Re-shaping the Future: Becoming a Circular Economy

Resource depletion, global warming and climate change are grim realities that our planet and global population are facing as their impact on the state of the economy, society and our very way of life becomes ever more urgent. Much has been said about the need for greater awareness of these environmental problems and crucially, the need for solutions to mitigate or prevent the inevitably dire consequences they will bring.

Amidst the doom and gloom, the circular economy has emerged as a concept that offers a sustainable solution to these complex planetary challenges.

A circular economy is an alternative to the traditional linear economy (which follows a make-use- dispose process) in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life.

The circular economy involves gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system. It is driven by a transition to renewable energy sources. The circular logic of this model builds economic, natural and social capital.

Even though the circular economy concept appears to be a novel one, the idea of circularity itself has deep historical and philosophical origins. The idea of feedback and of cycles in real-world systems has roots in various schools of ancient philosophy. It was revived in industrialised countries after World War II when the emergence of computer-based studies of non-linear systems revealed the complex and interrelated nature of the world we live in.

With modern-day advances, digital technology has the power to support the transition to a circular economy by radically increasing virtualisation, de-materialisation, transparency, and feedback-driven intelligence.

 

 

Benefits of a Circular Economy

A shift to a circular economy portends numerous benefits, the environmental one being foremost. The initial target of the circular economy is to have a positive effect on the ecosystem and to mitigate the exploitation and overstress of the environment. It has the potential to reduce harmful gas emissions and the use of primary raw materials, increase agricultural productivity, and decrease in negative externalities such as pollution and waste.

Economic benefits can still be had under the circular economy. These include continued economic growth, substantial material savings, growth in employment and incentives for innovation. According to calculations by strategic consultancy McKinsey & Co., the GDP of a circular economy grows due to a combination of increased revenue from new circular activities, and cheaper production costs from getting more functionality from materials and other inputs. The value-add of circular products and services leads to higher valuation of labour, which increases income and expenditure per household, thus resulting in a higher GDP.

A transition to the circular economy would also have positive effects on employment. This could be due to greater spending by lower prices, increase in labour-intensive, high-quality recycling and repair practices, and growth in new businesses through innovation, the service economy and new business models.

A circular economy is a driver of innovation as new solutions based on a new way of thinking are sought. A shift to circular rather than linear value chains and aiming for optimization for the entire system results in new insights. It also spurs interdisciplinary collaboration between designers, manufacturers and recyclers, resulting in sustainable innovations.

 

 

Embracing the Circular Economy in Singapore

The government in Singapore has acknowledged the need to embrace the circular economy and is enacting multiple policies and initiatives in that direction. Some aspects of Singapore’s vital resources already adhere to the circular concept. For instance, the water sector functions in a closed loop as used water is converted into NEWater, significantly enhancing Singapore’s water resilience and sustainability.

According to Environment and Water Resources Minister Masagos Zulkifli, the authorities are now working on closing the waste loop. To that end, under its Sustainable Singapore Blueprint, Singapore aims to become a Zero Waste Nation and achieve a 70% recycling rate by 2030.

 

 

 

 

This is an area that needs improvement considering current recycling rates: Singapore’s household recycling rate of 21% is low when compared to other developed countries like Germany and South Korea. The blue recycling bins placed at HDB flats are “gradually becoming a more welcome sight in many estates”, said Minister Masagos, but some still treat them as general waste bins. The National Environment Agency estimates that 40% of the load collected from these bins is tainted. We would all do well do adopt better recycling practices.

Policies are also being reviewed to encourage sustainable production and consumption, particularly in sectors where the market fails to take into account environmental externalities. For that, the government is introducing a mandatory reporting framework for packaging data and waste reduction plans, to be in force in 2020, to require that producers be responsible for the ‘end-of-life’ of their products. Businesses, such as brand owners, importers and large retailers will need to start collecting data on the types and amounts of packaging they place on the market and submit plans for reduction.

Such a system is based on Extended Producer Responsibility (EPR), a policy approach under which producers are given a significant responsibility – financial and/or physical – for the treatment or disposal of post-consumer products. EPR It will incentivise businesses to design products that are more easily recycled, or develop innovative circular business models. The overall aim is to bring about more sustainable use of packaging materials, including single-use plastic packaging, by businesses and consumers.

In addition to reducing plastic waste, Singapore is relooking the waste management cycle for three major streams of trash – food waste, packing waste and e-waste – under its first Zero Waste Masterplan. To that end, the environment ministry has designated 2019 as Singapore’s Year Towards Zero Waste, a campaign that aims to raise awareness of waste issues and the need to conserve resources. Electronic waste or e-waste is a waste stream of particular concern due to its toxic nature; Singapore produces in excess of 60,000 tonnes of e-waste a year.

In order to help Singapore achieve its zero-waste goals, S$45 million has been invested in harvesting smart technology, as well as research and development. One example is finding other uses for Singapore’s incinerator bottom ash (IBA), a form of ash produced in incineration facilities which is usually dumped into the Pulau Semakau landfill. One option being explored is developing technological solutions to extract potentially toxic metals from the IBA. If that can be done, the IBA can be mixed with construction materials and also used for road construction.

Transforming the environmental services industry is another part of a shift towards a circular economy. The industry currently faces acute challenges such as an ageing workforce and low productivity. Under an industry transformation map, the government is pushing to increase productivity, digitalisation and innovation to introduce new vibrancy into the sector and to provide better jobs under the circular economy.

