Business Loans

Need a Business Loan Broker in Singapore? Ask These Questions First!

Eric Koh
October 17, 2018

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.

SMEs commonly hire business loan brokers because:

  1. They prefer to spend their time growing the business and let someone else handle the tedious application process;
  2. They have exhausted their options and no financial institutions are willing to extend them a credit line and;
  3. They believe that professional loan brokers can provide consultancy services to identify their business needs accurately and recommend the business loans they require.

They prefer to let someone else handle the tedious application process

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.

They have exhausted their options

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! 

They would like loan brokers to identify their business needs accurately

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).

Question 1: Ask your loan broker how he can help you get a business loan in Singapore

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.

Question 2: Ask your loan broker what the total cost of this service is

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:

  1. A small upfront fee ($100 – $300) and a percentage of the total loan amount given by a financial institution to the SME (1 – 3%)
  2. A free upfront service and a larger percentage of the total loan amount (2-5%)

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!

Question 3: Ask yourself if you can afford to pay for this service

This is a simple way to look at the fees and determine the above:

  1. Unsecured Term Loan Interest Rate = 12% effective interest rate (EIR)
  2. Bank Facility Fee = 2% (paid upfront)
  3. Loan Broker Fee = 4% (paid upfront)

For a one-year loan, your minimum profit margin required (a+b+c) is at least 18%.

Question 4: Ask your loan broker if there are other types of loans that could be more beneficial for your business

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.

So should you engage a business loan brokers in Singapore?

Yes, you should, but find the right one. In general:

  1. Business loan brokers can get much quicker responses from banks and relationship managers.
  2. Business loan brokers can help to negotiate for a lower interest rate.
  3. Business loan brokers can provide clarity and guidance, which is especially useful for small business owners.
  4. In urgent circumstances, business loan brokers can also provide a direct route to the quickest lenders.

Request for a Business Loan Now! 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.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

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.

business loan
SME Loan
Business Loan Broker

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