Alternative lenders made their debut in the loan market over 10 years ago, but have only gotten its well-deserved attention as of late. Though many traditional SME borrowers maybe satisfied with getting their business loans from the go-to banks, they may lose out on other opportunities arising from partnerships with alternative lenders.
Operating on a smaller scale, alternative lenders go through fewer rounds of approval and assessment, and are able to provide a more customised business loan solution. They are known for having lesser red tape, which results in a smoother application process with loan disbursements taking as little as a day.
Smaller companies with too little a track record of their credit history, may look to alternative lenders which may not be as tight about a company’s quantitative credit quality. On top of having a need to have 2 years of operations, banks also require potential borrowers to have a minimal revenue of $500,000 before considering a loan offer, which many SMEs struggle to qualify.
Borrowers often enjoy greater flexibility in choosing a loan that aligns with their desired repayment schedule, loan amount, interest rates and working style. Loan structures from alternative lenders should be exploited for its innovative structure - such as adopting a flexible revenue financing based on the borrower’s capacity.
That being said, the market for alternative lenders may be an overwhelming catalogue, so here are Lendingpot’s Top 5 Non-bank Lenders of 2022.
Choco-up is best known for being the largest revenue-based lender in Asia with loan disbursements coming in as early as 2 days. Their flexible loan structure allows borrowers to loan and repay said loan according to each month’s inflows which works great for companies with variable inflows. Where necessary, loans can finance up to 40% of the company’s revenue - which means partnering with Choco-up could be a long-time partnership through the rock start-up days to high monthly earnings. Their rates are at a competitive flat rate of 8% and applications can be done fully digitally. With some suspicion in the air, you can also rely on their wide range of customers to back their credibility as a lender.
That being said, Choco-up may not be the lender for everyone, depending on your working style.
As Choco-up’s signature flexible financing relies on each month’s revenue, partnering borrowers should have their monthly reports in check for them to ensure the legitimacy of the customized repayment structure.Though the shortest time required for the loan to disburse remains at a record of 2 days, the turnaround time may vary depending on how smooth the application process runs. Being a jack of all trades, Choco-up would be optimal for companies who don’t mind keeping their books a little more in check.
Funding Societies is the largest SME financing platform inSoutheast Asia and is backed by both institutional and private investors. They specialise mostly in shorter-term loans, Micro Loan and Term Loan, where the former provides quick disbursement rate with next-day approvals. This quick fix can be applied for entirely online for working capital expenses, urgent financing and even longer-term loans for business expansion, for example.
However, a fair reminder that quick fixes are only for temporary use.
Both Funding Societies’ Micro Loan and Term Loan have a shorter term of 6-12 months and will incur a higher-than-average processing fee of 3%to 7%. On a good note, partnering with Funding Societies for a Term Loan can finance you with between $50,000 and $2 million at a competitive interest rate of 0.8% per month. It may be better to loan for a large urgent expansion if you’re going to need financing ASAP!
They are also able to extend their business loan solutions to sole proprietors which is pretty rare amongst non-bank lenders.
ZETL aims to support the operational expenses of asset-light companies by using company receivables to secure their loans. They offer 4 different products, including a credit line, a wage layer, revenue share and invoice financing. Similar to Funding Societies, their loans can be signed digitally and their invoice financing application has a turnaround time of 24 hours. As for interest rate, ZETL products also provide a competitive 1% and up per month. We call them an easy invoice financier is because they are not strict about the invoices they finance and do not require acknowledgement from your end-buyer unlike most invoice financiers like Culum and IFS capital.
However, when competing on quantum, ZETL stands on the lower end of lender offerings with a maximum loanable amount of US$ 300,000 . They also have a strict preference for service related companies, but depending on your company performance, they might be open to other industries as well.
Fundtier is an MAS-licensed entity which capitalises on the benefits of crowdlending and technology to support SMEs with flexible financial products. Specifically, they take a customer-first approach by allowing borrowers to customise their loan quantum, repayment period and so on. In doing so, they open their door to a greater range of borrowers who can alter the different terms to their liking, regardless of financial capacity, purpose of financing and other constraints. Fundtier also prides itself in being able to provide quality service by welcoming queries through their contact line where their FAQ page does not suffice.
Because of their non-quantitative assessments and flexible product range, Funditer does fall short when it comes to the application and disbursement turnaround time. For loans, they take a longer turnaround time of 3 days and 14 days for cash, though still faster than institutional lenders. It is best to assume a minimum of 14 days for your funding application process to close. Fundtier’s financial products may be priced slightly higher at 3% per month.
The overall tradeoff comes between higher prices and a steady, state-backed lender. For companies more conscious of the lender’s backing, Fundtier would be a viable option.
Similar to Fundtier, Affinity Financial Services leverages on private funding to finance businesses, particularly for their working capital, business expansion or project specific expenses. They offer 4 different financial products, namely, secured loan, unsecured loan, invoice financing and project financing. As the only lender on the list offering an unsecured loan, this product offers lower interest rates, longer loan repayment period and a higher quantum than most unsecured loans. Competing on the fast-track, Affinity is noted to approve applications within 24-48 hours of full documentation, and immediate funding thereafter.
Welcoming not just enterprises, but sole proprietors and individuals too. Competing with Choco-up in the field of flexible financing, Affinity Financial Services also introduced a flexible lending plan with varying loan tenure, monthly payment and capital repayment. Notably they range from prices of about 3% per month which is usually the trade off for some level of flexibility. One other restriction that they may have is the requirement for 2 eligible guarantors.
As an overview, these 5 lenders have an average turnaround time of less than a week, differing by a couple of days, but have vastly different levels of customer service and loan quantum.
So what?
Since every borrower has different primary and secondary concerns, knowing briefly what lenders have to offer may be the best assessment of what would suit your financing needs the most. Instead, try first to rank your priorities and work through things from there - maybe starting with a “personality-based”approach for one.
Tarsilla has been an avid writer since 2019 and covers topics from event exclusives, photography, to finance. With a creative and explorative mind, she actively seeks opportunities to learn new things and takes challenges head-on.
