Cash-hungry startups urged to try venture debt

$500m worth of loans will be disbursed.

The government is urging startups to try venture debt to slake their thirst for financing. Deputy Prime Minister Tharman Shanmugaratnam revealed in yesterday’s budget that the government will pilot a venture debt risk-sharing programme to help startups get financing via venture debt.

DPM Shanmugaratnam stated that venture debt is “worth trying” because it typically requires minimal collateral as lenders instead receive equity options to share in the company’s future growth.

“SPRING will provide 50% risk-sharing with selected financial institutions for such loans over an initial period of two years. Over this period, we aim to catalyse about 100 venture debt loans, totalling approximately $500 million,” he said.

Eric Tham, Managing Director and Head of Group Commercial Banking at United Overseas Bank, hailed the venture debt risk-sharing programme as a move that will set the stage for Singapore to become an international hub for high-tech ventures.

“Venture debt is one of the ways start-ups can diversify their financing options. It is suitable for companies that can provide their financiers and investors with opportunities to realise their investments, be it through an initial public offering, trade sale or redemption, within a specified time frame,” Tham said.