Factory Financing in Singapore: A Guide for SMEs

Looking to finance a manufacturing facility in Singapore? Two routes cover most needs: invoice financing for the day-to-day cash-flow gap when customers pay late, and the government-backed Enterprise Financing Scheme — or Funding Societies’ own Business Term Loans — for larger equipment and premises purchases. All three are covered in detail further down this guide, alongside the operating costs every manufacturing business needs to plan for.

If you are looking to set up your own manufacturing facility in Singapore, there should be some factors for you to consider as it can be a challenging task for any entrepreneur. Your profit and loss figures identify your sales, expenses and the resulting profit or loss. This information is vital as a financial overview of the viability of the business and as a basis for calculating your tax liability. However, this figure does not detail the actual production unit costs. The income statement does not provide a basis to determine what profit would be if sales were increased. You cannot project a profit from the income statement alone because there are certain expenses that would stay the same, no matter your sales numbers, and certain expenses that would increase or decrease. In addition, the income statement does not provide information relating to the number of units sold.

In order to project increased sales and profits, you could consider breaking down the sales and expenses into a different format, re-categorizing your expenses into variable and fixed costs and create a cost accounting report.

What are expenses faced by a manufacturing business?

There are many types of cost in the manufacturing business such as fixed costs, variable costs, direct and indirect costs. Mapping out your costs will help you conduct business more effectively. It will also help you arrive at the right pricing for your product in the market. Let’s take a look at some of the costs that might be applicable to your business:

Variable Costs

A manufacturing business would include costs of materials, packaging, direct labour and any outside subcontracting costs. A variable cost is an expense that changes according to the number of products sold. For example, you manufacture widgets and the cost to produce one is $8. Material cost is $6. Let’s do an analysis of the direct labour cost. The person overseeing the conveyor belt, the inspector and other workers is $2 per widget. If you make 100 widgets your cost is $800. However, if you make 200 widgets, your cost is $1,600 and the cost increases with the quantity produced.

Fixed Costs

A fixed cost is one that does not change, regardless of sales volume or changes in production levels. List and total the fixed costs the business incurs. To do a costing for the month, add up rent, utilities, insurance, office supplies, administrative salaries, and all the items on your profit and loss statement not included in variable costs. Subtract your fixed costs from the gross profit generated on the variable cost report to see how much you are making or losing every month.

Direct Costs

These are costs attributed to production and include the cost of raw materials, labour, machinery and equipment. Fuel and electricity can also be classified as direct costs.

Indirect Costs

Indirect costs sit further from the factory floor: administration, factory overheads, utilities, and depreciation of equipment and facilities. Getting both direct and indirect costs right is what lets you ascertain the true cost per unit of your product, which in turn is what lets you price it correctly.

Financing your manufacturing business

Manufacturing companies often encounter cash flow problems when their customers pay their invoices late. Late payments make it difficult for businesses to pay operational fees, such as employee salary, electricity, water, rent, etc. You might need short-term funding to tide you over until your customers pay their bills. Invoice financing — also called Accounts Receivable Financing — is built for exactly this gap.

Funding Societies is Southeast Asia’s largest SME digital financing platform. Our Accounts Receivable Financing line gives manufacturers a credit line of up to S$1 million, financing up to 90% of an unpaid invoice’s value. With tenors from 30 to 120 days, you are not waiting out a customer’s payment terms to keep production running. We’ve financed manufacturing businesses across a range of use cases — from bridging invoice payment gaps to funding raw-material purchases ahead of a large order.

“Manufacturers can be profitable on paper while still facing a working-capital gap because a significant amount of cash is tied up in unpaid invoices. Receivables financing is designed around that timing mismatch, giving businesses access to working capital without having to wait for their customers’ payment cycles.” — Simon Xie, Country Head, Funding Societies

Invoice financing solves the cash-flow gap, but it won’t fund the factory itself. If you’re buying equipment, machinery, or premises, you have two routes — one through a bank, one directly through Funding Societies:

Route	Who provides it	Amount	Best for
Enterprise Financing Scheme (EFS) – SME Fixed Assets Loan	A participating bank or finance company, with Enterprise Singapore co-sharing 50% (up to 70% for young or challenged-market enterprises) of the lender’s risk	Up to S$50 million per borrower group	Large equipment, machinery or factory-premises purchases where you want the government risk-share
Business Term Loans	Funding Societies directly	S$100,000 to S$1 million	Equipment or expansion funding when you’d rather stay with one financing partner and skip a separate bank application

The EFS-FA route is administered through participating banks and finance companies, not Funding Societies directly — ask your financing partner whether your purchase qualifies before committing. Funding Societies is itself a Participating Financial Institution under Enterprise Singapore’s Enterprise Financing Scheme – SME Working Capital Loan, which is the government-backed option for day-to-day working capital rather than fixed-asset purchases.

Is my manufacturing business eligible?

Accounts Receivable Financing is open to Singapore-registered Pte Ltd or LLP businesses with at least 30% shareholding by a Singapore Citizen or Permanent Resident, and a minimum of six months’ operating history.

Frequently asked questions

What documents do I need when applying for Accounts Receivable Financing?

Sales will walk you through the full list, but manufacturers can speed the conversation up by having ready: 2 years of financial statements (or up-to-date management financials, whichever applies), the latest 6 months of bank statements, and directors’/shareholders’ NRIC or passport plus the latest 2 years of Notice of Assessment (NOA) and a CBS report. Credit reserves the right to request additional documents as needed for assessment.

How fast can a manufacturing SME get financing?

Speed depends on the product. Accounts Receivable Financing runs on tenors of 30-120 days matched to your invoice terms. Funding Societies’ Micro Loans — a separate, smaller working-capital product — disburses in as fast as 24 hours after approval.

Does the Singapore government help fund factory equipment?

Yes — the Enterprise Financing Scheme – SME Fixed Assets Loan co-shares 50% (up to 70% for young or challenged-market enterprises) of a participating bank’s loan risk for equipment, machinery and factory-premises purchases, up to S$50 million per borrower group. If you’d rather not run a separate bank application, Funding Societies’ own Business Term Loans can fund equipment purchases directly, up to S$1 million.

Is Funding Societies a P2P lender?

Not any more in name. Funding Societies now describes itself as Southeast Asia’s largest SME digital financing platform rather than a “P2P” lender, though the underlying model of individual and institutional investors funding SME loans is unchanged.

Disclaimer

The above information is not a loan offer and is provided for information purposes only. The information is not intended to be and does not constitute financial advice or any other advice. All applications are subject to underwriting guidelines and approval.

In need of funds? Check your eligibility now

Apply for Accounts Receivable Financing to turn unpaid invoices into working capital for your manufacturing business.