"[T]he gap within SME financing landscape has been a widely discussed topic in Southeast Asia, and with the rise of the FinTech, more alternative lenders are trying to fill the US$120 Billion financing gap in Southeast Asia through digital lending platforms.
At Funding Societies, we conducted an extensive research and spoke to our business borrowers in Singapore, and identified 3 key reasons SMEs struggle in financing their businesses:
1. SMEs are not getting paid on time
Any delay in receiving payments increases the risk of negative cash flow and compounds the working capital problems, that could set SMEs back in their growth path. The results were corroborated by the SME Development Survey in 2017 (conducted by DP Information Group) wherein 81% of SMEs surveyed in 2017 experienced delays in payments, up from just 17% in 2016.On an average, the Days Sales Outstanding (DSO) for Singapore B2B invoices were at 46 days DSO, higher than the regional average of 41 days DSO.
2. Younger SMEs get less support from the big boys
Smaller SMEs face higher rejection in bank loan applications, compared to their larger counterparts. Most SMEs that approach Funding Societies for financing do not get enough support, if any, from traditional financial institutions due to lack of collateral, operational history or strong financial statements.Other SMEs that have received loans from Funding Societies find bank loan processing time to be too long, or the approved value insufficient to meet their immediate financing needs.
3. SMEs don’t know their financing options
Singapore’s Institute of Policy Studies conducted a study and found that a lack of understanding in trade financing – both traditional and non-traditional forms – as well as knowledge of financing options contributed to 68% of companies not seeking alternative forms of financing when they were rejected by financial institutions.
How Funding Societies addresses SMEs’ financing woes
At the Echelon Asian Summit, Kelvin explained the driving force for Funding Societies, “We want to generate impact in Southeast Asia by funding promising societies (SMEs).”"
To read more about how Funding Societies and fintech can help SMEs, click here.