SME Loans or Peer-to-peer (P2P) Lending – What is the difference?

SME Loans : Bank’s SME loans or P2P lending SME loans? Which is better?

SME Loans are instrumental to the survival of SMEs who are often cash strapped. With SMEs accounting for 99% of Singapore’s enterprises, opportunities to cater to the SME market is not to be ignored. And one area that is growing is fund raising for SMEs be it in the traditional banking sector or the relatively new peer-to-peer lending sector.

SMEs are by definition small and usually require funding for growth or even for day to day cash flow.

If you are the boss of a SME, you would have no lack of funding options in the market today if your business is cash flow positive. However if your business is not cash flow positive or is suffering funding options, then you may need to explore the different types of loans in Singapore and possibly in your personal capacity.

SME Loans

Image Credits: SME loans – Maybank Branch, Paul HO,

While banks are still entrenched in the market, with local names like DBS, UOB and OCBC partnering or investing in P2P platforms, each has found their niche in this market. Maybank is also strong in Commercial property financing or SME working capital loans.

Traditionally, most SMEs have to turn to banks or even personal connections for loans. Banks typically lend to more established SMEs with strong financial record. You certainly can look at SME micro loans first.

Those who fail their requirements may struggle to find funding in the past.

Here P2P lending has filled the gap, by linking investors to these companies. Currently, there are several of such platforms, the more established ones being MoolahSense and Funding Societies.

What they offer is a range of financing options such as using invoices and property as collateral as well as crowdfunding to offer SMEs greater options, including short term financing, greater flexibility and faster approval.


Funding Societies

Loan Tenure

24 months for business loans and as short as 15-90 days for invoice financing

Flexible; 1-12 months for business term loan

Minimum Loan Amount

$20,000 for business loan and S$15,000 for invoice financing loan.

Up to S$3 million

Late Payment

One time fee of S$500 or 3% of arrears whichever is higher to MoolahSense and 30%p.a. (on daily rest basis) to investors. This will start to accrue one day after the due date.

Borrowers of Business Term Loans and Bolt loans are given 7 days grace period from the date the repayment is due. If the borrower fails to make the full repayment within 7 calendar days, a late interest of 0.1% of the outstanding principal per day (from due date) is applied and distributed back to investors for the delay. A late penalty fee is also charged to deter borrowers from paying any later than 7 days from the due date.

Application Fee



Success Fees

3-5% of amount of funding raised

A service fee is charged

Interest Rates (P.A.)

10% to 20+%

10% to 20+%

Source: MoolahSense, Funding Societies

Usually, the process for P2P lending can be completed online, including documentation and matching with investors. Interest rates could be higher than those offered by banks from 10 to over 20%.

As proof of the tremendous growth, take a look at Funding Societies, which claims to be Southeast Asia’s biggest P2P financing platform. It is licensed by MAS and loan amount crowdfunded regionally amounted to over S$270 million shortly after surpassing S$100 million in January this year. The default rate is relatively low at about 1%. Kelvin used to be a management consultant at Accenture and McKinsey & Co while Reynold used to work at a family business conglomerate in Indonesia.

In some P2P platforms, the founders – invest their own money in every loan, so this gives some assurance on the due diligence process.

So if you were a SME owner, what loans should you look for?

Check if you qualify for government assisted loan programmes by Enterprise Singapore as interest rates can be as low as 3.5% flat.

You can take a look at the different types of loans in Singapore and it’s financing costs.

This is especially so for small companies as Enterprise Singapore works with banks to offer funding targeted at such companies. The company should be operating in Singapore and at least 30% should be owned by Singaporean or PR. Contact us here to determine the best loan.

Enterprise Singapore shares the risk of with financial institution in the event of company insolvency.

There are a range of loans such as the SME working capital loan, SME Venture loan, SME Equipment and factory loan and SME Micro Loan. Loan quantum can range from up to S$100,000 to S$5 million.

To qualify for such loans, your chances are higher if your company is profitable and have strong cash flows and your directors have healthy credit history.

Typically, if you are an established company with strong financial record requiring funds of S$100,000 and above, you would be able to secure a loan from the bank, with attractive interest rates depending on type of financing eg with or without collateral. Banks are also making it easier for application eg application is doable solely online.

But if you are unable to get a loan from these routes, you can consider P2P lending. Beware of the late payment charges though as it can run up quickly. At MoolahSense, the late payment charge is 30%p.a. on a daily rest basis. That is even higher than late charges on your credit card bill.

If you are in need of funds, talk to us.

Just email our chief mortgage consultant, Paul Ho, with your name, email and phone number at for a free assessment or simply connect with Paul HO in Linkedin.

Written by Paul Ho

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