Do You Really Need A Business Loan Broker In Singapore? - Loan Broker Singapore
As a business owner in Singapore, you may be looking at plans for business expansion, purchasing more inventory, upgrading of machinery or maybe just to improve your business cash flow. First question to ask yourself is, “Which bank should I go to?”. If this is the first time you are applying for an SME business loan, or an SME Working Capital (Small and Medium-sized Enterprise) loan, you might not be aware that a loan application process is tedious and cumbersome.
It may sound easy, just gather all the information and documents that the banks require, email them and then wait for them to reply on what other details they need. However, this to and fro process can take a long time, as different banks have different requirements and lending criteria. Especially if you have not organized your files regularly, this can be very time consuming. Drawing up a good business proposal and making realistic projections can take up a lot of time too.
So while you are busy managing your business, why not outsource this to a reliable SME business loan broker Singapore?
The question is, is it worthwhile to engage a broker to secure a business loan for you?
A business loan broker, or also known as an SME loan broker, acts as a middleman between you and prospective funders. His role is not just to source for the best rates and financing deal for you, but also to ensure that the loan application process runs smoothly till loan inception and disbursement.
What are the benefits of engaging a business loan broker?
Some business owners probably insist on doing all the paperwork and applying their own financing on their own to save on paying the broker’s commission, while some choose to outsource to a broker to save time and effort to ensure they always get the best deal
Before giving an outright rejection to outsourcing loan applications to business loan brokers, you can consider the advantages of using an intermediary versus applying on your own.
1. An experienced broker is well versed in the lending process, requirements and credit documentations. He has knowledge of the various business loans available and he is kept up to date with market rates as well as the industry rules and regulations. He will be able to advise you on more complicated business banking facilities such as trade financing and factoring. And given his experience with handling different loan contracts, he will also be able to better explain the terms and conditions to you, especially when it comes to the terms regarding business loan fees, early loan redemption and penalty.
2. Besides the vast knowledge and experience that a broker should have, relationships with bankers and funders are important too. Having worked with many banks and financial institutions gives the sme loan broker advantage of knowing which of them could offer the best deal. A resourceful one would know which bank or funder will match your needs, and he is also kept updated of new loan products and promotions. What you are paying for is his extensive contacts and networks that he has built over the years with bankers who are responsive and reliable.
3. One important point to note, however, is that getting a loan through a broker does not guarantee that your loan application will be successful upon the first application. But in the event of a loan rejection, you can count on your broker to explore other alternative funding financing options for you. You may not qualify for a traditional bank loan, but your broker may still be able to secure alternative fundings for you. On top of being an experienced and resourceful loan broker, a good loan broker would have prepared an alternative strategy just in case.
4. In addition, when your loan application is rejected, a broker will be able to advise you on what are the possible reasons you got rejected, and how you can improve your credit standing over the next few months. Your relationship with your broker should be based on long term understanding and trust. He will go down to the nitty-gritty details and pinpoint the areas that could potentially jeopardize your loan approval, hence increasing your chances of getting the loan. As mentioned earlier, different banks and financial institutions have different credit criteria and lending criteria that most business owners are not aware of. This could also depend on which industry your business is in. For example, some industries might have a high chance of approval in Bank A, while the same industries might not be the preferred risk for Bank B. Your broker will be able to advise you on this and save you the trouble from applying.
5. Most importantly, because your broker has contacts and relationships with different bankers, instead of approaching banks one at a time, your broker can submit your loan proposal to multiple banks and financial institutions concurrently. This definitely saves you a lot of time from going from bank to bank. This way, he can also get the best of the best loan terms offered in the market, and also advise you on the optimum loan deal for you, which translates into lower interest rates charged.
All these being said, what could have stopped you from engaging a business loan broker?
We believe that a relationship between a broker and a business owner should be long term, and it has to be built based on trust and understanding. The loan application process takes up so much time and effort, and taking a loan might not be a one off situation. Hence, it is important that you find a broker whom you can work with.
While there are many professional and credible loan brokers out there, there is bound to be some black sheep in this industry. Here are some things you should look out for in choosing who to work with:
- Brokers who over promise and guarantee a successful loan approval even before looking through your financials. The final decision lies with the bank’s credit approver, and as we have mentioned many times, regardless how competent a broker is, lending criteria differs across the banks.
- If your broker is often uncontactable, takes a long time to reply to your questions, or is always feeding you with wrong information, then it is time to re-evaluate his credibility and competence before letting him have access to all your financial information.
- Your broker should also be transparent in the amount of commission he is charging you for his brokerage service. Whether the commission is payable after successful loan approval, or does he charge even if the loan did not go through? You should both agree on the price and terms and conditions first before engaging him.
This brings us to the last point: How much does it cost to engage a business loan broker?
It varies. We have heard of terrible experience from SMEs that engaged unethical brokers that demand them to pay a processing fee upfront or sign an exclusive broker agreement with them. We have even heard cases where SMEs are still forced to pay broker fee for loans that were approved but not accepted by SMEs due to un-favourable terms and conditions.
Bear in mind that, loan brokers should only charge SMEs based upon successful loan inception, i.e. Letter of Offer signed and funds disbursed.
A broker usually charges a commission calculated based on a percentage of your approved loan amount. Usually it is 3% to 5%, negotiable depending on the broker. Certain considerations include the targeted loan size (commission percentage can be reduced the higher the loan amount), the complexity of the case and also, the financial standing of the company (based on your company’s credit records, financial documents, cash flow position etc),
Remember, your broker will be doing all the legwork for you, from gathering documents and doing up a business loan proposal, to mitigating any potential issues that could arise during the application process and securing an approval for you, and lastly to ensure no hiccups during the disbursement of the loan amount.
Hence it is best that you and your broker have a mutual agreement and align your interests before you decide to outsource the loan application to a broker.
Why Use Loan Broker? Get the information you need FREE here!
If your company's financial standing is strong, save on your broker fees and do your own submission to Financial Institutions with our easy comparison of the rates and terms and conditions of various lenders in Singapore here! *Psst we let you know the exact terms and conditions that lenders do not want to share with you.
Not sure whether your company can be qualified for bank loans or alternative lending? Try our A.I assisted loan, and Smart Towkay team will send you a lending report within 24 hours' time. With the lending report, we aggregate and recommend the highest chance of approval be it with BANKS/FINANCIAL INSTITUTIONS or Alternate lenders like Peer to Peer Lenders or even B2B lender!
Note that Loan Broking Industry is not regulated like Insurance or Property agents, thus the barrier to entry is low which will result in a lot of unscrupulous fly-by-night agents. Always look for a reputable broking firm that can recommend and source for the best lending package for your company.
Not sure whether your company can be qualified for bank loans or alternative lending? Try our A.I assisted loan, and Smart Towkay team will send you a lending report within 24 hours' time. With the lending report, we aggregate and recommend the highest chance of approval be it with BANKS / FINANCIAL INSTITUTIONS or Alternative lenders like Peer to Peer Lenders or even B2B lender!
Share with us your thoughts by leaving a comment below!
Stay updated with the latest business news and help one another become Smarter Towkays. Subscribe to our Newsletter now!