According to Allied Market Research, the global micro lending market is expected to reach $343.84 billion by 2027. The expansion of the market is not without reason – companies have been seeking out Micro Loans to help their businesses survive and thrive. The expected growth in the global micro lending market also indicates the importance of cash flow boosts to the businesses adapting in the aftermath of the global pandemic

What are Micro Loans and who are they for?

Micro Loans, also known as microfinancing, are small loans targeted for Small and Medium Enterprises (SMEs) to cope with business demands. These flexible short-term loans can be processed and approved within 24 hours. 

Funding Societies offers such loans of up to S$100,000 to help SMEs that require urgent financing. These Micro Loans are suitable for SMEs as they are catered for sole proprietors, and firms with a shorter operating history and a lower annual turnover – all of which are common traits of SMEs and young businesses. These firms typically find it more difficult to access traditional bank loans without a strong credit history, thus making Micro Loans ideal to help them in various stages of growth.

How Can Micro Loans Help Businesses?

Micro Loans are useful in a variety of situations commonly faced by SMEs. In particular, it is helpful in repaying one-off costs, capturing urgent projects and opportunities, as well as to resolve unanticipated cash flow challenges.

  • One-off costs

COVID-19 has changed the business environment and disrupted many firms’ plans. Consequently, one-off costs may arise. These costs come from non-operating activities, which refers to activities outside the company’s usual operations, and may also cripple businesses’ working capital if they are not paid in time.

For instance, an SME may need to purchase laptops for staff to adapt to the work from home/hybrid working arrangements. 

Companies may need to relocate from a home office to a larger office space due to an increase in headcount stemming from the acquisition of a long-term big client. The move will require the payment of one-off costs for office renovation and rental deposit. These larger one-off costs may hamper business-as-usual operations as they are cash-intensive.

  • Urgent projects and opportunities

With COVID-19 as the background, affected SMEs sectors may be forced to digitalise their workflows and processes fast to stay reactive readily.

For instance, an SME with only a physical presence such as a bakery with a brick and mortar store that only accepts on-site cash, nets or credit card payments may face the problem of reduced footfall. With the ever-evolving restrictions and mandates in place stemming from COVID-19 variant worries, in-store customers may fluctuate or be greatly reduced. This translates to a lesser revenue for the firm, which can spell disaster over time.

To adapt, the bakery will need  to adapt by setting up an online shop offering delivery services. This is when they can approach a Micro Loan to tide through the situation to stay afloat within a short timeframe

  • Unanticipated cashflow challenge

Cash flow and liquidity are arguably the lifeblood of SMEs. Minimally, firms need to maintain a sufficient level of working capital for operating expenses. A healthy cash flow helps firms to function continually without hampering day-to-day operations.

For instance, buyers who are unable to pay in time may cause a snowball effect, leading to inability to pay suppliers and ultimately bring down sales and profit. Micro Loans, with its 24 hour turnaround time, is a good solution to react this unforeseen situation without disrupting the supply side. 

Beyond that, SMEs with a healthy cash flow and liquidity are also better positioned to capitalise on their flexibility and remain competitive. This can be achieved by purchasing new equipment and machineries (i.e. Industry 4.0) or  incorporating new platforms/systems to improve efficiency, or simply increased costs of retaining valuable staff. 

What are the benefits of Micro Loans?

Micro Loans by Funding Societies have a quick disbursement and application turnover time, which is suitable for SMEs who need the fund urgently. There is also a flexible tenor range of up to 12 months with no early repayment fees, thus allowing firms to customise the loan period or repay earlier respectively based on their respective situation.

At Funding Societies, getting a Micro Loan is simple and easy. You can apply in minutes with zero collaterals without much documentation hassle. All you need is less than 5 basic information about your business for verification. You will then receive a financing offer within 1 business day, and receive funds in your business bank account upon acceptance of the offer.

What to take note of

With all its benefits, Micro Loans do have a capped loan amount  at $100,000. This may be insufficient to certain SMEs requiring financing for their business needs. Alternative Working Capital Loans options like Express Business Term Loans and Business Term Loans offer higher loan limits without any collaterals.   

Micro Loans can be helpful for SMEs

You can weather the COVID-19 storm with Micro Loans. The process is fast, fair, easy and transparent. It takes as fast as two minutes to apply, two hours to reach a decision, and as soon as 1 business day for disbursement. 

Micro Loans are made for SMEs, particularly in today’s rapidly changing business landscape where SMEs need to adapt quickly or inject urgent funds to tide through difficult stretches. The loans can be a timely lifeline for SMEs facing unanticipated cashflow challenges, covering large one-off costs, or reacting to urgent projects and opportunities.

Find out more about financing your SME with Micro Loans from Funding Societies today.

FS Writer
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