Singapore F&B Businesses and Investors On Crowdfunding to Grow During Covid-19
Businesses, especially savvy SMEs and promising startups, are increasingly turning to crowdfunding platforms. During an economic downturn such this year’s, banks and other lending institutions are not only less willing to lend, but the interest rates are also unattractive to businesses that cannot afford them.
According to a 14 July 2020 report by CNA, Singapore entered into a technical recession after its economy shrank by more than 40% due to the effects of Covid-19 and the circuit breaker measures. The economic pain continues to be felt across various industries such as the food & beverage, construction, retail and tourism industries.
Singapore F&B Sector Badly Affected by Covid-19
While the F&B sector contributes just under 1% to Singapore’s GDP, the estimated 12,000 restaurants employ nearly 200,000 workers. So, what’s the damage in the F&B sector?
- Sales fell by more than 50% in May 2020 vs May 2019 (according to SingStat)
- 42% of restaurants not hopeful they will survive if circuit breaker measures continue (according to a Chope White Paper)
Many have turned to deliveries and take-outs, such as on apps like Deliveroo, FoodPanda and Grab, but most still saw at least a 50% decline in sales.
Bridging the Gap with BRDGE: How Atas Food and Jin Met Their Financial Goals Despite Circuit Breaker
In this episode of Bridging the Gap, we talk to Steven, the owner of Atas Food Pte. Ltd. We sought to understand from his point of view on
- how badly affected the F&B industry is, and
- how his business benefited from crowdfunding via BRDGE.
We also hear from Jin, a young investor on BRDGE, on how and why he decided to jump on the wealth-growing opportunities in BRDGE.
F&B Businesses Evolve as Coronavirus Keeps Diners Home
Steven is a veteran of the F&B industry. Seeing opportunities in Thai food’s steady growth in popularity, he founded Atas Food Pte. Ltd with 3 partners. Atas Food specializes in Thai Food, Thai Boat Noodles in particular. Within 3 years, they built 3 outlets at Changi City Point, Bugis Junction and Seletar Mall.
Due to the effects of the Covid-19 circuit breaker, Atas Food’s dine-in customers, who make up the bulk of his diners, had been holed up at home. As a result, his overall sales fell by more than 80%. His F&B business, like many of his peers’, was badly affected and new strategies were urgently needed to weather the storm and survive the initial sluggish reopening of a post-COVID-19 economy.
How Covid-19 Drove Atas Food to Relook Business Models
Atas Food and many other restaurants and eateries relied on takeaways and delivery apps to generate demand and make ends meet. However, these services charge a near-30% fee on each order. Already faced with thin profit margins, F&B businesses find themselves caught between a rock and a hard place.
With the coming of Phase 2, Steven’s goal for Atas Food was to keep costs low and survive the difficult period. Thanks to a combined rental waiver of 4 months from the government and the landlord, Atas Food managed to stay afloat. Their usual rental costs take up 15-20% of their monthly overheads.
Atas Food now aims to set up future shops in low rental locations like HDB shophouses that are not in suburban areas. Although Steven foresees lower footfall and thus revenue, he sees promise in a new normal which is in food delivery.
Finding Opportunities in Singapore Crowdfunding Platform
Jin is one of BRDGE’s youngest investor at 18 years old. When he first knew about crowdfunding, he was only 14. To him, BRDGE is the platform of choice with its:
- attractive interest rates
- interest payments
- very low default rate
- safety and convenience
Jin eventually became one of Atas Food’s investors on SeedIn.
Thanks to investors like him, Atas Food was able to repay their loan 7 months in advance instead of paying it over 12 months. This not only lowered the cost of interests for the business, but it sped up the returns on investment for its investors!
Not only had his investment generated surprisingly early returns, Jin’s freed up liquidity could now be used for more investments. He hopes to get better interest rates based on his principle investment.
Crowdfunding: An Alternative Financing Avenue for SMEs
Starting an SME in Singapore isn’t easy, according to Steven. His opinion is not unlike those of his peers in the SME arena. Not only are SMEs more vulnerable than the established corporations, but SMEs are also faced with unique challenges to secure a bank loan for growth. It is notoriously hard to convince banks to loan yet-to-be-proven SMEs a 5-6 digit sum. However, to prove themselves, SMEs need the resources to test their sails.
Steven, however, was extremely pleased to find out that there a platform such as BRDGE exists to bridge this gap. He is also extremely grateful to the community of investors on BRDGE for putting their trust in his business and other local SMEs. As a result, promising startups could now take their businesses to the next level.
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