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Comparing Business Loans: Banks vs. Licensed Moneylenders

Bank vs licensed money lender business loan singapore
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In today’s competitive business landscape, businesses across various industries in Singapore are continuously seeking opportunities to grow and prosper. Securing the right type of funding plays a pivotal role in this process. In Singapore, traditional banks and licensed moneylenders are the two popular financing options available to business owners.

Both options offer unique benefits and challenges. For instance, licensed money lenders are less stringent and have lower rejection rates. On the other hand, business bank loans offer higher loan amounts and longer loan tenure.

As such, it is crucial for business owners to carefully consider which lender best aligns with their needs and objectives. Here, we will delve into the key differences between banks vs. licensed moneylenders. Plus, we’ll take a look at the advantages and disadvantages of each as well as factors such as eligibility criteria, loan amounts, interest rates, and repayment terms. 

Business Loans From Banks vs Licensed Moneylenders

When seeking financing for your business, it is crucial to weigh your financial options before committing to any business loan plan. Choosing between a bank loan and a loan from a licensed money lender depends on factors such as your business’s financial health, credit score, funding requirements, and preferred repayment terms.

Carefully evaluate these aspects and understand the advantages and disadvantages of each option to make an informed decision.

At a Glance

  Banks Licensed Money Lenders

Interest Rates

4% and 10% p.a.

Between 5% and 15%.

Loan Amounts

Larger loan amount; depends on the bank

Up to S$200,000

Repayment Terms

Up to 5 years

Up to 24 months


Stringent eligibility criteria

Flexible requirements and less stringent eligibility criteria

Application Process

Time-consuming and complex process

Faster and more straightforward process


No collateral required

No collateral required

Credit Check

Thorough credit checks, less lenient with poor credit

More accommodating for lower credit scores

1. Interest Rates

Banks: Most banks in Singapore offer competitive business loan interest rates averaging around 4% and 10% p.a., depending on several factors. The interest rates are relatively lower than alternative loans since banks are highly selective in their application process. These lower rates can result in significant cost savings over time.

Licensed Money Lenders: Typically, licensed money lenders in Singapore charge between 5% and 15%. They have higher interest rates because of catering to a smaller client base and taking on greater risk when providing loans.

Note that for a personal loan, legal money lenders can only charge up to 4% interest rate per month.

2. Loan Amounts

Banks: Banks typically offer larger loan amounts, enabling businesses to secure more substantial funding for significant projects or expansions. The maximum loan amount will vary depending on the bank. For instance, Standard Chartered Business Instalment Loan offers up to S$300,000 financing while DBS Business Term Loan provides financing up to S$500,000.

Licensed Money Lenders: Loan amounts from licensed moneylenders may be smaller, making them more suitable for businesses that require urgent and short-term funding or smaller capital injections. With a legal lender, you can borrow up to S$200,000.

3. Repayment Terms

Banks: Banks generally offer longer repayment terms, giving borrowers more time to repay the loan and easing cash flow concerns. Most banks in Singapore offer a loan tenure of up to 5 years for business loans.

Licensed Money Lenders: Repayment terms with licensed moneylenders are shorter – typically up to 24 months. However, this is still subject to the terms and conditions of the loan. While the shorter tenure results in higher monthly payments, it also means business owners won’t have to take on higher amounts of total interest.

4. Requirements

Banks: Banks usually have stringent eligibility criteria, requiring borrowers to provide extensive documentation, a strong credit score, and a proven business track record. In fact, most banks in Singapore require businesses to have at least 2-3 years of operational history and at least 30% of shareholders need to be Singaporean citizens or Permanent Residents.

Licensed Money Lenders: Licensed moneylenders are known to be more flexible with their requirements, making them an attractive option for businesses that may not qualify for traditional bank loans.

5. Application Process

Banks: The application process for bank loans can be time-consuming and complex, with multiple rounds of assessment and a longer wait time for approval.

Licensed Money Lenders: The application process with licensed money lenders is typically faster – within 30 minutes! Additionally, the process is more straightforward, allowing for quicker access to funds. With legal lenders, you can receive the cash within the same day of application.

6. Collateral

Banks: The standard business loan in Singapore is an unsecured loan. This means you don’t need to put your assets at risk.

Licensed Money Lenders: Business loans with a legal lender are also a type of unsecured loan so you don’t need to put up any type of asset as collateral.

7. Credit Check

Banks: Banks perform thorough credit checks and may reject applicants with poor credit history, making it difficult for some businesses to secure funding. A low credit score may cause banks to consider you as a risky borrower, doubting your ability to repay the loan.

Licensed Money Lenders: Legal lenders in Singapore are more likely to accommodate borrowers with lower credit scores, offering greater opportunities for businesses with less-than-perfect credit rating. They will not focus on your credit score but rather on your overall financial situation.

Bank Sign on Building Facade

Banks Business Loan

At some point, your business may need additional financing- whether to finance growth and expansion or to inject more working capital. One of your first options may be to borrow from banks.

Banks in Singapore offer a variety of loan products tailored to the needs of different industries and business sizes. Some of the leading banks in Singapore offering business loans include DBS, OCBC, and UOB.


  • Banks usually offer competitive interest rates starting at 4% p.a.
  • Banks can provide more substantial funding for significant projects or expansions.
  • With a bank business loan, you can enjoy longer repayment terms, easing cash flow concerns for borrowers.
  • Lastly, with banks, you can choose from a wide variety of loan products to cater to different business needs.


  • Stringent eligibility criteria and extensive documentation
  • Higher risk of getting rejected due to a low credit score
  • Time-consuming application process so it may take a few days or a week to receive funds.

