I know several Singaporeans who are good at marathons and will keep going no matter the distance. Not everyone, including myself, can do that though. I’m the kind of guy who starts the run with much enthusiasm and speed but loses stamina after just 10 minutes.
It’s the same with running a business in Singapore. Not everyone can just decide they want to run a business and make it through in one piece, especially without any help at all. In the same way that pacing is key in running and certainly finishing a marathon, businesses need to make sure that they are able to keep pace themselves and not run out of steam too early. Also, just like many marathon runners have discovered, there will be times when business owners might need the help of others to give them that little boost to spur them to the finish line.
I imagine a lot more of us would be willing to be entrepreneurs if we thought that we had the resources and ability to keep a business running in the long run. That’s because, regardless of how good your business is going, cash flow problems can and will crop up from time to time.
So what options do I have in such a situation?
Getting a business loan is one solution that can help to ease cash flow issues. Much like how a tailwind might help to ease the running of a marathon, a business loan can also give you that push needed to keep your business going. Now, it might not seem like a good idea to go into debt the second you have cash flow problems, but there are actually three excellent reasons why a business loan can be considered good debt:
1. Ensures liquidity to pay monthly expenditure
There will always be costs you need to pay regularly. In addition to rental and utilities, you may also need to pay employees a monthly wage. It’s the beginning of the end for your business venture if your workers walk out on you or your landlord kicks you out because you don’t have enough cash on hand to make payment.
Now, don’t think that this is just a problem faced by start-ups. Even when you’ve been in business for a couple of years, you could find your revenue drying up unexpectedly due to changes in the industry or economic climate. Ensuring liquidity in those few months are crucial. You definitely don’t want to have to deal with cash flow problems that hinder you from paying your rent and staff.
Some businesses, especially those providing services, often face issues with receivables, which can sometimes take months to come in. In lean months, the last thing you want is to be held hostage by your clients, and then shut down your operations because you don’t have the cash on hand to pay your monthly costs.
In both these cases, a business loan may be able to help tide you over while waiting for your revenue stream to kick back in.
2. Ability to expand at the right moment
Making the decision to expand your business is often about timing. Whether it’s a new innovation, opening a new branch of operations, or even breaking into an overseas market, it’s all about finding the right time to do so. And really, when it comes to taking advantage of certain market opportunities, especially overseas, timing is everything in this day and age. Move too slowly and someone else could have easily taken your place by then.
In situations like these, you’ll want to have enough funds readily available so that you can take advantage of the right opportunity. You could spend time looking around for investors to back your expansion plans, or wait until your profits increase to the point where you have enough excess cash for expansion plans. However, this delay might cause you to miss that window of opportunity and end up with sleepless nights wondering “If only…”
A business loan allows you to have the funds available to take advantage of an opportunity when it presents itself. Sometimes, the opportunity cost of missing the timeframe can be higher than the cost of the business loan itself.
3. Tiding over unexpected expenses
No matter how meticulous your planning is, life is bound to throw you a few unexpected surprises that could cost you a significant amount. A machine breaking down unexpectedly, or a long-time client suddenly being unable to continue the working relationship. There are a myriad of issues that could arise, and these could affect your company’s cash flow if you haven’t set aside funds for such emergencies.
In such situations, you can’t expect your investors to come up with money to inject into your business, and it would be a waste if this unexpected expense affected your company’s regular operations. Instead, applying for a business loan could come in handy in such exigencies, especially if it allows you to repay the loan over time, thus spreading out the cost over many months.
It is important to note that if you are already dealing with cash flow issues, and have yet to solidify your business’ monetization model to generate a relatively consistent revenue stream, taking on additional debt might not be such a good idea at this point in time. That’s not to say that a loan is bad but the last thing you want to do is to turn the loan into a liability instead of using it to your benefit.
Standard Chartered’s Business Instalment Loan
So what product is suitable for SMEs looking to handle the above 3 points? With Standard Chartered’s Business Instalment Loan, businesses with at least 3 years of business operations can apply and get up to $300,000 in loan quantum, subject to the bank’s credit approval process. The repayment period for such loan is over a period of 1 to 5 years. This loan is unsecured, which means you don’t need to provide any security collateral. This is good for companies as there will be no issue about liquidity since your assets are not tied down as collateral. Standard Chartered will however require a personal guarantee from the key stakeholders.
Have you considered applying for a business loan? Share your thoughts with us.
This story was brought to you by Standard Chartered Bank (Singapore) Limited (“SCBSL”). This article is for information purposes only. All loan applications are subject to SCBSL’s loan approval process at its sole discretion. Visit Standard Chartered’s Business Instalment Loan page for more information.