How do I get a small business loan in Singapore? Should I get a business loan from banks or private lenders? If you are considering starting a small business, these might be some questions you find yourself thinking about.
This article hopes to provide some insights into obtaining business loans from private lenders by guiding you through the following:
- Everything you need to know about private lenders
- Differences between private lenders and traditional banks
- Pros and cons of each
What Is A Private Lender?
Private lenders are individuals or companies that lend money to those who either prefer not to or cannot secure a business bank loan. They use their capital to finance investments, such as real estate or working capital, for small businesses that lack collateral otherwise.
Private lenders operate faster than traditional banks, as their approval process is comparatively informal. They can also be private funders for businesses with bad credit, providing them with another financing option since it is highly likely that their bank loan applications would be rejected due to their weak, or insufficient, credit history.
How Does Using A Private Lender Work?
Private lenders can come in two forms: individuals or private lending companies, such as Poss Capital. Although receiving a loan from a private lender is much easier, private lending companies do tend to charge a higher interest rate as compared to traditional banks.
However, a direct business lender can offer you the quickest solution to your business loan needs and provide you with funding based on clearly defined lending criteria. As they work with alternative funds, they offer a hassle-free process unlike applications made to institutions. Of course, nothing too rapid and without a thorough credit check comes without a price. Lending from them forces you to be much more diligent about timely instalment.
Nevertheless, you might find that applying for small business loans from private lenders that operate entirely online tend to be better, especially for those who find it a hassle to gather and provide documents physically. Poss offers you access to Quik with fast and flexible loans that come with no early repayment fees while allowing you to select your preferred loan repayment tenure. You can test out this flexibility with our handy loan calculator, and submit your online application in less than 10 minutes.
What About Traditional Banks?
Traditional banks operate differently compared to private lenders. They put their applicants through a much more meticulous and longer assessment process to see if they are suitable to receive a business bank loan. Consequently, for applicants without a long standing and good relationship with a traditional bank, it would be less challenging to borrow from a private lender instead.
Key Differences Between Private Lenders And Traditional Banks
Be it alternative loans, small business loans or real estate loans, some critical differences between lending money from a private lender and a traditional bank exist. These differences can include:
- Interest rates
- Loan tenure
- Processing time
- Maximum loan amount
- Processing fee
- Criteria for eligibility
Transparent payment schedules and interest charts are crucial, such as those Poss Capital provides, as they allow you to know exactly what you are paying for when taking up a business loan in Singapore. Additionally, Poss does not impose any early prepayment penalties, so you are paying only for what you need to use. Only the best private lenders for business loans do this.
Why Do Private Lenders Lend Money?
Private lenders provide loans for various reasons as they see fit for their investment. Their business model involves profiting off the interest rates of the money lent to you. At Poss Capital, we understand that small and medium-sized enterprises (SMEs) face challenges due to limited access to funds across the different stages of their business cycle. Poss wants to bridge this financing gap for businesses by providing them with an alternative source of capital.
What Are The Advantages And Disadvantages Of Private Lending?
Pros Of Loaning From Private Lenders
- Responses are quicker than that of traditional banks (Within 48 hours with Poss)
- Fewer requirements
- Shorter assessment for eligibility
- Customised loans specifically tailored to your loan needs
- Easier and faster approval, even for businesses with bad credit history
Cons Of Loaning From Private Lenders
- Shorter loan tenures than traditional banks loans.
- Higher interest rates than traditional banks loans.
- Lower maximum loan amount (due to budget constraints)
Seize Growth Opportunities Without Stress
It is much more flexible to get a business loan from a private than from a traditional bank. Borrowing from private lenders can provide your business with a much smoother path. Contact Poss today, and let us help you get there faster. We are here to provide you access to funds when you need them the most.
