By Kevin McSpadden for E27
New Union also has a legitimate presence in a country not often discussed in local startup media: Cambodia
Crowdfunding is one of the intriguing emerging industries in Singapore and the surrounding region. It’s not because the city is seemingly going to produce the next Kickstarter. Rather, it’s because investment crowdfunding has quickly emerged as a relevant and culturally accepted phenomenon.
Just a couple of weeks ago, Grace Chng of The Straits Times posted on Facebook about the approval by the Monetary Authority of Singapore of equity crowdfunding platform license for Crowdo — the third company of its kind to receive government approval.
In Singapore, there is another investment crowdfunding startup receiving much less attention than it’s equity-based peers. It is a debt-based company that is putting up numbers that are, to be frank, staggering in comparison to its peers. The company is called New Union.
Just within Singapore, New Union has facilitated almost S$36 million (US$27.8 million) worth of investments through its platform. In Asia, companies have raised a whopping S$762.8 million (US$556.5 million) via its platform.
These are incredible numbers in the context of an industry that legitimately makes news when a startup raises US$500,000 through social crowdfunding.
“We have funded over 500 companies with more than 130,000 investing members, our goal is to attract a total of 200,000 members by end of the year,” said Eddie Lee, Co-Founder and Managing Director at New Union Singapore in a conversation with e27.
In Singapore, SMEs enjoy a wide variety of options to address their funding needs (traditional bank loans, an active investment culture or the ol’ mom and pop route).
Crowdfunding is becoming an ever more more important part of the funding list because it breaks down traditional barriers to accrue capital. For example, at New Union, credit evaluation takes as little as three days because it has leveraged internal risk assessment technology to expediate the process.
Established in 2010, New Union started as a traditional invoice financing company who has built on a stringent credit risk assessment.
But when the P2P lending company LendingClub emerged in the US — disrupting the traditional lending industry — New Union decided to adopt technology and pivot the business model into a tech-based crowdfunding platform.
An example of a typical campaign is below:
Clicking around the website, I found a fund seeker raising money for a real estate investment with the goal of amassing S$500,000 (around US$350,000). It offered a six-months tenor with an eight per cent return.
The above terms suggest is a bridging fund — a short-term cash infusion with the goal being that the fund seeker makes enough money on the project that the eight per cent return on investment is worth the debt.
Lee says New Union appointed a trust company regulated by the Monetary Authority of Singapore (MAS) to be an appointed escrow partner in order to assist the company in managing the money invested by our members.
“This is to mitigate platform risk and at the same time we like to show our investors that we handle their money very carefully,” he said.
Fund seekers are generally business owners seeking an inventory boost to cater to a festive sale season, real estate contractors looking for a short-term working capital to take on additional projects or trading companies who need working capital to fulfill incoming orders.
To approve a fund seeker, New Union goes through a very strict credit evaluation process.
Once the fund seeker passes the credit evaluation process, the application is forwarded to credit review committee that comprises of five individuals made up of private bankers, veteran entrepreneurs, former CEOs of listed companies and senior accountants who are highly competent in their respective fields. They raise “tough questions” to the credit officer who put forth the application.
New Union is present in Singapore, China, Taiwan and, recently, Cambodia.
In Singapore, it is not often comes across a company with an active presence in Cambodia. When asked about it, Lee says New Union saw the viability of expanding to Cambodia after a year and a half of due diligence on Phnom Penh.
The company believes they could leverage on technology and their experience in credit risk assessment to make a difference to SMEs there.
However, every company has its own challenges and for New Union, the current environment in which crowdfunding investment regulations are not set-in-stone is a drain on resources.
The company must constantly ask itself questions such as “Do we get more freedom to open our arms and legs? Does this action fits the regulations? Are we OK?”
“Every department has a new thing to look at. Knowing everything from start would make things much much easier,” says Lee.
While regulations are being legislated, New Union remains an extremely successful company with fund seekers routinely seeking US$2 million to US$4 million a month on its platform.
Which, of course, begs the question why would someone want to invest such a high number via crowdfunding?
To answer that, let’s look at a success story.
“Mezzo Interior who specialised in commercial renovations for financial institutions and large corporate clients did not qualify as customer as they were a young business who did not meet the banks minimum criteria,” Lee explained.
The company Founder, Lee Yue Cheng, needed the funding to expand his team in order to cope with an upcoming series of alteration, addition and rebuilds works she had in the pipeline (including the management of a few overseas projects in Cambodia).
The injection came at an opportune time and Lee Yue Cheng said his company expects to boost annual turnover by three times thanks to the funds.
“Through crowdfunding, we hope to help aspiring SMEs elevate their business standing and have their needs addressed by the local banks in the future,” said Eddie Lee.
Crowdfunding platforms play a more and more important role in supporting businesses in Singapore and New Union is on the way to prove it can be considered a leader in this emerging industry.
First appeared at E27.com