Business Funding

One of the primary goals of starting a business is to make money. However, it takes an undeniable amount of capital in order to properly launch and sustain a business. This amount of money for a given venture has to do with the unique goals and needs of the entrepreneur. It is crucial for a new business to develop resources and additional means to obtain further capital because without proper financing, a new enterprise may find it extremely difficult to compete with an already established competition. In addition, the lack of funding may also lead to a company closing or even worse, bankruptcy. It is important to consider the pros and cons of different financial sources that are available in order to make an effective educated decision to fund a startup.

Bootstrapping

This term refers to a company owner who decides to solely fund their business on their own without depending on outside sources for financial support. In this type of funding, the entrepreneur often evaluates all of his/her assets, including personal savings accounts, credit cards, equity in real estate, retirement accounts, vehicles, recreational equipment, and even collectables. By assessing their personal assets, a business owner can easily generate cash if they decide to sell their property. They can also use these possessions as collateral for a future loan. The more money that an entrepreneur uses on their own for their business, the more likely they will acquire capital from other sources when they need it in the future.

Pros- When business owners decide to bootstrap their business, they are able to gain complete independence of their company and avoid having a diluted role when investors, directors, etc. are introduced.

Cons- Unless the business owner is rich, they will have much financial constraint when using their own finances. Their company may be underfunded, they may underestimate business costs, and/or do not have the resources and support (financial advisors, mentors) that the business needs to successfully take off. Bootstrapping entrepreneurs also have the tendency not to write a business plan, which increases their chance of failure since the business is less likely to be researched, analyzed, or have outside feedback. In addition, many people use credit cards to fund the costs of their startups. Even though this is a quick and easy way to obtain the money that is needed, they end up spending large amounts on the credit card interest payments.

Funding From Friends, family, business associates

When self-financing is not enough to provide the needed capital for a startup, business owners usually turn to their families, relatives, friends, and business partners for further financial support. These people tend to provide much needed support to the entrepreneur and enjoy the excitement and success of the new venture.

Pros- Loans from family, friends, and partners can be obtained quickly since they share with the entrepreneur a relationship that is based on a more personal level. Business owners have the benefit of not paying back interest or providing a monthly payment as bank loans require.

Cons- One downside of borrowing money from friends, family members, and associates is the fact that the entrepreneur may give up more ownership of their company. The more partners involved, the more profit will be divided among all members. Friends and relatives who provide business loans sometimes feel that they have the right to offer suggestions concerning the management of the business. Their suggestions may sometimes be contrary to the entrepreneur’s strategy and may even strain personal relationships. Entrepreneurs should repay the loans as quickly as possible in order to avoid interpersonal conflicts among family members and friends.

Angel Financing / Angel Investors

Angel investors are wealthy individuals who like to invest in small start-up enterprises. When they invest their money into a business, it is not considered a loan. Instead, they desire an agreeable percentage of stock or share in a company for their own financial gain.

Pros- Most angels have experience in the industry of their investment and most likely have been successful business owners themselves. They can act as effective, obliging advisors and mentors to entrepreneurs on how to make their business thrive. In addition, they offer a large sum of money that may not be available from other sources.

Cons- Angels often require a percentage of stock or shares in their invested companies. This means that entrepreneurs may have to give up some control of their businesses.

To read more about the Pros and Cons of Angel Investing, please refer to our related articles.

Venture Capitalist Financing

Venture capitalists usually prefer to invest in companies that are in their later stages of development. They typically invest anywhere from $500,000 to more than $5 million. Like angel funding, venture capital dollars are invested in exchange for equity (an ownership share) in a company. VCs obtain their money out only when the business is acquired by another company or "goes public," that is, when its company shares become publicly traded on a stock exchange.

Pros- Venture capital can help business owners expand their companies and obtain market share.

Cons- By obtaining venture capital, the business owner will no longer be the sole owner of your company and may lose control. Moreover, a VC may move their invested company towards an Initial Public Offering (IPO) of publicly traded shares faster than might be best for the long-term health of the business.

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Singapore Company Incorporation At a Glance

• Excellent tax benefits from small-to-midsize companies: 0% taxes on 100K annual profits (first 3 years), approx. 9% tax on annual profits up-to 300K
• Low overall tax rate of 18% on profits above 300K
• Zero taxes on capital gains in general
• We can incorporate a Singapore company in one day
  (after incorporation documents are signed by you)
• 100% foreign shareholding allowed
• Minimum paid-up capital of $1 only
• Singapore rated as #1 in ease of doing business in the world
• Singapore rated as the best place to work and live in Asia
• Immigration visa (entrepreneur pass) available for company owners wishing to relocate to Singapore to run their new Singapore company

Procedure and timeline for Singapore Company Incorporation

The basic steps are as below:

• Get company name approval
• Prepare registration documents
• Client to sign company registration documents
• Register company
• Open bank account