To support innovation, a regulatory sandbox for environmental services has been introduced. This allows innovative environmental services-related technologies and solutions to be tested in a safe environment with relaxed regulations, a necessary ingredient for a circular economy that always seeks new ways of doing things.

As a city-state known for its excellent governance, infrastructure and human capital, Singapore has the potential to be a world-leading circular economy. However, this will require not just the policies and resources of government and industry, but the enlightened effort of each and every individual as a consumer of goods and services, working member of the economy, and inhabitant of this beautiful planet.

In line with Singapore Sustainable Blueprint, corporations are proactively incorporating green efforts into every aspect of their organisation inorder to be keeping up to times. Sustainability has become the key strategy and new business approach in creating long-term value and foster longevity in the industry.

Require some funding to expand or transform your business? We offer a series of financing solutions for businesses from equipment financing, term loan singapore, SME Micro Loan and many more. Do contact us for a non-obligatory discussion!

 

 

5 Things Drivers Should Never Do In An Automatic Transmission Car

Driving an auto transmission vehicle tends to be the drivers’ preferred choice for the ease and convenience. Although it seems to be a straightforward process, there’re still hidden pitfalls that drivers should keep away from to have smooth driving experience. Been a frequent patron for car rental services in Singapore but always been charged extra on repair work for transmission problems upon returning your rental car? Your driving habits may be secretly damaging the gearbox. Here’s 5 habits drivers should avoid while driving an automatic transmission car!

1. Never shift the gear to park until the vehicle has come to a complete stop.

Please do not shift the gear to park while the car is still moving. By doing so, it may damage or break the locking pins that are meant to lock the transmission in place. Unlike the parking brakes which are meant to bring the vehicle to a stop, the park gear prevents the vehicle from moving.  Do rather be patient by applying the park brake and the lever to a complete stop than to spend more money for unnecessary repairs. With the advancement of modern automation, newer vehicles comes with speed sensors which prevent drivers from doing so.

 

2. Never put the vehicle in neutral mode while going downhill

One of the habits that some drivers have is to slide down slopes with neutral gear engaged (coasting).  The misconception that they have is that it’s fuel economy in this way. In neutral mode, the gearbox will be disconnected with the transmission with more fuel used to keep the engine at idle and insufficient fluids to lubricate the transmission for a smooth operation, causing significant wear and tear to the transmission band.

Not only it damages the vehicle transmission, drivers also have limit control over the vehicle. In neutral mode, connection is cut off the engine and the wheels. Drivers will not be able to accelerate or react in time in the event of any emergency and becoming a major road hazard. Do you know that coasting in neutral gear is prohibited in some states in United States? After all, it’s not worth to risk the repair fee and your life.

 

3. Never put the vehicle in neutral mode at traffic lights

Similarly when travelling down slopes, drivers have the misconception that it’s fuel economy to engage in neutral gear at traffic lights. However, it might end up revving the engine, consuming more fuel and more friction, damaging the transmission with more friction in the process. Apart from the fuel efficiency, drivers enjoy the fact that they will be able to rest their foot away from the brakes especially during traffic jams. Engaging in neutral gear is dangerous as drivers will have no control over the vehicle especially if any emergency movements is required.

For those who engage in the park gear during traffic lights, the damage involve will not be as minimal after all. Imagine having to switch from drive to park mode at every traffic light? In a long run, it’s a burden and will lead to critical damage to the transmission. Who knows if the gear might end up in reverse mode accidentally? Therefore, it’s always the best to step on the brakes and keep the gear in drive mode while waiting for the traffic lights to turn green! For newer vehicles which comes with the start/stop button, another option is to switch off the engines if the stop is lengthy.

 

4. Never try switching gears without stopping

Ever tried shifting gears without stopping in a manual transmission vehicle? You’ll probably get a very loud screeching sound. It’s a bad habit to switch gears while the vehicle is in motion. While automatic transmission vehicles will allow drivers to do so, the rapid movement of the gear shift could wear out the gearbox at an astounding pace. Use your brake to stop the vehicles before engaging in any gear shift.

 

5. Never launch the vehicle in neutral gear

Revving the car in neutral gear sounds cool in action movies. However, do you know that it’s actually very bad for the vehicle? Never rev the car engine in neutral gear and dip to drive suddenly to launch forward. Automatic transmission uses a torque convertor which serve the same purpose as the clutch in manual transmission vehicles, transmitting power from the engine to the wheels which are used to change and drive in different gears. By doing so, both the clutch and the transmission bands get wear out very fast and it’s costly to replace!

To prevent unexpected car rental charges, you may want to take note of the pointers above. For car owners, to lengthen the life and functionality of the vehicle components, do look out for your driving habits! Stay tuned for the next article on signs that drivers should look out for possible transmission problems.

As a full-fledged automotive solutions provider, ETHOZ provides car rental and leasing services in Singapore. Trusted by our clients, we are known for our reliability and high service standards. To optimize the best driving experience for our customers, we conduct stringent quality checks for every vehicles. These checks are performed by experienced mechanics in our own workshop facilities before every vehicles are released for use.

