Top 5 non-bank & alternative SME lenders for 2023

There is a reason why alternative lenders still exist as some may offer value that banks cannot. This includes speed (as soon as same day) and acceptance of unique credit situations like low bank balances, length in business and weak credit score. Read why choose alternative lenders here.

Last year we wrote about 5 of them and this year we are glad to share new lenders that has risen to the challenge. Out of the 5 we wrote about last year, only 1 remain which goes to show how competitive the space has become for the betterment of SMEs.

Here’s a summary of this year’s list in no order of preference.

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1. Funding Societies (The quick fix)

This is the only one that remained on our list from 2022. Funding Societies stands as Southeast Asia's largest SME financing platform, supported by both institutional and private investors. They are renowned for their prowess in short-term loans, specifically Micro Loans and Term Loans. These offerings cater to businesses' urgent financing needs, making Funding Societies a notable player in the lending industry.

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Strengths:

• Speedy Gonzales: this one took only 3 days before our client got approved and funded. So expect speed.
• Sole Proprietor Inclusivity: Sole proprietors can benefit from their program as well.
• Easy Application Process: Their process is made smooth with no site visits required. They have truly emerged digital with the use of photos and videos for proof of business operations. Also no lengthy interview sessions.
• High Quantum Availability: One other good is that they can offer unsecured loans up to S$2mil which is almost unheard of in the non-bank industry. Of course, for such cases more documentation and time is required but it’s still a big win for those needed a higher quantum.

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Areas for improvement:

• Shorter Loan Terms: Both Micro Loans and Term Loans offered by Funding Societies have relatively short terms, typically ranging from 6 to 12 months. Businesses seeking longer-term financing may need to explore alternatives.
• Interest Rate and Fees: Funding Societies charges interest of about 3% per month and processing fees ranging from 3% to 7%, which should be considered when evaluating the overall cost of borrowing. And honestly 7% is quite high.

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Ideal clients:

Clients with short term and urgent needs and financing requirements of up to S$2mil. So, if pricing really isn’t much of an issue, I think Funding societies is a no brainer.

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2. FAZZ (The premium quick fix)

Fazz Financial previously known as Xfers is a dynamic player in the financial services sector from Indonesia. They are known for their innovative approach to digital banking and financial solutions. They bring a unique blend of modern technology and traditional financial services, catering to a wide range of financial needs for individuals and businesses alike.

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Strengths:

• Speedy but No Guarantee: If you case is straight forward, we would say they can approve your credit as fast as 48 hours.
• Affordable Rates: Rates are affordable at 1.5% per month as they are going for strong credit customers.
• Decent Loan Quantum: Unsecured business loans go up to $300k which is ahead of most non-bank lenders.

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Areas for improvement:

• Shorter Loan Terms: Similar to Funding Societies, tenors only go as far as 12 months.
• Stringent Credit Assessment: While most of the application process is fairly similar in terms of documentation, they have a slightly lower tolerance in terms of the total leverage.
• Better Inclusivity: Right now, FAZZ is unable to support sole proprietorships.

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Ideal clients:

If you have long had a strong credit record with the banks and are looking for a short-term financing gap urgently this might be a place to go. The ability to get funding of up to $300k at interest rates of 1.5% per month can be quite affordable. Think of this as a Funding Societies Premium. Suitable for those with more premium credit record (i.e. total debt obligations and repayment track record).

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3. Validus (The minimalist)

Validus Capital is another of my top choice and is a Singapore based Fintech that specializes in peer-to-peer lending for SMEs. They were founded in 2015 and have had multiple reiterations of their loan model. Right now, we think that they have found a good fit for SMEs. We call them the minimalist because of their overall low requirements which makes application a breeze.

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Strengths:

• Only 2 Documents Required: Now this is true financial technology. Validus only needs your 6 bank statements and the CBS record of your guarantor to get you that offer. This means you can get your documents in as little as 5 mins.
• As Fast as Same Day: After you submit your documents, it only takes less than 24 hours before you get your result. Super fast.
• One of the Best Pricing for Non-banks: Rates have seen to go all the way to 0.9% flat per month which is honestly an attractive one.

