6 Benefits of engaging a Business Loan Consultant in Singapore
Many have asked, what is the point of engaging a business loan consultant, when I can apply for the loan by myself? (This tends to occur before they engage our service and are still unsure of what we do.)
Is it worthwhile for SMEs to engage a broker to secure a business loan in Singapore? This is for business owners who are looking for a business loan to finance an expansion, working capital requirement for cashflow purpose, or equipment upgrades.
What I normally tell them is, “Take us as PR consultants who have helped many foreigners apply for their PR status. You can always apply for PR by yourself, but the chances of rejection are very high especially in Singapore where they are tightening the quota.”
We can help you because we know what attributes the financier is looking at in order to approve your loans.
Applying for a business loan is an extremely tedious process. In fact, for many small business owners, it is an extremely tough process to start (especially as a first-timer); due to the sheer number of requirements banks might ask for. Most SME owners are unaware of what the banks may be looking for.
With over 10 years of experience in the corporate finance industry, let me shine a light on the role of a loan consultant.
What’s the role of a Business loan Consultant?
Most SME loan brokers in the market take on the role of an intermediary, a “go-between” facilitator linking business owner to the prospective financier.
The main task of the individual is to ensure a smooth loan application process, from meeting the requirements of a financial institution to the actual disbursement of the SME loan.
A good loan consultant, however, not only takes on the role of an intermediary but also acts as an advisor to help you improve your chances of loan approval and bring your business to greater heights in the long term.
What are the benefits of engaging a Loan Consultant?
1. Contacts and network
Professional brokers, especially those who’ve been in the business for years, have built relationships with a large network of financiers and bankers.
Having worked with so many banks and financial institutions in the past, this gives them (and you) the advantage of knowing which ones offer the best deals. A loan broker understands where to look for a financer that is a good fit for your financing needs. He ‘s going to locate the missing puzzle piece for you.
A broker is also aware of new loan products and promotions. He is aware of every useful and latest information about lenders and loan programs because of his range of contacts and network. In other words, he is always in the loop.
So what are you paying for? You’re paying for the extensive contacts of a business financing specialist who has filtered through numerous bankers and have direct ready access to bankers who are responsive and dependable.
2. Expertise and experience
A seasoned consultant will have both mastery and experience in the lending process as well as documentation.
He is aware of the market, including indicative costs, and knows when there is an overpriced loan. He has knowledge of the common types of collateral provided for taking on a loan as security.
He’s also aware of basic laws and regulations governing lenders and borrowers. Since he has reviewed most types of loan contracts, you can rely on him to clarify any terms and conditions that may be unclear to you. He can walk you through each loan provision and highlight any business loan fees that you may need to look out for.
The background of the funder is also important as his/her knowledge and experience can help you understand your case situation better, they also can value add your case when they have good credit knowledge.
3. Alternative strategy and practical advice
Getting a loan through a consultant doesn’t guarantee that you will obtain a loan the first time you approach a bunch of funders. In the event of the bank’s rejection, not all hope is lost! Your consultant can still work it out for you as he is aware of other financing options. While one might not qualify for a traditional bank loan, they may still be able to get the green light for a merchant’s cash advance, revolving credit line or other funding options.
A good loan broker ALWAYS has a Plan “B” ready and a plethora of alternatives prepared for you just in case. He can also advise you on possible reasons your application is rejected and how you can improve your credit standing in the future.
4. Favourable loan terms
Most loan brokers think that by submitting your loan proposal to a bunch of different financiers instead of just one financier is a strategic way of getting the best loan terms offered in the market, whereby approaching multiple banks and financial institutions concurrently, you have the highest chance of getting the best rates and payment terms.
However, while this method indeed saves you time, we would like to share that Bizsquare does not do this. Although many brokers do that, Bizsquare feels that this is not the right thing to do.
So why is this so?
This is because while it is easier to just forward your document to many financiers at once, without accessing your credit, this method does not help the SME at all.
In our view , a good loan consultant would have the knowledge of accessing the credit profile and business needs of the customer and then suggest to the customer the correct loan package or financing product. Instead of just a simple business loan, if the client needs a trade financing, a good loan consultant will clarify the mechanism of a trade cycle and how it would benefit the business.
Upon deciding the correct product, the loan consultant will then share with the client about the different financiers that offers this product and also all the terms before deciding on the final choice with the client. Once decided, the loan consultant would then apply to only 1 or 2 financiers.
- There is no need to approach and compare as this only means that the consultant does not full understand their work and required the banker or the credit approval to tell them.
- An important reason not to approach multiple banks at once is that when the banks look up the guarantor’s personal credit bureau or the company’s ACRA; there will be extra searches on personal credit bureau (of the director) from the banks, bringing down the credit rating of the guarantor. Same for company ACRA searches from banks, additional searches show the credit approval that the SME is applying for any loan at the same time and it doesn’t look good. (I am saying this from an ex bank’s credit-approval point of view)
- This frequency of searches from different funders in a month also shows other funders that this company is desperate for funding and it does not reflect well if you have (for example) 8 searches in a month.
Till today, many inexperienced brokers still do that, and they do not realise the error of these methods.
Have an experienced broker access your case and understand how you can improve your credit record before you even start submitting your loan requests . Even after being rejected, the consultant should be able to let discover the problem and help solve it together with you; therefore, helping you apply in the next few months.
5. Handling the small details
A consultant will go down to the small details and assess how you would fare in the eyes of a potential creditor. They are able to point out red flags that could lower your chances of getting approved.
Different banks have different credit criteria that most SME owners are not aware of. For example, did you know that your business industry nature might affect your chances of approval as bank A might be open to a certain industry while bank B might reject the same industry?
Assisting you with the nitty-gritty of loan packaging will free you from grinding all by yourself and increase your chances of getting approval for your business loans
6. Sharing the same interest
Most consultants charge their consultation fee by a percentage of the loan approved amount and this will place the interest of the SME in line with the consultant.
Beware of any broker/consultant who charges you an advance fee without applying the loan for you, as this is not the common practice.
The consultant would do their best to ensure that your loan is accepted by expressing the same interest and will not short-change your application, since their fees are dependent on this.