 

 

Choosing your Working Capital Loan Lender: 5 Things to Consider

As a borrower, you should look beyond your immediate needs. A suitable Working Capital Loan lender should be able to match your evolving financial needs as your business grows. The longevity of the relationship should be your end goal in mind. To start off on the right foot, how do you choose the right lender for your business? Here are 5 key factors to consider:

 

 

Credibility

Before committing to something new, a common practice is to ask around our circle of friends and family. It is advisable to do the same when taking up an SME business loan. Before handing over your sensitive personal and business financial information, ascertain that your lender is trustworthy. Accreditations by objective parties play an imperative role. Check against this list of licensed moneylenders in Singapore. Actively connect with other small business owners who have been in a similar position. They are likely to provide reliable referrals. When you get in touch with a potential lender, do your own groundwork. Observe if your queries are promptly and accurately addressed.

 

 

Interest Rates

Chances are interest rate is your first concern as a borrower. Never settle for the first quotation you receive. You can only determine how competitive the interest rate of a Working Capital Loan lender is when you have seen the rates of others. Most of the time, interest rates are proportional to the urgency of funding. If your business demands a higher response rate, it will probably come with higher interest rates.

 

 

Additional Fees

There are a number of costs associated with a Working Capital Loan. Some lenders leave it to you to read the fine print. Be aware of the basic costs to expect. It equips you to enquire on specific areas if details are not laid out transparently. The additional fees you can expect to pay include: origination fees, appraisal fees, underwriting fees and processing fees. Some lenders may offer packages that waive certain fees and others may include other miscellaneous fees.

 

 

Flexibility of Repayment

Some banks or financial institutions may offer no room for negotiation when it comes to fulfilling your repayment plan. Look for a lender that offers flexibility. You will find this quality especially invaluable when unexpected events arise. For example: seasonal fluctuations, business expansion opportunities, economic downturn etc. In these situations, it is vital that your lender is open to providing alternative options. For instance, an alternative option will be stretching your loan tenure without charging an exorbitant penalty fee.

 

 

Response time

Time is of the essence when it comes to business. Banks can take up to months to approve a loan application. By the end of the process, a golden opportunity may have slipped you by. In this aspect, a private Working Capital Loan Lender typically one-ups a bank. The key response times are: time taken to deliver proposal, time taken to deliver commitment, time taken to deliver closing documents and time taken to disburse funds. The shorter the response time, the lesser opportunity cost incurred by your business.

 

 

Conclusion

In conclusion, your choice depends on your business priorities. There is no one-size-fits-all solution to finding a Working Capital Loan Lender. More often than not, one or more factors will be compromised in a financing arrangement. For example, if response time is on the top of your priority list, it is highly likely interest rates may be higher.

 

 

Why ETHOZ?

Incorporated in 1981, ETHOZ is an established Working Capital Loan Lender. Our shareholders are well-established in the market – Tan Chong Motors and ORIX. At ETHOZ, we understand the importance of being equipped with cash flow to capitalize on a window of opportunity. Hence, we pride ourselves on our competitive response time. With our customers’ varying and evolving needs in mind, we offer flexible repayment options. Our processing fees and interest rates are fixed, providing transparency to all our customers.

To find out more on how ETHOZ can assist your business with Working Capital Loans, call us at 6654 7799 or drop us a message here.

 

 

How Fintech is Reshaping the Financial Sector

“Fintech” has become a buzzword in the tech community of late, and for good reason as well. Based on a KPMG Pulse of Fintech report, funding for the industry went over the US$31 billion mark in 2017 – US$229.1 million in Singapore alone. This year, it only took six months for global investments to reach US$41.7 billion, surpassing that of last year, says research by Fintech Global.

But what is “fintech” really about and why has it seemingly taken over the financial landscape? To the uninitiated, fintech is short for financial technology, and is at its core the use of technology to develop new financial services and products – often for financial businesses themselves.

Such innovations (such as cryptocurrency, mobile banking, crowdfunding and blockchain) are typically disruptive to the traditional market, and may bank on other technological trends such as big data, the Internet of Things and artificial intelligence (AI).

While this has created a wealth of opportunities for startups to break into the finance market with new Fintech Singapore innovations, industry giants in the form of major insurance and banking institutions have hopped onto the bandwagon as well with their own developments, resulting in changes in various banking, lending and insurance services.

 

 

Banking Services

For one, traditional banking is evolving into a more digital process with mobile payment apps, Internet banking and digital, paperless outlets. DBS, one of the most popular banks in Singapore and the largest one in Southeast Asia, is leading the way with a complete rebranding. Kick-started in May 2018, its golden jubilee saw the “world’s best digital bank” focusing a lot more on digitising and automating its services with an aim to make banking “invisible”.

It started in 2014 when the bank launched DBS PayLah!, its mobile payment and money transfer app. Today, it has unveiled fully mobile, digital banks (also known as digibank) in India and Indonesia that use AI virtual assistants and natural language technology to serve more than a million customers.

But it’s not enough to introduce these front-end solutions. It had to be a total revamp that tackles even the back-end processes, such as running internal operations on the cloud and rejuvenating old legacy systems with APIs.

With increased digitisation, comes more obsolete jobs as well. In DBS’s case, Digibank’s AI-powered assistants have replaced customer service representatives and conventional bank tellers. Likewise, OCBC’s digitisation efforts have led to the cutting down of teller jobs. As Business Times reports, the number of tellers working at OCBC has dropped by 15 percent in the last five years, and the bank is looking to reduce the number even more to half as many in the next two years.

