You feel that your business requires additional working capital in order to survive or expand.
Unfortunately, the banks have rejected your business loan application. You think a business loan broker might be able to help you get the capital you need.
Ask yourself: Why are you hiring a business loan broker in Singapore?
This is important because it solidifies your business decision and will guide your subsequent actions.
Most SME business loans offered today are program-lending, based solely on the details of the documents that you submit. Thus, once you have gathered the required documents, it will not take too much time to send it to another bank or financial institution for evaluation.
Many loan brokers have extensive connections to banks and financial institutions, which makes it easier to apply. However, you will be surprised to know that some loan brokers are also using the same method of connection you are, namely - searching on Google and calling!
Most loan brokers were previous bank officers who spent time analysing and assisting many small business owners. They are mostly able to provide sound advice and coaching on SMEs can qualify for a business loan (e.g. bank statements should not go into excess).
Is the business loan broker using its connections to help you get a good deal or merely submitting online listings?
Some solutions and services provided by the broker, such as the loan consultancy service, may be more worth paying for compared to others.
It is important to know the full terms and conditions of this service, as such loan brokers will often require small business owners to sign a “contract” with them before carrying out their service.
This is done to ensure that business owners will not refuse to pay them after the job is done.
Common types of payments include:
Be careful not to get into unequal contracts with unscrupulous business loan brokers.
We have seen cases (in 2018 no less) where the loan broker “locks in” the small business owner with a contract for a fee of at least 8% of any loan that the broker manages to find.
However, the unscrupulous part is when the contract also demands the same fee even if it is the owner, and not the broker, who manages to get other types of financing for up to a year!
This is a simple way to look at the fees and determine the above:
For a one-year loan, your minimum profit margin required (a+b+c) is at least 18%.
The benefits of working with a business loan broker in Singapore include having multiple lenders to choose from and exploring multiple loan types that could be useful for your business.
Every single loan type has its own sets of pros and cons that need to be acknowledged.
Be wary if your loan broker does not take the time to discuss these options with you. Sometimes, it may indicate that the broker’s interests may not be aligned with yours.
Sometimes, this means that a certain bank or type of business loan product may be paying the broker a higher commission for its referral of your business.
Yes, you should, but find the right one. In general:
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
Eric Koh is passionate about helping SMEs grow and has spent years interacting with business owners at OCBC and IFS Capital. He is interested in 70s rock ‘n roll, the odd novel and copious amounts of historical trivia.