I’m going to tell you the truth.
If you’re starting a new business today, unless you’ve a track record of at least 1 super-profitable business, and your name is as famous as Elon Musk, none of the traditional banks in Singapore are going to issue you a credit card, especially if you have no business credit history.
Why? Because they are all afraid that you will go bankrupt, and not be able to pay back the credit you owe.
So my suggestion is going to be simple, especially if you’re a new business.
Especially if you:
- Haven’t contributed to your CPF for the past 6 months, of at least $925 per month
- We assume that you are the employer, and also the employee. You thus pay 17% as the employer, and 20% as the employee. This totals 37%.
- Assuming a yearly wage of $30,000 (which is the yearly salary minimum for most credit cards like the DBS Platinum Business Card), or a monthly wage of $2500, you will then need to pay $925 per month.
A hack if you haven’t made that much money in your own business yet
If you’re quitting your job to start your own business, make sure that you’ve at least gotten one personal credit card.
Your previous job would show a certain level of credibility, especially when they see your paychecks, and CPF contribution.
You might think that using your personal credit card is scary, especially when debtors might potentially seize your personal assets.
Why you may want to use your personal credit card
Well, even if it were a business credit card, they would also seize your personal assets if your business assets are not enough to pay the credit.
But I think it offers two things.
Firstly, it means that you’re able to have greater liquidity in your business.
Yup, liquidity. And no, I’m not just spouting fancy terms just so I look smart.
Gone are the days when people say credit is bad
If you’re running a service business like me (I run a web development agency), you would quickly realise that clients will pay you on average, in 30 to 60 day cycles.
Unlike a supermarket where what you pay is immediately debited and put in the supermarket’s pocket, you often deliver the service first before you get paid.
This payment cycle is just a normal way of working.
Some people might suggest that you ask for an upfront deposit of 50%, but if you’re a new business (meaning that you don’t have fancy logos of big MNC companies you’ve worked with), you’re not likely going to get that.
Ideally you would still ask for an upfront 25% that ensures that you’re not out of pocket delivering the service.
Because of this payment cycle, you need to have your own line of credit that allows you to pay your suppliers in 45 days too, so that you can have some flexibility.
For example, if you were a small business, you might be paying for subscriptions to web hosting services, or Google Workspace.
If you bought an item today, rather than debiting your account immediately, the payment out is lodged as a future liability you have to pay off, by the due date. That’s usually in 30 days.
That gives you greater flexibility to wait for the monies people give you, before you pay out the money.
Having flexibility around the payments out, will help you not to go kaput.
You have skin in the game
Taleb’s book ‘Skin in the Game’, talks about how many of today’s financial crises were caused by people who had no skin in the game. They would engage in highly risky financial manoeuvres, and then offset that risk to the public capital markets.
Using your personal credit card will put skin in the game. It will make sure that you work, because your personal reputation and assets are on the line.
Why the Trust Credit Card?
For one, having been running a business for a year, I had no CPF contributions.
I had no salary slips.
No bank would grant me a credit card, except Trust.
They approved despite my lack of credit history
I’m not sure why they trusted me (no pun intended, and hopefully they don’t stop after reading this too).
I took their card in October 2022, when Trust first started their operations. I suspect they were desperate for customers.
- I had no credit card before.
- I had no CPF contributions for the past 12 months.
But they also put me with a credit limit of $6000.
It’s already good enough to start though.
No foreign transaction fees
I once used Wise for Business, until I realised that it was too troublesome to:
- Top up the Wise account card from my Singaporean bank accounts
- Convert to USD
- Pay in USD
Rather, using the Trust Credit Card was easy peasy.
- Key in the card number.
As a web agency, most of our transactions are for software subscriptions which are paid in USD.
If you’re primarily transacting in USD or foreign currencies, or at least have monthly transactions in other currencies, I would suggest that you use Trust.
But Trust says they also have no transaction fees, although I suspect that the foreign exchange rate that they quote ‘live’ might already come with built in fees.
The ugly parts? It’s confusing.
Whoever designed the user interface of Trust will probably not get his job back. It’s hard to see which button to press, especially if you’re new to it. You might take some time before you figure out things like:
- How to set up your PayNow number to the Trust account
Get greater liquidity
If you’re running a startup today, one of the most difficult things is finding customers. I am there, with you.
Opening shop, and expecting a sudden flood of customers to order from you is the ideal situation that everyone wants, but which not everyone has.
Unfortunately, the sad truth is that most of the time, we end up in a place where we are trying our best to push our business, but find little moving.
During times like these, whilst there isn’t an easy answer to what will fix your business, what you need to know is that having the patience and the ability to stick it out for the longer term, would help.
It starts from using credit, however evil that sounds.