At the same time, the remainder of the banking workforce that deal with customers are sent for training to get them reskilled and geared up for the new digital wave. Known as the professional conversion programme (PCP), it has seen hundreds and thousands of employees from Citibank, DBS and UOB.

In the area of investment, automation has also been made possible through fintech. Dubbed “robo advisers”, they replace their human counterparts, and use algorithms and the abundance of data they have to offer investment advice, making it a less complex and costly process for individuals. These are useful tools for investing newbies, as well as those who lack the time and energy to manage their assets and investments.

Various apps have popped up as well, some providing a marketplace that matches investors with borrowers, others introducing an easy, passive way to make micro-investments.

 

 

Lending Services

A close cousin to investing is lending, of which the traditional process involves the borrower, lender and regulator. With fintech introducing peer-to-peer lending and crowdfunding platforms, the middleman is removed.

The money now moves directly from one party to another without the help of intermediary institutions such as banks and insurance firms. As such, the cost of borrowing is pleasantly lowered, while the length of such transactions is shortened.

Though the absence of an established middleman translates to more control over the lending process, there is the issue of security. How do you ensure you’re not just throwing your money away? Thankfully, fintech has solutions for this as well, and the answer lies in data analytics.

Lenders are able to gather a wealth of data from sundry sources and websites, with the click of a button, to analyse the borrower’s creditworthiness and discern the risk attached to them. Because such data is so readily available, the review process becomes a lot speedier and no longer requires stacks and stacks of documents – which means greater convenience for the borrower.

Processes such risk assessment and underwriting have been automated with fintech, while traditional banks are lagging behind with manual, human-powered work. Needless to say, thanks to automation, it has led to a massive reduction in operating costs, and increased the capability to process and approve more cases – in particular, cases that larger banking institutions would typically reject.

Though the ones who stand to gain more from these new lending models (made possible through fintech) seems to be the borrowers, the lenders are not forgotten either and receive more autonomy over their loans – a big benefit of security and control that isn’t afforded in traditional processes.

 

 

Insurance Services

Just as other sectors of the finance industry have seen a flurry of new apps, services and programmes, so has the insurance sector. From Singapore Life to PolicyPal, these products simplify the process of getting insured and advise you on the best plans for your specific needs, with all things taken care of within the digital sphere.

Not only do users get more transparency over the process, they also get to dodge the traditionally high premiums of insurance offered by the usual insurance companies. While the consumers enjoy these digital perks, the agents suffer the consequences.

Gone will be the days of commission-driven insurance sales, when people are better equipped to buy the plans themselves. It’s no surprise that the fintech-fuelled digital transformation of finance corporations equates to the loss of jobs, and while some have quietly accepted their fate, others have been pushing back – such as the insurance agents of Prudential.

After announcing their plans for digitalisation, about 350 out of 600 its dissatisfied employees submitted a petition in protest, citing that focusing on online sales will threaten their earnings, and thus, their jobs.

Perhaps it’s a necessary evil to reduce or get rid of soon-to-be obsolete jobs. For Prudential, they’ve set their sight on using new technologies such as AI to data analytics to produce better products and experiences.

As long as traditional companies such as DBS and Prudential continue to adapt to the changing landscape and customer needs, they just might stay afloat long enough not to be wiped out by the fintech disruption. As for the others who still believe in the “old is gold” adage, it’s likely to end up as fool’s gold.

 

 

SME Working Capital Loan Application: 5 Things Lenders Consider

Understanding your lender’s perspective is key to securing a business loan. When reviewing a Working Capital Loan Application, lenders assess your SME based on a few critical factors. The 5 Cs of Credit is a benchmark commonly used by lenders to determine the credit worthiness of potential borrowers.

In this article, we look at the 5 Cs of Credit and how you can improve on them. This will increase your chances of a successful Working Capital Loan application:

 

 

Character

Character refers to a business’s reputation of trustworthiness. Having a solid credit history is a good indication. It reflects your ability to run a profitable business. For young SMEs with minimal business credit history, your personal credit score as a business owner is critical. If your business has been operating without credit history, we recommend that you start building your business credit score. It will come in useful in future loan application for expansion purposes. Ways to improve your credit history are ensuring timely repayments, leaving a percentage of available credit unutilized and having a good credit mix. In addition to your credit history, lenders also look at the length of time in business. The longer you have been in operation and profiting, the lower the risk perceived. A fair amount of management and ownership experience is an added bonus.

 

 

Capacity

The primary concern of a lender is whether your daily business operations generates sufficient cash flow for repayments. Most lenders require you to provide cash flow statements and projections. Another common measure of financial health is Debt Service Coverage Ratio. It measures the relationship between the debt and income of your business. As a general rule of thumb, a ratio under 30% is favorable. Having a buffer allows your business to continue making timely repayments in times of financial instability.

There are a few ways to lower your Debt Service Coverage Ratio. The methods are: increasing your net operating income, decreasing your net operating expenses, and paying off existing debt.

 

 

Capital

Capital refers to how much money you, as a business owner, have invested in your venture. In other words, it refers to how much you have at stake if the business fails. A large investment in your business indicates that you are willing to take a personal risk. This in turn gives lenders the confidence to take the risk with you.

The key is to allow your lenders to see your commitment to the business. First of all, have a significant personal investment in the business. Next, highlight how you have been successful in utilizing your capital in investments. Back your success with figures i.e. increase in sales revenue. Lastly, communicate the purpose of the loan. Let your lenders know the detailed planning of how the loan amount will be distributed across business operations.

