Through crowdfunding, financiers offer capital to small businesses for the purchase of assets. This is a cost-plus profit arrangement (also known as Murabaha in Islamic Finance), wherein financiers buy assets for businesses at market value and immediately sell the asset to the business at a marked-up price on a deferred payment basis (see infographics on â€˜How it worksâ€™). The typical funding period is 3-12 months depending on the SMEs cash flow strength and timing of receivable payments on existing orders.
To be eligible for funding from Kapital Boost, a business will need to fulfill the following requirements:
- At least one year of operation;
- Revenue of at least SGD100,000 in the past financial year;
- Positive free cash flow in the past year; and
- Preferably with receivables from existing orders or sales contracts with fixed payment terms.
If you do not meet these requirements, please contact us to discuss how we can help you.
Click on 'Contact us' and provide us with information on your business and asset purchase needs. A Kapital Boost representative will contact you to request for additional information including company registration details, historical financial statements or bank records, and business plan or company presentation.
Between two to five weeks. This assumes five working days for Kapital Boost to conduct due diligence on the SME and a maximum of four weeks for the crowdfunding campaign.
Most deferred payments will be amortising on a monthly basis to reduce repayment risk for financiers. For businesses that prefer a bullet payment at the end of the contract period, the profit margin on the asset purchase is likely to be higher to account for the increased risk premium.
Compared with most non-bank money lenders, we provide lower funding costs. Versus banks, we offer a higher approval rate, less administrative paperwork, and less restrictive covenants. Additionally, Kapital Boostâ€™s funding adheres to Shariah principles, which are ethical. The use of an asset purchase/cost-plus profit structure versus a loan increases the sharing of risk and reward between businesses and financiers.
A successful campaign will be charged an administrative fee of 5% of the total funding amount. A failed funding campaign will be charged a fixed fee of $50 to cover our administrative costs.
The profit margin on asset sales will be determined by Kapital Boost with the business owner's consent, and will depend on the repayment period and risk profile of the business.
No. Kapital Boost encourages an accelerated payout (asset purchase) by businesses.
Yes and no. There is no collateral involved in this financing structure. However, assets purchased businesses will belong to the financiers until after they are fully paid for.
Yes, although at this time only to Indonesia and Malaysia. We intend to expand our services to other ASEAN countries over the medium term.
Xfers is a payment processing gateway that simplifies online bank transfers. It is currently compatible with all major retail banks* in Singapore and compliant with Singapore's FAST (Fast And Secure Transfers) protocol.
*ANZ, POSB, Deutsche Bank, CIMB Bank, DBS, HSBC, Far Eastern Intâ€™l Bank, Citibank, Maybank, OCBC, RHB, UOB, RBS, SMBC and Standard Chartered.
Only those with internet-banking enabled Singapore bank accounts can use Xfers as a payment method to make the fund transfer.
Xfers payment service is regarded as a stored value facility under the Singapore law. Although not required to obtain the approval of Monetary Authority of Singapore (MAS), its operations and business activities are in compliance with MASâ€™ regulation, specifically the PSOA-NO2 on Prevention of Money Laundering and Countering the Financing of Terrorism.
For financiers (members)
At Kapital Boost, our investment opportunities are guided by moral and ethical values. For instance, we do not support activities involved in gambling, weapons or those causing environmental harm.
Additionally, our financing arrangement ensures that the funding is for productive rather than consumptive purposes. The former creates far more positive impact, in terms of production and growth in real economic activities that is beneficial for the society.
Several steps are taken to reduce the risk to financiers. First, Kapital Boost screens for businesses with stronger credit profile to provide funding to. Second, Kapital Boost prioritizes funding of businesses with existing sales receivables, of which the proceeds can be used to purchase contracted assets from financiers. And third, we believe the asset purchase funding model lowers the overall risk to financiers. The financing structure prevents businesses from using the funding for unintended purposes (e.g. for owner's personal use). The initial ownership of the assets by the financiers also offer some form of collateral for the funding.
Businesses must meet the following requirements:
Additionally, we have a credit risk scoring system based on the companyâ€™s business profile, financial position, and corporate governance. On a risk scoring scale of 1 (lowest) to 10 (highest), we only allow businesses with a risk scale of below 3 to raise a crowdfunding campaign through Kapital Boost. We have also partnered with UK startup Friendly Score (www. friendlyscore.com) to determine the credit-worthiness of the business owner based on his/her social media activities.
- At least one year of operation
- At least SGD100,000 of sales in the past year
- Positive free cash flow in the past year
The three core areas we focus on are the companyâ€™s business profile, financial position, and corporate governance.
1. Business risk:
2. Financial risk:
- Industry profile (e.g. industry competitive landscape, profitability, life cycle/growth potential, economic sensitivity, and regulatory risk)
- Company profile (e.g. size â€“ in terms of annual sales, historical profit, operating track record, differentiation)
- Management (e.g. experience, risk profile, risk mitigation)
3. Corporate governance risk:
- Cash flow (operating cash flow/interest, historical free cash flow)
- Operating performance (net income margin, sales/net profit growth)
- Capital structure (Total debt/EBITDA, total debt/assets)
- Liquidity (current ratio)
We give a score of 1 to 10 for each of these factors (1 being the least risky; 10 being the most risky). Based on weighted average score, we get a final credit risk score.
Only businesses with a score of below 3 will be eligible to apply for financing through Kapital Boost.
- Credit score of largest shareholder
- Clarity of company strategy
- Availability of a business plan
- Availability of historical financial statements â€“ audited or not
No. While we utilize the Kapital Boost credit score to pre-screen all businesses and select the best for inclusion in our platform, we are not responsible for formal due diligence on the funding investments. The need and onus to do due diligence lies squarely with the financiers as we do not profess to advise on the same. All dealings and transactions are directly with businesses and financiers.
In the event of a default, Kapital Boost will immediately engage with the business to find out the reason for the missed payment. We will attempt to find a solution which will satisfy the financiers and the business. If after eight weeks there is a failure to come to an agreement between the financiers and the business, and there is a continued default, the financiers may take legal actions to either force the payment of asset purchase by the business or to take back the assets. Note that Kapital Boost as a broker, will not be involved in the legal matters between the financier and the business.
All contracts/agreements will be sent electronically to to the investors. Signing will also be done electronically using Echosign. Once signed, the contract will be binding under Singapore Law.