Need a business loan?
You took the plunge, quit your job and started your own business. Your brand new online store selling tea and t-shirts (or food, or a small event management company.. you get the idea) is starting to gain traction and your investments into social media marketing seem to be working.
Now it’s time to bring your business to the next level by applying for a loan to expand, buy more supplies or take on bigger projects… and BAM! You’d never expected it to be so tough borrowing money from the banks!
Let’s look at a comparison of the basic business loan (NOT the government assisted scheme).
|Lendingpot’s Business Loan Comparison|
|Product Name||DBS Business Loan||OCBC Business Term Loan||UOB BizMoney|
|Max. Loan Amount||Up to S$500,000||Up to S$500,000||S$50,000 – S$350,000|
|Loan Tenor||Up to 5 Years||Up to 5 Years||Up to 4 Years|
|Pricing||From 10.88% p.a. (EIR)||8.88% – 13.88% p.a. (EIR)||8.0 – 12.99% p.a. (EIR)|
|Annual Fee||N.A.||N.A.||S$288 – S$500
Bank may vary annual fee payable.
|Lock-in period||2 Years||a. No lock-in (higher interest rate)
b. 2-year lock-in (lower interest rate)
|Prepayment Fee (within lock-in)||2.5% of principle amount prepaid||2.0% of principle amount prepaid||4.8% flat or any such fees specified by the Bank|
|Cancellation Fee||2.0% of loan amount||2.0% of loan amount||4.8% flat or any such fees specified by the Bank|
|Processing Fee||S$500 or 2% of approved loan amount, whichever higher||2% of approved loan amount||A minimum of S$288 or not more than 2.88% of the approved loan amount|
|Min. Business Turnover||No information||N.A.||Min. S$750,000 annual turnover|
|Min. Years in Business||2 years||2 years||3 years|
|Secured by Guarantors||Yes||Yes||Yes|
|Sources||Up to 5 Years||Up to 5 Years||Up to 4 Years|
|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|
In our opinion, there are minimal differences between the three local banks.
From our experience, although UOB appears to be the most restrictive in terms of their business loan eligibility requirements, they are the most flexible in practice (read: can be affordable, based on negotiation) in terms of their pricing of fees and interest rates.
So is there any difference between these banks?
The only tangible difference between them is the type of industries that they provide business loans to.
Although not stated explicitly, sometimes, due to risk categorization, some banks may not grant loans to certain “high-risk” industries (i.e. construction, retail, café or spa).
However, ordinary business owners will not know what is each bank’s “high-risk industry” flavour of the day.
Tips for small business owners getting a business loan.
a. Try getting a loan with another bank (other than your operating account’s bank).
i. Tell them you are also applying with your operating account’s bank.
ii. If you are a “new-to-bank” customer, the relationship manager usually works a little harder trying to convert you (here is where you can request for more competitive rates!).
b. If possible, take your time and don’t accept the first set of interest rates/fees.
i. As stated above, the relationship managers have some leeway to offer better rates. No harm asking for a cheaper interest rate (e.g. a 1% reduction of interest rates will save you $1500 of total interest payable for a 5 year, S$50k loan).
ii. This is most likely to work if your business has a strong cash flow.
c. Get a business loan from a marketplace like Lendingpot.sg (forgive our shameless advertising)
i. You get connected to multiple relationship managers at the same time who knows they are competing with other banks
ii. In order to win your business, relationship managers are more likely to either compete on price (offer cheaper interest rates) or improve their service level to win your business
iii. It’s free. No gimmicks. Read why here.
Good luck in your business loan hunt!
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.
Connect with him via firstname.lastname@example.org