 

 

Collateral

Collateral is an asset pledged to the lender. Similar to owner’s capital, collateral gives the lender assurance. If your business defaults on the loan, the lender can recover the debt by seizing and liquidating the collateral. To ensure that the collateral provides sufficient security, the useful life of the collateral is expected to meet or exceed the term of the loan. As an extra layer of security, most lenders loan only a percentage of the appraised value of the collateral. Each lender has a set of requirements when it comes to collateral. Some lenders will require a personal guarantee. As there are no specific assets pledged, personal guarantee does not constitute a secured loan. However, it is important to understand that all of your personal assets are at stake if you fail to make repayment. At the end of the day, it boils down to the extent you are comfortable with offering as collateral to secure a loan.

 

 

Conditions

A lender takes into consideration factors beyond the boundaries of your business. Factors include the global and national economy, industry trends, as well as legislative changes relative to your business. These factors directly affect the ability of your business in making repayments. While you may not be able to control the aforementioned factors, you can improve conditions. A tip is to apply at the right timing. While it may seem counter intuitive, the best time to make a Working Capital Loan application is when your business does not need it. When your business and the economy are flourishing, you are likely to receive the most favorable terms.

All in all, aim to establish the trustworthiness and profitability of your business. The end goal of a lender is to receive timely repayments. If you are weaker in one aspect, compensate with your strength in the other 4 Cs.

Stay tuned for our final installment of this series – 5 Things to Consider When Choosing a Working Capital Loan Lender. Visit our Working Capital Loans for small business page or call us at 6654 7799. Alternatively, drop us an email at contactus@ethozgroup.com today!

 

 

How much Working Capital Loan does my SME need?

In this sequel, we address the numbers question. How much Working Capital Loan does my business need?

An ideal working capital management can be defined as striking a balance between two key factors: profitability and liquidity. Profitability is determined by the use of cash to invest in long-term assets. For example, Research and Development. These assets maximizes returns in the long run. Liquidity refers to a sufficient level of cash on hand. This sum aims to cover operational expenses, repay debts and still have an adequate amount left. A business should have a financial reserve at all times to minimize the risk of insolvency.

A useful tool for determining the health of your business’s Working Capital is the Working Capital Ratio.

Working Capital Ratio = Current Assets / Current Liabilities

A general rule of thumb for Working Capital Ratio, a healthy ratio lies between 1.2 and 2.0.

If your Working Capital Ratio is lower than 1.2, your business may have difficulty with operational cash flow. This includes footing your bills and repaying debts on time. Your business is also susceptible to insolvency issues in times of financial emergencies.

If your ratio is higher than 2.0, it can be an indication that your business is not maximizing its profitability potential. The cash can be put into better use in investment and new growth opportunities. The aim is to generate profit in the long run.

The Working Capital Ratio equation helps businesses find the pivotal point between profitability and liquidity. A business needs to have ample cash for business operations and repayment of debts. However, not to the point of having excessive cash lying stagnant. This helps you figure out how much Working Capital Loan your business needs.

To find out more on how ETHOZ can assist your business with Working Capital Loans, call us at 6654 7799. Alternatively, drop us an email at contactus@ethozgroup.com for a non-obligatory discussion!

 

 

5 Types of Working Capital Loan for SMEs in Singapore

In the first article of this series ‘A Guide to Working Capital Loans for SMEs in Singapore’, we covered 5 Reasons why SMEs in Singapore need Working Capital Loans. In this segment, we look at the various types of Working Capital Loans. While each type caters to diversified business needs, they share a common objective of helping businesses manage cash flow. Here are the 5 most common types of Working Capital Loan:

 

 

1. Accounts Receivable Loan

A form of Working Capital Loan, an Accounts Receivable Loan is a loan taken out based on its accounts receivables. Examples of accounts receivable include invoices or cash owed by customers to the business. Taking into account factors such as the age of the receivables, a financial institution usually loans out a sum that matches or is less than the receivables’ value. An Accounts Receivable Loan alleviates the problem of cash flow trapped in unpaid debts, improving cash flow.

 

 

2. Merchant Cash Advance Loan

Similar to an Accounts Receivable Loan, a Merchant Cash Advance Loan works by exchanging future assets for immediate cash. The difference between the two lies in the asset being traded in. For Merchant Cash Advance Loan, the asset is future credit card sales. When a business takes up this Working Capital Loan option, it receives upfront working capital. The loan will then be paid off through daily deduction of a certain percentage. For example, a merchant deducts 15% of your daily credit card sales until he has fully recovered the advance. This type of loan is only applicable to businesses that accept credit card payments.

 

 

3. Trade Credit Loan

A Trade Credit Loan allows a business to delay the payment for goods and services. Under this Working Capital Loan arrangement, the bank or financial institution pays the supplier upfront. While the bank receives the title of ownership, it allows the business to take possession of the merchandise for manufacturing or sales purposes. This is certainly useful for businesses which are only able to make payment after cash inflow from sale of inventories. If your business faces difficulties repaying the full amount on the loan due date, some banks or financial institutions offer the option of converting to Trust Receipt. Trust receipt allows for repayment on an installment basis.

