007 Gregg Financial Services

Posted in Uncategorized | Comments Off