Entrepreneurs who are planning to start a new business in Thailand need adequate capital to get their venture off the ground. During the planning stage, it is essential to be realistic about the amount of capital they would need to start up a business in Thailand.
For many entrepreneurs, the decision about whether it is the right time to start a business in Thailand comes down to funding. There are many different ways one can go about funding a startup and some can be rather risky too. One may have a brilliant business idea that they may have perfected over time, but it may not mean much in the end if they do not have the funding in place to let the business succeed and flourish.
It is important to understand the different aspects of a business and future goals and then further analyze each type of funding opportunity so that one can ensure they are starting the business on the right foot. One wrong move when it comes to finances, could put them back to square one or even worse, incur a large amount of debt for the business along the way.
It is important to realize that a large percentage of businesses in Thailand fail in their first year and one of the main reasons for this is that they do not have enough funds to help get them through the tough times when they are establishing their customer base and getting their message out.
Here are some key ways to get the financing needed for a startup business.
Government Finance Incentives
The Thai government offers financial incentives in the form of tax breaks and tariff reliefs for businesses in the United Kingdom and the USA that are looking to expand and invest in the Thai economy. These special tax incentives are inclusive of most of the main industry sectors but usually only apply to businesses that are looking to invest outside of the city of Bangkok in specific development zones. The government incentives that are available to take advantage of include:
- No corporate income tax for up to eight years
- Import duty reductions or exemptions on machinery and raw materials
- 50% reductions on corporate income tax for five years
- No public utility costs
- Deductions for infrastructure construction or the installation of infrastructure
- No restrictions on foreign currency remittances
Read More: The Thailand Board of Investments
Private Banks Finance
Banking in Thailand is made almost exclusively of large national banks. Since the Asian economic crisis in 1997, the sector has dramatically improved its regulations. As with all commercial loans, a strong business plan and an understanding of the local business conventions and etiquette are important if pursuing this form of finance.
It is also recommended that you seek the advice of an account and an agent with a strong knowledge of the local financial environment. Companies such as Start-Up in Thailand can help companies that are new to doing business in Thailand to form a strong business plan that is more likely to be approved by Thai banks.
The British Chamber of Commerce Thailand and The British Embassy in Bangkok are currently working together on a special program that aims to assist businesses that are already established in the United Kingdom in expanding to Thailand, helping them to successfully gain entry to the marketplace through contacts and advice and contacting them would also be a good starting point.
Crowdfunding in Thailand
Obtaining the necessary funding capital for a true startup business can be difficult because anyone who is potentially interested in lending money cannot be absolutely sure that your idea will be successful. Many people who have a clever idea or invention have moved to Crowdfund platforms. Although the idea is quite new in Thailand, many Asian economic experts believe it will be an important concept to spur economic growth and encourage new entrepreneurs.
Platforms like Indiegogo and Kickstarter are great examples of websites where you create a Crowdfunding campaign that will attract attention. The way that Crowdfunding works are that absolutely anyone can contribute money toward helping a business that they really believe in. Other local Thai crowdfunding options to consider are Dreamakerequity and Sinwattana.
An entrepreneur will put up a detailed description of their business idea on a platform such as Kickstarter and this should include details of the goals of the business along with the future financial strategies for turning a profit, the target audience, how much funding the company needs and for what reasons. After this consumers can read about the business and give money if they choose.
Generally, people who are giving money to the business will make online pledges with the promise of pre-buying the product, giving a donation, or earning some type of reward which could be other related products, a holiday, or just about anything else that you feel will attract donations.
However, it is important to keep in mind the fact that although Crowdfunding campaigns may be trendy right now, there are hundreds of different campaigns that go unfunded each year through this method or fall short of their funding target. This is a competitive place to earn funding, so unless your business is absolutely rock solid and can gain the attention of the average consumers through just a description and some images online you may not find that Crowdfunding to work for you in the end.
The secret to gaining funding through Crowdfunding is to create an interesting and engaging back story that will help to paint a picture of your driving force and passion rather than simply asking for cash. People are more likely to feel inspired to help fund the business in Thailand if you appeal to their hearts rather than just their wallets.
This is often a group of professionals who are interested in funding strong startup ideas. It is often the case that venture capitalist, they have plenty of money to invest and simply need to be convinced that your business will be profitable enough for them to get their investment back with interest. This is the ideal funding resource for people who are starting a business in Thailand, but it should be noted that it does have a few downsides.
The biggest of these is that venture capitalist generally search for larger Investment opportunities rather than funding small businesses because these usually offer a much larger payoff in the end. The startup and the entrepreneur will need to be stable and have a professional team behind it.
In some cases, it will be necessary to surrender partial control of the company to the venture capitalists. People who are interested in receiving this type of funding must make sure that all the details are clear so that they know exactly what the terms are. In addition, it is essential to draw up a legal contract to make sure that everything is above board and expectations are met by all parties involved.
Read More: Project Financing in Thailand
There is a large number of Angel Investors in Thailand and this type of funding works in a similar way to venture capitalists. The main exception is that Angel Investors are a much smaller operation and in fact, this is sometimes only one person. In exchange for providing funds, Angel Investors often want a large portion of the company, which means when you start to make a profit they also make money.
It should be noted that owning as much as 49 percent of a company is not unheard of with an angel investor, which can seriously reduce the number of profits that you will be able to enjoy over time. people who are series about funding a startup may find that entitling the help of an Angel Investor is one of the best ways to raise the extra cash that they need because it allows you to keep control over the company and hopefully make money as your company continues to grow.
