Peer-to-Peer (P2P) Lending: Funding Societies vs Validus vs Minterest

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Peer-to-peer (P2P) lending, also known as crowdfunding, is an alternative business financing solution for SMEs. Unlike a traditional bank loan, SMEs that require funds are matched directly with individual investors through an online lending platform, hence the term “peer-to-peer”.

We list the information of 3 P2P lenders in the Singapore market:

1. Funding Societies Pte Ltd‍

- digital financing platform with business presence in Indonesia, Malaysia and Singapore. In 2019, It surpassed the S$1 billion mark in SME lending.

‍2. Validus Capital Pte Ltd‍

- addresses the financing of SMEs by utilising data analytics, machine learning and artificial intelligence.

3. Minterest Pte Ltd‍

- connects corporate borrowers with investors to empower both parties and helps them reach their financial goals.

	Funding Societies	Validus	Minterest
Established	2015	2015	2016
Type of Products	Business Loan Invoice Financing FS Bolt	Working Capital Loan Invoice Financing Purchase Order Financing	Business Loan Invoice Financing
Eligibility Criteria	Singapore incorporated companies with local shareholding of at least 30% Operating history of at least 1 year (not applicable for FS Bolt) Annual revenue of at least SGD $300k (not applicable for FS Bolt)	Registered Business with ACRA Operating history of at least 2 years Minimum annual revenue of at least SGD 500k	Business Loans: Registered Business with ACRA or Limited Liability Partnership At least 1 Guarantor Identifiable Cash Flow Invoice Financing: Registered Business with ACRA or Limited Liability Partnership in operation for more than 1 year 6 months ongoing relationship with invoiced clients Minimum annual turnover of SGD 250k
Maximum Financing Amount	Business Loan: Up to $2m Invoice Financing: Up to $1m or 80% of invoice value FS Bolt: Up to $100k	Working Capital Loan: Up to $250k Invoice Financing: Up to $500k or 80% of invoice value Purchase Order Financing: Up to 60% of PO amount	Business Loan: Up to $3m Invoice Financing: No information
Tenor	Business Loan: 1-12 months Invoice Financing: Up to 120 days FS Bolt: 1-12 months	Working Capital Loan: 3- 12 months Invoice Financing: 30-120 days Purchase Order Financing: 30-90 days	Business Loan: Up to 12 months (longer tenor may be considered) Invoice Financing: No information
Interest Rates	Business Loan: 0.75-1.5%/mth Invoice Financing: 0.67-1.5%/mth FS Bolt: 0.6-6%/mth	Working Capital Loan: From 1.5%/mth Invoice Financing: From 1%/mth Purchase Order Financing: From 1.25%/mth	Business Loan: 0.67-1.5%/mth Invoice Financing: 0.67-1.5%/mth
Other Fees	Service Fees Business Loan: 3-5% Invoice Financing: 2-4% FS Bolt: 3-5% Early Repayment Fee Business Loan: Subject to 2% on outstanding principal Invoice Financing: None FS Bolt: None Late Interest Charges and Late Payment Fees: 0.1% of outstanding principal per day on top of late payment fee (no information)	Disbursal Fee: 1-2.5% Late Payment Fee: No information	Processing Fee: Business Loan 2-6% Invoice Financing 2% Late Payment Fee: Amounts to 2% of the loan principal outstanding or $2,000, whichever is higher

Things to take note of when borrowing from a P2P lender:

Quantum and Tenor

Most P2P lending platforms offer borrowers working capital loans and invoice financing (at a capped quantum) and a shorter tenor as compared to banks. Depending on the type of product, the loan amount (I find that people understand this better than its technical term quantum) can range from as low as $5k (Capital Match Invoice Financing) to more than $5m (MoolahSense Business Loan), according to your eligibility.

Usually, the loan tenor that P2P lenders offer ranges between 3 - 12 months for a working capital loan. With fewer requirements needed to obtain a loan, P2P loan products are popular amongst borrowers who do not have collateral to pledge and require short-term financing solutions fast.

Interest Rates

The interest rates charged to borrowers start from 0.67%/mth to as high as 5%/mth. Typically, the rates vary according to an individual borrower’s credit evaluation score, as well as the requested loan amount and tenor.

Some P2P lenders such as Validus offer preferential rates to certain vendors and offer a higher loan amount of up to $500k (or up to 90% of the invoice amount) for invoice financing at 0.67% per month.

Fees

P2P lenders generate revenue by charging fees to borrowers and taking a percentage of the interest earned on the loan. One of the most common fees is the origination/processing/disbursal fee. This is the cost that is charged to a borrower by a lender for handling application paperwork and creating a curated loan proposal that suits his or her needs.

As illustrated in the table above, some P2P lenders also assign additional fees to borrowers. Funding Societies, for instance, charges an early repayment fee of 1% of the remaining principal amount to compensate investors for the promised interest lost, due to early repayment.

Conclusion

Before deciding on whether to take up a loan from a P2P lender, consider and ask yourself the following questions:

1. Suitability: Does the proposed loan solution solve your business needs?

2. Affordability: Are you able to afford the interest rate proposed to you and make timely repayments based on the tenor?

3. Additional Charges: Read the loan agreement carefully for any extra costs or penalties that are not stated on the lender’s website.

4. Repayment Schedule: Lenders offer repayment terms with varying degrees of flexibility (e.g. some require you to pay daily, others weekly and monthly). Work out which will best meet your business’s needs in terms of your cash flow.

If you are considering taking up a loan with P2Ps, financial institutions or private lenders, feel free to visit Lendingpot’s Business Loan Marketplace.

Lendingpot.sg gives you access to 47 lenders with just one application. Apply with us and get connected to only interested lenders. As the COVID-19 pandemic worsens, we understand that most financial institutions are tightening their credit, especially for unsecured loans.

Talk to us at 8774 9895 or email us at ask@lendingpot.sg to find out more about how you can explore other financing options or restructure/refinance your loans.

Disclaimer: All the information is believed to be accurate; however, no claims, promises or guarantees about the accuracy, completeness or adequacy of the information are made. All information, commentary, recommendations or statements of opinion provided in this article are for general information purposes only. We do not claim to be authoritative. If there are any errors in our reporting, please contact ask@lendingpot.sg for rectification.

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