How SMEs in Singapore Are Using Accounts Receivable Financing to Accelerate Growth

Small and medium-sized businesses (SMEs) in Singapore have had a harder time controlling their cash flow in recent years, especially as a result of clients’ late payments. The COVID-19 epidemic, which stretched financial operations and upset global supply chains, has made this problem worse. In order to retain cash and foster expansion, a lot of SMEs have resorted to accounts receivable finance as a strategic solution.

Comprehending Accounting Finance for Receivables

Invoice financing, another name for accounts receivable financing, enables companies to turn their unpaid bills into quick cash. Through this financial tool, SMEs can obtain up to 90% of the invoice value up front. The remaining amount, less any relevant costs, is paid when the customer settles. This type of financing is available to a wider range of SMEs than typical loans because it is based on the value of receivables rather than the company’s credit history.

Applications in the Real World in Singapore

A number of Singaporean SMEs have effectively improved their cash flow and fueled growth by using accounts receivable financing:

Clients’ late payments made it difficult for Asti, a business that provides non-destructive testing services to the oil and gas sector, to pay employees and suppliers on schedule. Asti was able to obtain funds quickly by using digital receivables finance solutions, which guaranteed on-time payments and allowed the business to take on additional contracts, which increased income.

Accounts receivable purchase programs, which offer instant working capital against unpaid bills, have benefited numerous Singaporean enterprises. For instance, after using these financing services, a client in the marine sector that had invoices past due for more than 120 days was able to improve cash flow and concentrate on growing their business.

The Advantages of Financing Accounts Receivable

There are various benefits to accounts receivable finance for SMEs.

Better Cash Flow: Without having to wait for client payments, companies may pay suppliers, cover operating costs, and invest in expansion prospects when they have access to quick cash.

Flexibility: As sales and receivables rise, so does the amount of finance available, offering scalable assistance in line with business growth.

No Collateral Needed: Because the financing is based on receivables, companies do not have to pledge any other assets, which makes it a desirable choice for those that lack substantial collateral.

Fast Processing: Compared to traditional loans, the application procedure is usually quicker, and some lenders can disburse funds in as little as 24 or 48 hours.

Things to Think About for SMEs

Despite the many advantages of accounts receivable finance, SMEs should take into account the following:

Costs: Since financing fees can differ, it is critical to comprehend the terms and make sure they match the company’s financial capabilities.

Relationships with Customers: A third party may be involved in some financing agreements to collect payments, which may have an effect on customer relations.

Eligibility Criteria: SMEs must fulfill certain standards set forth by each funding provider, such as a minimum operating experience or a particular percentage of local shareholding, in order to be eligible.

In Singapore, accounts receivable finance has become an essential instrument for SMEs looking to close cash flow gaps and fund expansion plans. Businesses can keep things running smoothly and take advantage of fresh opportunities by turning unpaid bills into instant cash. Examine accounts receivable finance as a potential remedy if your company is having cash flow issues or wants to grow. Speak with your bank or a trustworthy lending company about how this choice might be customized to meet your unique requirements.