Why do start-ups need more support from banks after the pandemic?

Singapore is one of the world’s leading startup capitals. Many entrepreneurs set up shop here because of the favorable tax laws and ease of setting up a business. As of 2022, Singapore is home to 20 unicorn startups with valuations reaching S$1 billion, most of which operate in the Southeast Asian region.

Still, start-ups were hit hardest by the COVID-19 pandemic. Their smaller balance sheets have made them particularly vulnerable in weathering multiple lockdowns compared to larger conglomerate companies. Are you facing

Also Read: Best SME and Business Loans in Singapore for Startups

Challenges facing startups

1. Lack of services by traditional banks

Startups found that traditional banks were underserved, partly because they were different types of companies. On the one hand, there are microstartups whose organizational structure resembles a one-man entrepreneurship. On the other hand, there are also large start-ups that reflect the structure and needs of large companies.

Significant differences in the organizational structure of start-ups means that there may be start-ups that may fall into the niche of services traditionally served by traditional banks. Startups may get lost between the retail and corporate banking segments and not get the relevant support they need.

This is especially true when it comes to fundraising. From a bank’s perspective, micro-startups are small business clients, higher perceived risk Financing requirements (credit rating, consistent cash flow, strong business plan, etc.) are based on established corporate structures and are unlikely to be met by small businesses. Startups often hold fewer assets as collateral, which reduces the types of loans they can apply for.

As a result, start-ups often find themselves at a disadvantage.They are not only in trouble getting a loan and other financial services through traditional banks, who are often unfamiliar with their wants and needs and often fail to get the level of customer service they desire.

2. The Inflationary Macro Environment

One of the lingering effects of the COVID-19 pandemic is the inflationary pressures we are currently facing.

Commodity prices around the world have been affected by labor shifts, multiple lockdowns in China and supply chain problems experienced as a result of the conflict between Russia and Ukraine.

The combination of these two major factors has resulted in the highest inflation rate in decades. As of September 2022, Singapore’s y/y inflation rate is 7.483%.

Startups have not escaped inflation either. Rising production costs due to inflation are squeezing corporate profits despite higher consumer spending after lockdowns.

Increased competition in the labor market is also putting upward pressure on wages. As labor costs are one of the major costs for most companies, they also have a significant impact on startup costs.

3. Cyber ​​security

The pandemic has drastically changed the way we work. Startups have had to adopt more remote work arrangements to support their employees during lockdown.As more employees access company cloud services from their personal devices at home, More vulnerabilities to hack many companies.

Estimate 43% of cyberattacks in 2020 It was aimed at small and medium enterprises. Small businesses are smaller and often lack the robust protocols and training in place to protect their employees from falling victim to cyberattacks compared to larger companies.

Similarly, cybersecurity breaches can result in significant financial and reputational losses for start-ups. 60% of SMEs It was forced to close six months after a cyberattack. Cybersecurity is therefore paramount, especially for smaller and more vulnerable start-ups.

How can banks better serve start-ups?

To solve the above concerns, start-ups are increasingly turning to digital banking. Digital banks are better suited to the size of startup businesses and can help fill a gap in the market. A previous study by Visa found that: 88% of small businesses They will be open to switching to a digital bank to meet their banking needs.

Digital bank accounts are especially attractive to start-ups who value a convenient and easy banking experience. A digital bank streamlines banking services through automation, with effective user-oriented pricing algorithms that create a more customized banking experience than traditional banks.

This can lead to cost savings for startups as unnecessary frills are reduced. Digital banks eliminate the physical presence of banks to reduce costs and focus on the core financial services businesses need.

Many start-up companies willing access to unsecured funding at higher interest rates As long as you get it through a reliable and convenient channel. Digital banks provide such channels and serve the needs of start-ups. Simple products and services with short delivery times.

While doing so, digital banks do not compromise cybersecurity. This allows customers to transact through various channels while bearing the burden of data security and risk mitigation.

Also Read: Best SME Loans for SMEs in Singapore 2022

ANEXT Bank — a digital bank for the SME community

Annex Bank We provide accessible and effortless digital banking solutions that meet the needs of start-ups and enable them to adapt and thrive in an increasingly challenging and competitive marketplace.

No-frills, affordable banking for startups

Banking with ANEXT Bank is also cost-effective and compatible with bootstrap startups.

Their competitive advantage lies in digital ANEXT Business AccountThis enables cross-border transactions that are cheaper and more secure than regular banks.

Dual currency accounts allow businesses to send and receive payments using major trading currencies such as SGD, EUR, GBP, HKD, JPY, KRW, MYR, THB and USD.

This enables seamless B2B transactions around the world.

On top of that, they don’t offer account opening fees, annual or minimum fees, or even wire transfer fees. Outbound wire transfers can also be made at flat rates, so there are no hidden costs for business account holders.

Singapore’s Digital Bank for Startups

ANEXT Business Accounts offer more value to business owners with daily interest, allowing businesses to grow their balance without additional or hidden fees.

This will help alleviate some of the inflationary operating costs that are a major concern for start-ups.

Additionally, ANEXT Bank addresses startup security concerns with its three-factor authentication feature. Multi-factor authentication acts as multiple barriers for hackers, greatly improving security and making startups less vulnerable. After all, it’s much harder for a hacker to forge or steal information through her three different layers of authentication.

Setting up a business bank account in Singapore is quick and easy with ANEXT Bank. Business owners can apply for accounts. Here I use MyInfo Business.

For more information on how to open a digital business bank account with ANEXT, please see our previous article. digital banking.

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