 

 

4. Line of Credit/ Overdraft Loan

A bank overdraft is a flexible borrowing facility granted by a lender on a bank current account. It allows borrowers to tap on a cash supply within a limit granted by lenders for working capital needs. The key benefit of an overdraft is the flexibility to make repayments at any point in time without incurring early repayment penalty. The risk lies in the overdraft being subject to the annual review of the financial institution. In this case, a business must return the difference in amount after review to the financial institution immediately to prevent an adverse impact on your credit record.

 

 

5. Business Term Loan

The most straightforward type of Working Capital Loan, a Business Term Loan is repaid in a structured way. It is disbursed with a fixed repayment period which spans 1 to 5 years. The interest rate can be fixed or variable, depending on the financial institution you are borrowing from.

In partnership with Spring Singapore, ETHOZ is committed to growing promising SMEs in Singapore. Under the Local Enterprise Finance Scheme (LEFS), we provide SME Micro Loans or Business Term Loans. These loans support local SMEs with amounts up to $100,000 and $300,000 respectively.

To find out more on how ETHOZ can assist your business with Working Capital Loans, call us at 6654 7799. Alternatively, drop us an email at contactus@ethozgroup.com for a non-obligatory discussion!

 

 

5 Reasons Why SMEs in Singapore Need Working Capital Loan

What is a Working Capital Loan?

A Working Capital Loan is a loan that finances the day-to-day operations of a company. This covers product development, rental, accounts payable and staff salaries. It does not include purchase of long-term assets such as property, machinery and equipment.

 

 

5 key reasons why SMEs in Singapore need Working Capital Loans:

 

 

1. Inconsistent Cash Flow

Especially for young start-ups, generating a steady stream of income in immediate may not be a practical expectation. During dry seasons, a Working Capital Loan ensures that bills are paid and daily business operations continue to run smoothly. In some arrangements, customers only pay on delivery of goods. In this case, a Working Capital Loan bridges the financial gap between the collection of accounts receivable and accounts payable.

 

 

2. Sales Fluctuation

Large dips and peaks in demand can be effected by several factors. Factors include change in season, trends, the global and local economy, population and technological advancements. Having a Working Capital Loan allows you to react effectively to evolving demand. When demand peaks, a Working Capital Loan equips you to divert resources to optimizing output. Similarly, it dulls the impact when demand dips by allowing you to make reflexive decisions. For instance, clearing of inventories at a lower price.

 

 

3. New Business Opportunities

Making business decisions is all about timing. A Working Capital Loan financially empowers you to take advantage of an opportunity when it presents itself. Business opportunities include product innovation and expansion into new markets. In such situations, seeking for investors or waiting until your profits allow for it may cost you the opportunity. At times, the opportunity cost of missing the time frame can be more costly than the value of the loan.

 

 

4. Emergency Fund

Having a financial reserve to tide over unexpected expenses is essential. No matter how meticulous your business planning and projections may be, unexpected surprises may come knocking on your door. From machinery breaking down to a long-standing client discontinuing your working relationship, these issues can be costly. A Working Capital Loan allows you to repay the debt over time. As a result, the impact and cost will be spread out.

 

 

5. Debt Restructuring

A business may take on loans from various entities at different stages. Over time, it may become increasingly strenuous to keep track of the different repayment terms. A loan that consolidates your borrowings makes your finances more manageable. Restructuring also allows you to take advantage of lower interest rates. This potentially reduces your total monthly repayments. Freed up cash flow can therefore be diverted to other areas such as product development or business expansion. Lastly, taking up a new Working Capital Loan is an alternative to defaulting on existing debt.

To find out more on how ETHOZ can assist your business with Working Capital Loans, you may reach our friendly Relationship Managers at 6654 7799. Alternatively, drop us a message contactus@ethozgroup.com today!.

 

 

How Much is Your Business Going to Cost?

You’ve progressively adumbrated a brilliant idea in your quiescent mind. But you’ve mostly spoken lightly about it because while you can foresee the benefice, you’re not sure how much you’re going to need from the get-go.

Well, guess what? It’s 2018, and the buzzword of the year seems to be disruption.

From the way we travel to the way we work, we’re talking about digital technologies changing life in every way possible. The digital age purports a bright future full of opportunities – and it is an exceptionally apt time for aspiring entrepreneurs to steer the wheels of disruption to their advantage.

Of course, even with the all right tools in all the right places, you’re going to need numbers. I’m talking about the dollars and cents that are going to determine if your idea remains in fleeting thoughts or translated onto paper and real results.

Before we go anywhere, I’d suggest reading up a couple of start-up guides. Check out the five recommended books to read before starting your business put together by online business resource hub Entrepreneur!

 

 

Upfront Costs

These are fees you, unfortunately, cannot avoid if you’re thinking of setting up a business here in Singapore.

As long as your business is intended for long-term profit making, you’re going to need to do is the register with the Accounting and Corporate Regulatory Authority (ACRA). That would cost you S$315.

Depending on the nature of you business, you should also consider other costs including permits, licenses or compliance costs, a website and domain name, and registering your intellectual property.

The good news is all these are one-time costs, which means they do not present as recurring bills so it’d give you a good idea of how much you need minimally to start a business.

Once you register your business, it’s official. Any business, regardless of size, is a long-term commitment so before you plunge into the black-and-white, explore these sources for a breakdown of funds you’re going to need:

 

 

1. Are you franchising?

If your idea has already been established by a reputable brand, franchising is a great option. An in-depth discussion with the franchisor will likely give you lots of insight about start-up costs but don’t take these numbers as absolute. Your actual budget would definitely vary by a margin taking into account the location of your business, among other factors.

