The Opportunity To Invest In SMEs in Singapore

Did you know that we can actually invest in SMEs (small-to-medium enterprises) in Singapore? This allows individual investors to earn attractive returns while supporting the growth of local businesses. We can invest in SMEs through debt-based crowdfunding platforms. This is where SMEs can issue bonds and everyday investors can buy the bonds and get returns on their investments.

Here's an example of a campaign that local crowdfunding platform, MoolahSense, had previously:

This was the first campaign listed under MoolahSense platform. It has paid out successfully to all investors at a rate of 9.9%. The target amount of the company was initially only $100,000 but due to popular demand, offers went up as high as $207,000.

Company: SMATHS

Smaths Consulting Pte Ltd is a boutique education centre that tailors solutions and learning needs in Mathematics, Physics, Chemistry, Biology and Economics, with additional activity streams in adult and continuing education.

They have four upmarket, mixed use education centres by end of 2014, targeting affluent customers who are quality sensitive, staffed by the best qualified, most motivated tutors in the business.

Programmes are free to try, backed up by money-back and results guarantees.

History:

• Founded 2010, first learning centre opened 2011
• Second centre opened 2011
• Third centre 2013
• Fourth centre (and our second in Bukit Timah) by end of 2014
• Projected ten centres by end of 2015

Issuer Summary:

• Date of Listing: November 5, 2014
• Amount:S$100,000
• Tenor:12 months
• Repayment Type:Equal Instalment
• Repayment Term:Monthly
• Target Interest Rate:18.00% p.a.
• Purpose:Business Expansion / Growth Capital

Use of funds:

• Development of additional education hubs during first quarter of 2015
• This will increase the usable space for learners and expand the number of educators available
• Will allow us to continue to grow the range of subjects on offer
• Expected to form a base to increase Smaths revenues substantially and free cash flows by over 100% within one year

Before investing, it is prudent to do our own due diligence to know the financial health of the company. For investment like this, which is similar to bond investing, there is always risk where the company goes bankrupt and default on their payments. In the case of SME investment, the bonds will have guarantors. For SMATHS's case, the guarantor of the bond is the Group Chief Executive of the company itself. 

Under Moolahsense platform, it has a section called MoolahCore, which shows the financial strength of the company. Here's a screenshot of it:

Click to enlarge

Under this section, you will see the turnover of the company, profitability, current ratio, debt/equity ratio, interest coverage ratio, cash flow from operations and the average cash balance of the company.

You can also ask any questions before investing, through an internal forum – MoolahPost. Moolahsense also organises info sessions for investors to meet the business owners personally for you to understand more before investing.

Investing in SMEs have its risk and thus the returns are higher than the average retail bonds out there. Investing in SMEs through Moolahsense allows you to reap an average of 11-12% p.a. on your investment. Most notes are only for 1 year period with some less than a year.

I have an account with Moolahsense and am looking out to invest part of my money into SMEs which I think is worth investing. You can check out their website and sign up for a free account to try out their crowdlending platform. Who knows you may just find a good company to invest in and at the same time get good returns on your money.

For local SMEs owners, this could be an interesting alternative financing option as well.

Click here to visit MoolahSense Website.

This article is written in collaboration with Moolahsense. All ideas portrayed are independent by SG Young Investment.