In addition, Angel Investors are experienced in doing business in Thailand, and because they will have an active interest in making sure the company does well they can provide mentorship and perhaps important connections. However, check out the background of the Angel Investor carefully before jumping into bed with them to make sure that they really are who they say they are and have the funds and skills to help you succeed.
Startup in Thailand is open to partner with companies and financing projects as an angel investor or through equity funding provided the companies have any viable project and business plan. They can also make an investment in the form of debt-financing.
Startup in Thailand works with a team of international financial institutions as well as a panel of individual investors residing in Thailand and other countries like the USA, Japan, and Singapore to cater to the financial demands that a business needs, in terms of Project Financing and Joint Ventures.
Startup in Thailand also promotes entrepreneurship in Thailand through their BUILD Entrepreneur scheme, wherein they provide venture funding to potential entrepreneurs looking for investment for their dream projects by private investors and money lenders. Startup in Thailand specializes in starting up small and medium businesses across 15 diverse industries. Learn more about their Investment consulting
Private Equity Financing
There are several other types of fundraising trends that have positive overtones to choose from in Thailand. 500 Tuk Tuks, which is the local branch of 500 Startups, has formally launched in the country and provides an interesting option for those who are looking for funding.
Moo Natavudh Pungcharoenpong, who is the founder of Ookbee, is a venture partner and Krating Poonpol, who is also a notable tech leader in the country, is another venture partner. People who find that they are having trouble obtaining the funding that they need for their business may discover that contacting these prominent entrepreneurs and setting up a meeting can help to smooth the way.
Small Business Loan
When most entrepreneurs are thinking about obtaining funding for their business, the bank is likely to be the first place that they turn. Major banks tend to offer a variety of specialized options for situations such as small business owners in the form of microloans. However, people who are setting up a business in Thailand for the first time are likely to find that the main obstacle in obtaining a small business loan navigating the way through an often very tough lending period.
When an individual goes into the bank, it is essential that they are able to present how every single baht of the loan will be spent. Even if this has been done in a clear and convincing manner, sometimes a first-time business owner may simply seem too risky to the bank and they might not be granted the loan. If this is the case, companies may also want to consider a small business loan alternative from a provider such as Express Capital that specializes in these specific types of financing.
It was announced in 2015 by Thailand’s securities and exchange commission that it now allows foreign firms to launch initial public offerings – known as IPOs – in the country and list on the Stock Exchange of Thailand. This is part of the rapidly growing trend for Thailand to establish itself as a center of fundraising for companies in neighboring countries such as Cambodia, Laos, Myanmar, and Vietnam as well as in the Chinese south-western province of Yunnan.
However, it can also be advantageous for foreign companies who are planning to do business in Thailand and require public funding to help get them off the ground.
Private Debt Financing
The Thai Credit Guarantee Corp is now making it easier for local Small Market Enterprises, commonly known as SMEs, to attract debt from banks. At the current time, it is difficult to secure even a small loan from the bank for business, despite the financial history and size of the business, without collateral. This special program aims to make the process easier and it is certainly worth looking into, although it may take a little time before all of the components are in place.
This is often where business owners start their search for venture capital. In order to convince a bank in Thailand to loan money for a new startup, you will need a very strong business plan as well as sound personal credit and the ability to be a smooth talker under pressure. If possible, collateral can be used to seal the deal and make things easier. Equity in residential or commercial property could be leveraged to obtain the money that is necessary.
Banks nowadays are not as willing to take financial risks as they have been in the past due to global economic woes. There are lots of traditional money lenders in Thailand and they offer to lend anything from just a few thousand baht to hundreds of thousands. However, there is often a high-interest rate that has to be paid back and it is not unknown for private money lenders to raise the fees without warning.
Anyone who is planning to receive a loan from a traditional money lender in Thailand is best off seeking a reference from a professional contact and making sure that the contract is fully legal and airtight by having it checked over by a lawyer before signing.
People who have an excellent credit history may be able to use that to help them to use a line of credit to fund their startup. There are specific credit cards that are designed for entrepreneurs, so it is a good idea to pay a visit to your bank and talk about some of the options that are available.
However, it should be noted that using credit cards to provide extra funding for a Startup in Thailand is one of the riskiest options around, but people who are able to make it work may well find that it can likely offer you the best results from the perspective of managing to hold on to complete control and full ownership of your company.
Help from the Community
There are lots of ex-pats in Thailand as well as Thai small business owners who may be willing to lend or invest a promising business a few thousand baht. In many cases, these individuals simply want to help out for the chance of feeling part of something, while others may be willing to provide sponsorship in order to promote their existing products or services.
It is worth taking the time to work your existing connections, as people that you know already may be more willing to help and provide better interest rates than strangers. It is also worth considering organizing a fundraising event where you can showcase what you have to offer and enlist support.
Get Professional Finance Help and Advice
A company that specializes in startup consulting such as Startup in Thailand will be able to provide you with more information on the costs of opening a business in Thailand. Because they are Startup Specialists in this field, they will be able to give you a clear picture of other elements that you may have overlooked or may be unaware of.
The legal team may also be able to provide tips on how to reduce costs, which is very important for anyone who is planning on doing business in Thailand. In addition, the consulting startup may be able to provide assistance in obtaining financing for your business in Thailand that will help to make the process a lot quicker and easier.
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