Capital is one of the most crucial factors when starting a business anywhere in the world. The lack of funds can become a barrier that prevents startups from entering the market.
As much as it is essential to have capital when kickstarting your business from scratch, it will also come in handy when maintaining the brand in the long run. This can extend from advertising efforts, purchasing inventory, all the way to investing in research and development.
Now that you have an idea of how beneficial it can be, just how much capital do you need to start a business in Singapore?
Let us take you through the basics and everything you need to know.
What is paid up capital?
Paid up capital can simply be described as the amount of money a company has received from various shareholders through the issue of shares. These funds are generated through an Initial Public Offering (IPO), where the company sells its shares to investors on the primary market. Shares issued for paid up capital can be in the form of ordinary shares, preferences shares, or other classes of shares.
Subsequently, business owners can then use the accumulated funds in the company’s initial stages as working capital. Different examples of how it can be used include paying your employees, purchasing new equipment, and paying for rent.
As the primary source of funding, this amount of money is incredibly crucial for the survival of any business in its early stages. On top of being the main source of capital, this is also a reflection of a company’s financial strength.
How much paid up capital do I need when starting a business in Singapore?
New startup founders and business owners alike are almost always taken by surprise when they find out this next piece of information. In Singapore, companies only need a minimum of S$1.00 in paid up capital to start a business. This applies to Singapore Citizens and Permanent Residents as well as foreigners who have plans to register a company in the country.
Eventually, this amount can be increased at any time even after business operations have commenced. Despite the low initial amount, it is important to note that there several other business types have different requirements for the minimum paid up capital. These businesses include financial services, travel groups and agencies, recruitment firms, and the likes.
How to raise capital for your startup?
If you are struggling to raise capital for your startup, there are various ways to raise money and receive funding.
1. Issue new shares
After you have registered your Singapore-based company, you can issue new shares to increase your paid up capital. This can be achieved by getting existing shareholders to buy additional shares or accepting new shareholders. Take note that it is always a wiser decision to have a higher paid up capital structure in the long run to enjoy a variety of benefits including lower interest rates for debt, better fundraising terms and greater credibility in the market.
At the same time, also make sure that you adhere to the legal requirements involved when it comes to shares such as shareholder approvals and directors’ duties.
2. Launch a crowdfunding campaign
Over the years, crowdfunding has become a popular and effective way to raise capital for startups. Compared to bank loans, this method is far more attractive among small business owners as they no longer have to be tied down to interest charges and costly fees. It also acts as a valuable marketing tool that can attract prospective customers and a great opportunity to give the public a sneak peek of your product or service.
Besides receiving funds, crowdfunding campaigns are also a great way for fellow entrepreneurs to connect with one another and potentially collaborate in the future, which can potentially increase sales and brand visibility for both brands.
3. Get access to funding from incubators and accelerators
Although this method requires entrepreneurs to invest a great deal of time and effort, acquiring funding from incubators and accelerators guarantees a significant amount of seed capital. Generally, the funds offered through these avenues go up to the thousands, which is more than enough capital for you and your business.
Various incubators have different focus areas for funding. They could range from fintech, medical technology, as well as life sciences. If you decide to go down this route, ensure that your chosen incubator is aligned with the nature of your business.
4. Apply for a bank loan or line of credit
Applying for a loan may seem like an ancient way of receiving additional funding, but it is still an effective method nonetheless.
In contrast to equity financing that requires founders to sell part of their company’s equity in return for capital, banks don’t own any ownership in a business when they give out loans. Bank loans are temporary arrangements; once you’ve paid off a loan, there is no more involvement with the bank and you are free to run your business as you wish.
Need help in raising capital for your business?
Think you could use an extra hand when it comes to funding? Aspire’s credit line secures working capital for you and your business as fast as two days and ensures that you only pay for what you use. With a 100% online application, 7-business-day approval period, and low-interest fees, we’ve streamlined the application process for you to save you from all the hassle. This is funding reimagined.
Get in touch with us at +65 3165 1500 or support@aspireapp.com to get started.
Frequently Asked Questions
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