See Also: Business Opportunities in Singapore

Best Bank Business Loans

Business Loan Interest Rate Loan Amount Loan Tenure Processing Fees

DBS Business Term Loan

Up to 11% p.a.

Up to S$500,000

Up to 5 years

Not published

OCBC Business Term Loan

6.75% to 8.75% (indicative interest rate)

Up to S$700,000

Up to 5 years

2% of the loan amount

Standard Chartered Instalment Loan

Up to 9% p.a. (Business Instalment Board Rate)

Up to S$300,000

Up to 3 years

2% of the loan amount

UOB BizMoney Loan

Up to 10.88% p.a.

Up to S$350,000

Up to 5 years

2% of the loan amount

How To Apply

Before you start applying, it’s best to take into account the eligibility criteria to qualify for a business loan. Different banks will have different requirements so it’s best to check with your chosen bank. Here are the most common criteria (using UOB as a benchmark): 

  • Sole Proprietor, Partnership, or Private Limited Company
  • Registered and operating in Singapore for a minimum of 1 year
  • At least 30% local shareholding
  • Company’s group annual sales of not more than S$100 million OR company’s group employment size of not more than 200

Document Requirements

Again, the documents required may vary per bank policies. It’s best to ask for a list of required documents so you can have them ready before applying. The list of required documents may include:

  • NRIC or other identification details of sole proprietors, partners, principals, and directors
  • Copy of sole proprietors’ or partners’ Income Tax Notice of Assessment
  • ACRA business profile information
  • Latest 2 years’ Notice of Assessment
  • Latest 2 years financial statements
  • Latest 3 months bank statements
  • Any professional certificate (if applicable) documents related to the establishment of entity, identity, and proof of business address documents

Using DBS as a benchmark, here’s how a business loan application works:

  1. Submit your application online
  2. Make sure that you submit all the necessary documents
  3. Inform your guarantors about your application
  4. Track your application status online
  5. Once approved, review the terms and conditions of the business loan.

Licensed Moneylenders Business Loan

Licensed moneylenders offer alternative sources of funding for businesses in need of urgent cash. They cater to a wide range of borrowers, including small and medium-sized enterprises (SMEs). Legal money lenders are regulated by the Ministry of Law in Singapore. This ensures that borrowers are protected against predatory lending practices by loan sharks.


  • Flexible eligibility criteria and less stringent requirements, making it easier for businesses to qualify for loans.
  • Faster and more straightforward application process, allowing for quicker access to funds. This is perfect for business owners who need urgent cash.
  • Licensed moneylenders are more likely to provide loans to businesses with less-than-stellar credit scores.
  • Licensed moneylenders may offer unsecured loans so you don’t have to put up your asset as collateral.
  • Legal lenders also offer a wide variety of loan products, including personal loans, payday days, and bridging loans.


  • Higher interest rates due to the higher risk associated with their loans.
  • Loan amounts from licensed moneylenders may be smaller, making them more suitable for short-term funding or smaller capital injections.
  • Repayment terms with licensed moneylenders are often shorter, which can result in higher monthly payments. However, this may also mean incurring less total interest in the long run.

Best Licensed Moneylender Business Loan

You can find our curated list of the best licensed moneylenders here. For more options, you check out the complete list of licensed money lenders on MinLaw’s website.

How To Apply

Eligibility Criteria

  • Your business or company must be registered in Singapore
  • Your business must have at least one year of operational experience
  • Your business has a minimum turnover of S$60,000

Document Requirements

  • Copy of NRIC of all directors and partners NRIC
  • Recent ACRA business profile information report
  • Recent Income tax assessment notice (both personal & from the company)
  • Recent financial statement
  • Recent invoices or business contracts
  • Recent utility bills under the company name
  • Recent 6-month bank statements
  • List of assets owned by the company, directors & partners (if any)
  • Office / shop tenancy agreement (if any)

How it works

  1. Compare licensed moneylenders: Use online loan comparison platforms, such as Loan Advisor, to quickly and easily compare different business loan packages from the top licensed moneylenders. In doing so, you can find the best terms that will suit your business needs.
  2. Check eligibility: Review the eligibility criteria and ensure that your business meets your chosen moneylender’s requirements.
  3. Prepare documentation: Gather necessary documents, such as financial statements, tax returns, and business registration papers.
  4. Submit application: Assuming you have checked the eligibility criteria and have all the necessary documents, it’s time to submit your loan application along with the documents.
  5. Await approval: The licensed money lender will assess your application. Once they’ve determined your eligibility, the lender will reach out to you to set a face-to-face appointment. This process usually only takes around 30 minutes.

Once you agree with the terms and conditions of the loan, you will need to sign a loan contract. After signing, the money lender will disburse the loan amount in person, or to your business account, or to any account of your choosing.


The choice between banks and licensed money lenders in Singapore depends on the specific needs and circumstances of each business. As such, it is crucial to carefully consider the unique features of both financial institutions as well as their pros and cons to make an informed choice.

Key Takeaways

  • Most banks in Singapore offer competitive business loan interest rates averaging around 4% and 10% p.a., depending on several factors.
  • Legal lenders in Singapore offer interest rates between 5% and 15% but have a shorter loan tenure of up to 24 months. The shorter tenure may mean incurring lower total interest.
  • With banks, business owners can borrow larger amounts while legal lenders only provide financing up to S$200,000. However, the quick cash disbursement by legal lenders makes it more appealing for business owners in need of urgent cash.

When you need urgent financing for your business, Loan Advisor offers a one-stop loan comparison service to help you choose the best loan plan. Loan Advisor provides biased-free and up-to-date information from the top licensed moneylenders in Singapore. Request up to 3 loan quotes today!

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