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Areas for improvement:

• Shorter Loan Terms: 12 months is the typical offer and can be made longer to help SMEs  
• Reduce Manual Loan Processes: With the need for physical signing and site visits, these can hopefully be reduced with technology and video calls.
• Getting Larger Quantum: While they tout to extend up to $150k in loan quantum. Offers we have seen are within the under $50k range, even for customer with over $5mil in revenue. So perhaps, only the best of credit gets the prize.

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Ideal clients:

For clients that are looking for something affordable, this is something to explore. They are slightly stricter on credit assessment and loan quantum, but pricing is unbeatable.  With the ease of documentation, I say Validus has earned its spot at the top 5.

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4. Fundaztic (The long lasting)

First started in Pahang Malaysia in 2004, Fundaztic has been supporting the SME market for a long time and understands the in and out of the SME loan market. The top peer-to-peer lender in Malaysia started operations here in Singapore in 2021 to do the same and has now grown to establish a name for themselves among the SME financing community. Why we call them the long lasting is because they are perhaps the only alternative lender that can do unsecured loans for 3 years. You heard me right, 3 years.

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Strengths:

• 3 Year Tenure: For SMEs, longer is almost always better as it reduces the cash repayment that obstructs growth for businesses. A 3 year tenor immediately reduces that cashflow commitment by a third.
• Generous Loan Quantum: This is where Fundaztic puts its money where its mouth is. According to the various credits, it is relatively generous with its loan offer of up to S$300k.
• Good Inclusivity: Yes, Sole prop, Sole Prop. Nothing else needs to be said.
• Competitive Pricing: Pricing starts as low as 1% per month

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Areas of improvement:

• Cumbersome Processes: This is a little of a sore point but perhaps you do pay for what you get. To submit a loan application, you will need to jump through many hoops which include bank verification, site visits and interviews, submission of detailed management details to name a few. Just to complete the application, it can take days.
• Lengthy Loan Approvals: Loan approvals also go through multiple loops with lengthy loan officer interviews. Finally, there is a fundraising period and perhaps because of its relatively new status, investor money can take up to 20 days to come in. Of which, if 80% of the funding is not met, the loan is rejected.

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Ideal clients:

Patient clients who are willing to wait it out. Like with all things, nothing good comes easy.

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5. Orix Leasing (The big quantum)

This is an old non-bank name in the industry. Perhaps the oldest amongst the lot. Starting out as a leasing business, they are now very focused on property-backed lending in Singapore. Here, you will notice that Orix is significantly different from the other 4 lenders as their loan focus is not on unsecured business loan. Their property backed loan offers business owners an alternative to raise larger quantum of loans to pursue larger projects. Property-backed loans also offer cheaper sources of financing as low as 7.5% p.a (effective). If you are wondering why a non-bank property lender over a bank we detailed it here in our article.

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Strengths:

• One of the Highest Loan-to-Valuation: Orix can do a loan to valuation of up to 85% which is 10% higher than what banks can do. This is one of the highest in the market even for non-banks.
• High Maximum Loan Quantum: Loan quantum can stretch up to S$10mil.
• TDSR Waivers: One of the key reasons why non-banks are chosen is because of the TDSR waivers for property cash out.
• Competitive Pricing: Interest rates go as low as 7.5% p.a. And repayment can be interest servicing only.

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Ideal clients:

Clients with a private property or commercial or industrial property with sufficient equity (i.e. Valuation minus outstanding loan amount). It is also ideal for clients who are looking for a larger quantum of loans with a lower price point. We didn’t add in any areas of improvement here because Orix is operating at an industry standard for their loan process. Either way, be prepared to deal with a bunch of unavoidable documentation as it has to do with taking a legal charge on your property.

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Conclusion

In summary, Singapore's top five alternative lenders offer diverse solutions to meet financing needs. Validus Capital, Funding Societies, Fundaztic, Orix Leasing, and Fazz each have unique strengths catering to various segments.

Borrowers should consider factors such as interest rates, terms, and fees when selecting a lender. It's crucial to stay informed about evolving offerings and regulations in this dynamic financial landscape.

For a streamlined lending experience, consider reaching out to Lendingpot, your trusted loan broker. They can guide you in choosing the best lender for your specific needs.