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Peer-to-peer (P2P) lending, also known as crowdfunding, is an alternative business financing solution for SMEs. Unlike a traditional bank loan, SMEs that require funds are matched directly with individual investors through an online lending platform, hence the term “peer-to-peer”.
We list the information of 3 P2P lenders in the Singapore market:
Most P2P lending platforms offer borrowers working capital loans and invoice financing (at a capped quantum) and a shorter tenor as compared to banks. Depending on the type of product, the loan amount (I find that people understand this better than its technical term quantum) can range from as low as $5k (Capital Match Invoice Financing) to more than $5m (MoolahSense Business Loan), according to your eligibility.
Usually, the loan tenor that P2P lenders offer ranges between 3 - 12 months for a working capital loan. With fewer requirements needed to obtain a loan, P2P loan products are popular amongst borrowers who do not have collateral to pledge and require short-term financing solutions fast.
The interest rates charged to borrowers start from 0.67%/mth to as high as 5%/mth. Typically, the rates vary according to an individual borrower’s credit evaluation score, as well as the requested loan amount and tenor.
Some P2P lenders such as Validus offer preferential rates to certain vendors (e.g. SMRT) and offer a higher loan amount of up to $500k (or up to 90% of the invoice amount) for invoice financing at 0.67% per month.
P2P lenders generate revenue by charging fees to borrowers and taking a percentage of the interest earned on the loan. One of the most common fees is the origination/processing/disbursal fee. This is the cost that is charged to a borrower by a lender for handling application paperwork and creating a curated loan proposal that suits his or her needs.
As illustrated in the table above, some P2P lenders also assign additional fees to borrowers. Funding Societies, for instance, charges an early repayment fee of 1% of the remaining principal amount to compensate investors for the promised interest lost, due to early repayment.
Before deciding on whether to take up a loan from a P2P lender, consider and ask yourself the following questions:
1. Suitability: Does the proposed loan solution solve your business needs?
2. Affordability: Are you able to afford the interest rate proposed to you and make timely repayments based on the tenor?
3. Additional Charges: Read the loan agreement carefully for any extra costs or penalties that are not stated on the lender’s website.
4. Repayment Schedule: Lenders offer repayment terms with varying degrees of flexibility (e.g. some require you to pay daily, others weekly and monthly). Work out which will best meet your business’s needs in terms of your cash flow.
If you are considering taking up a loan with P2Ps, financial institutions or private lenders, feel free to visit Lendingpot’s Business Loan Marketplace.
Lendingpot.sg gives you access to 47 lenders with just one application. Apply with us and get connected to only interested lenders. As the COVID-19 pandemic worsens, we understand that most financial institutions are tightening their credit, especially for unsecured loans.
Talk to us at 8774 9895 or email us at ask@lendingpot.sg to find out more about how you can explore other financing options or restructure/refinance your loans.
Disclaimer: All the information is believed to be accurate; however, no claims, promises or guarantees about the accuracy, completeness or adequacy of the information are made. All information, commentary, recommendations or statements of opinion provided in this article are for general information purposes only. We do not claim to be authoritative. If there are any errors in our reporting, please contact ask@lendingpot.sg for rectification.
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
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Jennifer loves helping SMEs in their business growth journey. She is also an epicurean and has perpetual wanderlust. During the weekend, she weaves poems out of thin air and buries herself in books.
