Financing growth: How SMEs can tap digital banks for working capital
Such lenders can streamline processes and speed up approvals, say panellists at a MariBank and BT event
At a recent panel discussion in Singapore, business leaders highlighted the potential benefits of digital banks for small and medium-sized enterprises (SMEs) in accessing working capital. Faster access to funds through digital lenders can help SMEs seize growth opportunities by streamlining lending processes and accelerating credit assessments and approvals.
Tan Yee Hern, assistant managing director of Capstone Aluminium, explained how timely financing became crucial during the Covid-19 pandemic. While many of his competitors faced supply chain disruptions, Capstone could continue operations in Malaysia due to Singapore's role in maintaining the flow of goods for construction projects. This allowed the company to take on more orders and quadruple its usual volume. However, this surge in business also meant a greater need for working capital.
Capstone's Tan emphasized the importance of speed in securing financing for businesses operating on long payment cycles. For the company, the shortest cycle was at least 180 days, and as order volumes increased, so did the financing required to fulfil them. Digital banks, Tan noted, could have an advantage over traditional banks in areas such as account opening and credit-line approvals, offering speed and cost savings.
However, switching banks is not necessarily a priority for businesses accustomed to traditional banking arrangements. Inspire-Tech CEO and co-founder Sharon Teo revealed that her software company has continued to bank with a traditional lender despite frustrations with minimum-balance requirements. Familiarity and convenience have kept the company from switching banks, even as banking charges can appear significant when examined closely.
MariBank's Tiger Wang discussed newer banking solutions that could help SMEs reduce costs, such as eliminating account fees and foreign-exchange mark-ups on overseas remittances. These features potentially benefit SMEs by reducing hidden banking costs. Teo added that SMEs often lack the transaction volumes needed to negotiate favorable rates with banks and suppliers, making digital banks a more attractive option.
Written by urgent.news from The Business Times - Singapore's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
