Budget 2018: SMEC suggests to develop startups into unicorns

Recently, the SME Committee (SMEC) submitted a proposal to the Government as part of the Budget 2018. The proposal included plans to offer incentives to attract startups with the potential to be unicorns, to set up headquarters in Singapore.

Through tax incentives, government grants, tax deductions, and rebates, private companies are better able to conduct its research and development and create more jobs for the Singapore economy and Singaporeans. Intellectual property (IP) holding and other key functions are to be housed in Singapore, are criteria, amongst others, for the private company to enjoy incentives offered by the Government.

Further support for IP acquisition financing for IP assets, and the acquisition of IP-owning companies was also included in the proposal as an expansion of the Intellectual Property Financing Scheme (IPFS). The SMEC also called for greater accessibility to government schemes, enhancements of the Business Grant Portal and the SME Portal to guide SMEs through the processes and requirements.

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Top 3 Challenges of P2P Funding Platforms in Singapore

Dealflow, scalability, and trust – a P2P crowdfunding startup is a 3 legged stool, without one of these, it risks a collapse. P2P crowdfunding has been a relatively recent phenomenon in Singapore, with the first platforms that are still operational having started in 2014/2015.

1. Dealflow – Gaining traction and proving the concept
Lining up a decent quality dealflow and attracting companies that are stable will be the main challenge that the platforms face. Two things are required for this, first, the interest rates of between 10% – 40% annualised need to decrease to become competitive with those of established financiers. Those rates are good to compensate yield hungry investors for the risk, but are difficult to sell to companies with a stable outlook that might be able to access bank financing at a lower interest rate.
Second, platforms need to increase the organic inbound leads and automate the onboarding of new clients. Hence, the challenge is to compensate investors adequately for riskier loans, while making the interest rate attractive enough for SMEs to see P2P Funders as a strong long-term partner, and to decrease the customer acquisition cost.

2. Scalability: Making the business viable in the long run
Once a platform has been able to implement the right processes, scalability is critical for the long term viability and also mostshareholders.

3. Trust: Ensuring stable operations
Lastly, Fintech is ultimately about offering a financial service and therefore, trust is paramount. Many Fintech companies are still young and have not established a track record. Becoming a player in the P2P Financing sector requires staying power and a sufficient amount of capital.

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