 

 

2. How niche is the market you’re breaking into?

Truth is, many new ventures today improvise existing business models to fill the gaps that current business failed to fill. What was a particularly niche market some 50 years ago could well be saturated today. But that also means you’re able to find entrepreneurs who own businesses similar to the one you’ve got on hand. Chances are, your future competitors wouldn’t want to assist you but you can always research outside of geographical location.

 

 

3. Do you require supplies?

Get on the phone and approach several suppliers. It’s okay to be forthcoming and tell them you’re intending to start a business. These suppliers will be equally forthcoming because they want to earn money from you. When you’re on the phone with a supplier, ask about working capital loan, equipment leasing, bulk-buying discounts, credit terms, inventory packages and other options that might lower your upfront costs.

Don’t ever be in a hurry to settle for the first few suppliers you contact, though. Aim to do some price comparison – that could make significance differences in your start-up costs!

 

 

4. Are you going to need a workspace?

If your business is retail-based, you might need a warehouse to store your stocks and possibly a physical storefront for retail operations. Rental leases will always demand at least two month’s payment as soon as you sign the agreement. Depending on how fast your business turns over, it is advisable to set aside at least four months of rental from the get-go.

If you don’t require a storage space or a physical space but a simple workstation, options are aplenty! In order for your business to flourish while working from home, you need to demonstrate the same kind of discipline you would with an office job ie. waking up at 6am, starting work at 8am, and actually working the full eight and a half hours. If you already know you won’t be able to commit that way, consider co-working spaces (JustCo, the Hive, The Working Capitol, etc).

If you don’t require a regular workstation, you can definitely cut costs by making use of public space (e.g. libraries, cafes)!

 

 

5. How big is your team going to be?

No one is a one-man island so you’re probably going to need some extra helping hands. But what kind of helping hands do you need? Realistically speaking, different expertise will command different pay grades. Thankfully, with digital disruption, we’re looking at an age with undefined job roles so while one person is equipped with various skills you’re looking for, you must not forget the basic benefits (annual leave, medical leave, hospitalization, etc) employees are entitled to. Don’t forget their CPF contribution as well!

Give it some detailed thought. Your budget will shift according to how big your team is expected to be.

With all these numbers here there everywhere, it’s definitely a great idea to fall back on the good ol’ Excel to help you forecast your cash flow for your first 12 months of business.

Do not be disheartened to find that you’re going to end up in deficit. It’s normal to operate at a loss when you first start, which is why this spreadsheet will give you a good idea how much you’ll need in reserve to sustain during this period.

ETHOZ is committed to growing promising SMEs in Singapore. If you would like to find out more about how ETHOZ can assist you and your business, you can contact our friendly Relationship Managers at 6654 7799 or drop us an email at contactus@ethozgroup.com today!

 

 

Singapore’s SMEs Flying High

Singapore’s very founding is rooted in a strong sense of entrepreneurism. Our forefathers crossed great oceans to strike it out in this veritable emporium of the East. Even today, small-medium enterprises (SMEs) make up the beating heart of Singapore’s economy. They comprise 99% of enterprises on the island which,  numbers roughly 188,000 entities, contributing up to 50% of our nation’s GDP, and providing employment to 65% of the workforce. Jostling alongside globally recognised MNCs for business both locally and overseas, these figures might come as a surprise to most.

SME’s, are described by the Ministry of Trade and Industry Singapore as companies with group annual sales of not more than $100 million or group employment size not exceeding 200. Even in the USA, SMEs pack a powerful punch, comprising 97.9% of all employer firms and provides more than 45% of GDP.  Although small in size, they are valued for being nimble – being able to adapt to changing situations, customer needs and changing client requests, highly innovative and scalable are all hallmarks of SMEs.

 

 

Drivers of the Future

As drivers of a country’s future, it is then only right that there is so much emphasis on SMEs by government bodies. In Singapore, there are several organisations created especially to provide assistance, financing and guidance to SMEs, such as A*Star, Spring Singapore, IE Singapore, and separate agencies like IMDA (Info-commercial Media Development Authority) and GovTech (Government Technology Agency of Singapore). This has helped greatly in encouraging a fledgling entrepreneurial spirit and drive for innovation in the nation.

In most aspects, Singapore is already a nexus point for ideas, start-ups and creativity, much in the same vein as Silicon Valley, Tel Aviv, Bangalore or London. Google, Paypal, Facebook, Amazon all maintain a presence on the island. Venture capitalists, the likes of Eduardo Saverin’s B Capital Group and Sequoia Capital have followed to provide their services and the community has been thriving since the last several years. With a vibrant, burgeoning scene, access to funding and developing markets not yet saturated with players, this is the place to be and the time is now.

 

 

Making Waves in Asia

Grab, with headquarters in Malaysia and Singapore, is a regional poster boy where prominent, successful and international start-ups are concerned. Founded only in 2012, Malaysians Anthony Tan and Tan Hooi Ling have ousted rivals the likes of Uber in several markets and acquired funding of US $2.7 billion.

Sea Group, more recognised by its gaming arm, Garena which is an internet gaming platform provider, attracted funding of US $1.4 billion. This shot in the arm allowed Singaporean CEO and founder, Forrest Li to diversify from fun and games to internet shopping and digital financial services.

