Right off our latest business loan series where we spoke about what one can do to get a start-up loan. One of the most obvious answer is a classic personal loan as it relies on your existing salary without taking into consideration the larger cashflow situation of the company. We also broke down one of the most common question of bank vs money lender and why a licensed money lender can be a better choice despite its high cost.
Today, we review one of our licensed money lenders on our platform, Friday Finance and shed some light on how we think of them as a lender. A quick glance at their website, gives you a sense of friendliness, warmth, and comfort in its all-pink persona, along with its tagline – Relax it’s Friday. Indeed, this lender is amongst the six moneylending licenses that were issued to protect borrowers through business-led improvements. This includes the use of digitalized processes to lower and give better terms to borrowers who repay their loans early and on time. Have they truly been an alternative to financial institutions? Our answer: It might be as good as it gets. But 8/10 for room for improvement. And here’s why:
One of the most important elements in determining service value is pricing. For most money lenders, the industry interest rate typically hovers around 2-3% per month with a cap of 4% set by MAS. While some might publicize a rate of 1% per month, these are typically disbursed with collaterals or on very rare high-quality cases which fall in the category of needing a larger quantum but earn less than $40,000. This is because most banks can only extend up to 2 times monthly salary in that bracket while license money lenders can lend up to 6 times your monthly income.
So for Friday, we have seen their interest rate linger between 2% per month but mostly under 3%. Based on our experience, we have not seen a charge of 4% per month and so we give this lender a higher rating on their pricing. But what puts them slightly above average is their administrative fee which is mostly priced at 7% (a far cry from their published 2% admin fee) but thankfully lower than industry which is 10%. You also get a refund on it when you make timely repayment to your loan.
So as part of their promise to ministry of law when they were issued their license, Friday has agreed to refund half of the administrative fee when the loan is fully repaid on time and the last we checked, more than a third of their borrowers actually benefit from the refund. That’s quite a significant saving which adds up to 3.5% on a 7% initial administrative fee, more than 60% cheaper than the industry (if you pay on time).
One other benefit you get from Friday is also its loan protection insurance. Personal Loan Protection Insurance is a personal accident insurance plan designed exclusively to insure you as a borrower against the financial burden arising from your outstanding loan in the event of an accident.
Friday’s loan application process is fairly digitized with the application first starting on their website and application submitted using MyInfo. This Singpass enabled step completes more than 80% of your entire application process and takes less than 5 mins to submission. The next step is to upload additional documents that might be relevant, this includes your CBS and Money Lender Credit Bureau reports and also any relevant business documents if your proof of cashflow is in a business you own. Thankfully Friday offers a simple portal for you to upload these documents into. Once your loan is approved, you will then need to make your way down to Friday’s office at Singpost Centre to get your loan offer signed and subsequently receive the funds within a day.
That said, we have high standards of digitization and we believe that instant approval capabilities and 24 hour disbursements are gold standards for any money lender. In our opinion Friday meets all minimum requirements for a digital application but fall short in terms of speed especially if a loan officer still needs to go into each document uploaded to extract certain information for assessment. Not to mention that there is still a need to make a physical appointment at the lender’s office. As such, a typical borrower with urgent cash might do better to simply go to their nearest money lender for a loan. Perhaps investments in Optical Character Recognition might help their efforts.
One of the reason Friday is on Lendingpot is because of its ability to finance sole proprietors on a personal basis. This means your business performance will be considered in the credit assessment which is unlike other money lenders who only focus on the lender’s personal credit quality. Additional documents like financials and company bank statements could be requested as part of the process to enhance your credit worthiness. This positions them well above many other licensed money lenders in the industry.
Finally, which is perhaps one of the most important factor is a lender’s approval rate. We give Friday a 6/10 as they have a generally low approval rate than the rest of the money lenders and this might be their strategy after all - only targeting a very niche segment of the market. Afterall, with the 50% refund on their admin fee on early or timely repayment, they are attracting good and higher quality borrowers which might be only a minute proportion in the market. Whereas the true gap might be in less predictable, credit challenged individuals. Therefore we are only giving them a low score on this front as their credit assessment is much stricter than the rest.
In summary, we think that if this is your first time dabbling into the licensed money lending space, Friday Finance might be a good place to start. It also puts you in good stead as it means that you are not too heavily ladened with non-bank debt which improves your approval chances with Friday. Finally, we think that this is suitable for sole proprietors and freelancers whom their business records can be used for assessment in their loan application.
Most importantly, Friday is on Lendingpot for all our sole-proprietors and they are not the only one. Make a single application today to get access to all relevant lenders at one go on Lendingpot or simply make an appointment with us to speak and learn more.
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 for free. 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.
Benjamin heads up Lendingpot with a background in all things SME. He was previously a commercial banker at Citi with experience in Relationship management, Credit Risk, Trade Operations and Corporate FX sales; and understands the difficulties SMEs face in this opaque world of SME financing.
