Factoring Loans: Boosting Cash Flow for SMEs in Singapore

May 21, 2024
April 28, 2024

In Singapore's vibrant economic environment, small and medium-sized enterprises (SMEs) frequently encounter cash flow challenges. Factoring loans offer a distinctive financial solution by swiftly converting outstanding invoices into immediate cash, easing liquidity constraints for these businesses.

What is a Factoring Loan?

A factoring loan enables businesses to sell their accounts receivable to a third party, known as a factor, at a discounted rate. This arrangement diverges significantly from traditional small business loans by providing immediate capital access. Businesses receive up to 90% of the invoice value upfront, thus improving their cash flow without needing collateral or diluting equity. Particularly beneficial for SMEs, factoring loans are ideal for those with limited credit history but with reliable customers, offering a swift liquidity boost to enhance operational efficiency.

Advantages of Factoring Loans for SMEs

Factoring loans offer SMEs a compelling financial solution with several advantages over traditional credit forms:

  • Quick Access to Cash: Factoring provides immediate funds by converting outstanding invoices into available capital, sidestepping the often lengthy approval processes associated with conventional loans.
  • Flexible Credit Requirements: Unlike traditional loans that heavily rely on the borrower's credit history, factoring loans assess the creditworthiness of the SME's customers, opening up access to a broader range of businesses.
  • Cash Flow Management: By receiving funds quickly, SMEs can better manage their operational cash flow, ensuring that business activities continue smoothly without the need for equity dilution.

These benefits make factoring loans particularly appealing for SMEs looking to maintain control and agility in their financial strategies.

Case Study: Park N Parcel

Established in 2016, Park N Parcel provides essential logistics services such as fulfilment, collection points, deliveries, and returns. As a startup, Park N Parcel struggled to secure traditional funding due to needing to be more profitable, a common challenge for emerging businesses. Recognising their potential, GB Helios offered factoring and credit revolving facilities that were tailored to their operational needs.

Gan Hong, the founder of Park N Parcel, likes GB Helios’ supportive and flexible approach and that GB Helios was keen to understand the business deeply rather than just assessing it based on current financials. This partnership enabled Park N Parcel to improve its cash flow significantly, which was essential for its operational sustainability and growth. Gan expresses his satisfaction, stating that the responsiveness and tailored solutions provided by GB Helios make them a recommended partner for companies seeking supportive financial growth strategies.

Steps to Acquiring a Factoring Loan for Your SME

Securing a factoring loan in Singapore involves several straightforward steps:

  1. Eligibility Check: Assess the creditworthiness of your customers since the loan is based on their financial reliability.
  2. Invoice Assessment: Determine which invoices to factor, considering their value and your immediate cash needs.
  3. Choose a Provider: Select a factoring provider like GB Helios that offers terms suited to your business’s financial structure.
  4. Application Process: Submit the required documents, typically less extensive than those needed for traditional loans, such as recent bank statements and proof of business registration.

Collaborating with GB Helios for Customised Factoring Solutions

Partnering with GB Helios offers SMEs access to factoring solutions that cater specifically to their financial circumstances.

Reach out to us today and learn how our expertise in business financing solutions in Singapore can empower your growth and streamline your operational processes.

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