Taking on the likes of Netflix, is Viu Singapore, that picked up US $110 million in funding. Since its launch in late 2015, it has acquired 12 million monthly subscribers across Asia and the Middle East, with plans to serve 20 million by 2020.

Aside from attention-grabbing tech companies, Singapore’s F&B SMEs have also found success by making forays into neighbouring countries. Breadtalk, the bakery, and even Bee Cheng Hiang, the barbequed pork chain have both penetrated markets as far away as Japan. Even banks, with its traditionally prudent approach to working with SMEs have begun to tailor its offerings to this sector which, have seen venture capitalists and angel investors snap up chunks of the pie. Case in point is OCBC and Lion Global Investors establishing a private equity fund in 2015 to invest in SMEs in Singapore, Malaysia, Indonesia and China.

 

 

Bright Sparks Despite Difficult Times

It seems that SMEs have got it made but the truth is that topping the competition is a hard worn battle. Competitors can come from all angles. Globalisation has proven to be a double-edged sword providing opportunity as well as rivals from around the world. The perennial problem of high operational costs, especially rent and staff-related expenses remain a bane for small businesses. Office rentals reached a peak in 2015 after rising about 40% in 10 years, only abating less than 10% in the 2 years since then. Customers are also becoming harder to get a hold of. Greater access to information empowers customers to make the best or cheapest purchases, making it more difficult for SMEs to make a sale even if their product or service is superior. These empowered customers have more choices, more information and also more demands.

Overall, in the face of these challenges along with fears of a global slow down, SMEs are maintaining a brave front about the future. There is a general wave of confidence that 2018 will bring positive developments. A survey done by the Singapore Business Federation, indicated that services, manufacturing, trading and the construction industry showed the highest levels of confidence due to public sector construction works in the pipeline. Many companies also expected to expand their business within the year and have sanguine expectations of continued availability of financing options such as SME loans in Singapore.

Rising to the occasion with enough grit to make our pioneering forefathers beam with pride, several SMEs have, nevertheless, already beaten the odds to carve a niche in their respective fields. Aside from the usual measure of perseverance, foresight and creativity, these tenacious establishments had much more in them, allowing them stand out from the pack.

 

 

MM2 Asia

Since the halcyon heyday of local film studios like Shaw, Cathay Keris and the Malay Film PRoductions Ltd. of the 1940s through to the 1960s, local and even regional talent has been sidelined into obscurity. MM2, however, has made great strides in recent years to put Singapore back on movie-goers’ minds and fending off modern cinema stalwarts from Hollywood, Japan, Korea and China. Having the foresight to identify a gap in the film industry, MM2’s core business started in film production. Relentlessly producing content to the tune of almost 80 films in the decade leading up to 2018, they honed their craft and released favourites like the “Ah Boys to Men” series. By 2014, they were the first and only Singaporean film production company to list on the stock exchange (SGX). With this available financing, they diversified into upstream and downstream activities such as expanding their production capabilities into animation, as well as operating a string of cineplexes and even a foray into organising events. This approach has paid off, with revenue growing 73% and profits increasing by 127% since 2013.

 

 

The Watch Fund

Although Singapore has branded itself as a financial centre, there had not been an exotic investment of this breed until now. The brainchild of local watch aficionado, Dominic Khoo, the fund allows those who buy in with a minimum of a quarter of a million dollars to wear insanely valuable timepieces while potentially earning a return on the investment.

Investment grade watches are difficult to come by and unavailable to most. The founder spent many years building up a global network of contacts in the highly guarded industry by getting involved in watch publications, marketing and then in auctioning. This in turn led to the idea of starting an investment fund centered around watches. Its secret to success comes down to access. Firstly, investors are allowed to wear the time pieces that form the underlying asset of the fund and this is a strong inducement. Next, the founders have access to the products which otherwise lie behind high barriers to entry. The ability to procure items on first access, at lower prices, that are limited editions or provenance pieces is the key to obtaining watches that can yield a return when sold.

 

 

Chope

As Singapore’s other favourite pastime aside from watching movies and making money, we spend much of our time looking for that next delicious dinner. Combining new technology with the age-old love of food, Chope is the most successful in a slew of restaurant reservation booking platforms, attracting a funding round by venture capitalists in 2015 and 2017.

Starting in 2011, Chope was amongst the first movers to attempt to capitalise on the idea of making restaurant bookings online from a single platform. Since then many competitors have entered the scene and many have also thrown in the towel. In an interview, founder Arrif Ziaudeen cited tenacity, constantly building its network of restaurants and expansion into new markets as the reason for its success. Having aggressively extended its reach into markets like Shanghai, Hong Kong and Indonesia in its relentless search for new business, is the chief reason why international venture capital firm Square Peg Capital took notice of the hungry, growing start-up. It seems that equally ravenous patrons have not overlooked them too.

With the often quoted dismal survival rates of businesses in their first year and fifth-year milestones, running one seems like an uphill task. However, with some good old Singaporean perseverance and can-do spirit together with ingenuity and elbow grease, rewards can be reaped.

Together with government support initiatives and confidence in the economy expected to turn a corner, the next Adidas or Apple might just be around the corner. After all, these juggernauts all started from humble beginnings themselves – all part of the natural lifecycle of an enterprise.

Find out more about our SME loan package in Singapore. If you would like to find out more about how ETHOZ can assist you and your business, you can contact our friendly Relationship Managers at 6654 7799 or drop us an email at contactus@ethozgroup.com today!.