Bank vs private lender
The bank said no. A private lender will probably say yes.
That is not the good news it sounds like until you know what the yes costs. Here is the trade in full — including when we would tell you not to take it.
Bank vs private lender
That is not the good news it sounds like until you know what the yes costs. Here is the trade in full — including when we would tell you not to take it.
A bank lends against your record — years of trading, filed accounts, clean repayment conduct — and prices that certainty cheaply. A private or non-bank lender lends against your situation, looking harder at security, cashflow and the specific transaction than at how long the history runs, which is why it can say yes where a bank says no. You pay for that in the cost of the money and usually in a shorter repayment period, and you may be asked for security or a personal guarantee a bank would not have needed. That trade is the whole decision. It is worth making for a real, time-bound need with an identified way out — a bridge to a payment you can name, an order you have won. It is a bad trade for an ongoing shortfall, because expensive short money does not fix a business that is not covering its costs; it sets a deadline on it.
Last reviewed . This page describes general market practice in Singapore, not any one lender’s rules, and it is not financial or legal advice.
The mechanism
A decline is rarely a verdict on your business. It is the answer to one lender’s question — and a non-bank lender asks a different one.
A bank lends money it holds on deposit. That funding is cheap and it is other people’s, so a bank buys certainty: filed accounts, years of trading, a clean record, a debt servicing ratio inside policy. Where a file does not fit that shape the answer is no — and it is no for a good business with a short history exactly as it is for a weak one. Policy does not distinguish between them.
A non-bank lender funds itself in the market rather than from deposits. That money costs it more, but it also sets its own risk appetite instead of inheriting a policy written for a far larger book. It can look at the file in front of it and decide.
What it looks at differs in kind. Rather than the length of the record, it weighs what can be recovered and what is coming in: the collateral available, the quality of the receivables, the specific transaction the money is for. Facilities like invoice financing and a bridging loan exist precisely because a lender can price a known, self-liquidating event more confidently than a company’s next five years.
The speed follows from the same thing: fewer committee layers and a narrower question generally mean a faster answer. That is a characteristic of how these lenders work, not a timeline anybody can commit to before a file is assessed.
If you have just been declined and have not read it yet, what happens after a business loan rejection covers the steps that come before this decision.
The other side
Nobody takes more risk for the same price. Every reason a private lender can approve you has a matching cost, and these four usually arrive together.
Cost
Non-bank funding is generally more expensive than bank pricing, and materially so. Two things drive it: the lender's own cost of money, and the fact that it is writing files a bank declined. Neither is negotiable away. What you can insist on is seeing the cost honestly — the total repayable, and the effective rate rather than a flat one.
Tenure
Repayment periods are usually shorter than a bank's. A shorter tenure means a larger instalment for the same amount borrowed, landing on the same monthly cashflow you already have. Model the instalment, not the rate — the instalment is what has to be paid.
Security and guarantees
You may be asked for collateral a bank would not have needed, for a personal guarantee, or both. Some facilities also take a charge over receivables, which quietly changes who gets paid first when money arrives.
Less room when things go wrong
Shorter, more expensive, more closely secured facilities carry less tolerance. A missed payment tends to have faster consequences and, where a guarantee has been given, consequences that reach past the company. Ask what happens on a missed payment before you need to know.
Two of those decide almost everything about affordability: tenure and the difference between an effective interest rate and a flat rate. Two offers compare only once both are expressed the same way. A personal guarantee is the one to read hardest — it is a personal commitment that outlives the company.
Side by side
General market patterns, not any single institution’s terms. Lenders on both sides sit outside these norms, and the only terms that bind anyone are the ones written in your own facility letter.
| Bank | Private / non-bank lender | |
|---|---|---|
| Who they lend to | Established companies fitting a written policy | A wider range, including files a bank's policy excludes |
| What they look at | Track record: accounts, years trading, credit conduct | The situation: security, cashflow, the transaction being funded |
| Speed | A longer, more layered process | Generally faster, though no lender can commit to a date in advance |
| Cost of the money | The cheapest funding a qualifying business can get | Generally more expensive, reflecting funding cost and risk |
| Repayment period | Longer periods are commonly available | Usually shorter, so each instalment is larger |
| Security expected | Often a personal guarantee; collateral for larger or secured facilities | Guarantee likely; collateral or a claim over receivables more often |
| If you miss a payment | More process before consequences escalate | Consequences tend to move faster and reach a guarantor sooner |
Scroll the table sideways to compare on a narrow screen.
When it works
Every good case has the same two features: the need is time-bound, and the exit is identified before the money is drawn. If you can say what repays the facility and roughly when, you are in the right territory.
A dated gap with a named inflow
A completion, a milestone, a customer settlement you can point to on a calendar. The facility covers the gap and the inflow repays it. This is the job short-term funding was designed for, and the test is whether you can name the source and the date without hedging.
An opportunity with a deadline
An order you have won, stock at a price that will not hold, a contract to resource now. The question is arithmetic: does what the money produces exceed the cost of carrying it, over a period shorter than you would like? If the margin only works on the optimistic version, it does not work.
A bridge to cheaper money
Funding the months until you qualify for bank pricing, then refinancing. Reasonable — provided the refinance is treated as likely rather than certain, and you can service the expensive facility for longer than planned if it does not land.
Security you have and a bank cannot use
Some companies are asset-rich and record-poor. Where a lender can take a view on the asset, a short trading history matters less, and the facility is shaped around the security rather than the file.
The honest warning
A facility that solves this month’s problem can create a worse one six months from now. That is not a caveat — it is the most common way a borrower is harmed by financing that was, on the day, approved and available and entirely legitimate.
Funding an ongoing shortfall
This is the one that does real damage. If the business is not covering its costs, an expensive facility does not close the gap — it adds an instalment to a company that already cannot meet the ones it has, and it sets a deadline. The relief is immediate; the position is worse in a few months, with fewer options than today.
No identified exit
"Something will come in" is not an exit. If you cannot name what repays this and roughly when, the plan is that the future is kinder than the present. Short-dated, expensive borrowing is the least forgiving instrument to hold that hope in.
Refinancing expensive debt with expensive debt
Replacing one costly facility with another rarely reduces what you owe; it usually resets the clock, adds cost and can leave more security pledged. Refinancing is worth doing when it lowers the total cost or genuinely restructures the repayment — not when it only moves the pressure a few months out.
Stacking facilities
Taking a second and third short facility because each is individually approvable is how a manageable position becomes an unmanageable one. Every lender sees a snapshot; you are the only party who sees all the instalments landing in the same month.
Pressure to sign today
Urgency is a normal feature of a real deadline and it is also the oldest sales technique there is. A facility that cannot survive you reading the document overnight is not one to sign.
Where we stand on this
Lead Advisor only introduces clients to banks. We do not recommend loan products, negotiate terms, or prepare or submit loan applications. Discuss eligibility, documents, rates and any application directly with the bank.
Due diligence
None of these depends on trusting anyone, including us. Each is something you can establish yourself, in writing, before you commit.
If a broker is arranging the facility rather than the lender itself, the same transparency applies to them — how a private broker works, and how one is paid, covers what to ask.
Straight answers
Because they are answering a different question. A bank largely assesses your track record against a fixed internal policy, and a file outside that policy is declined regardless of its merits. A non-bank lender generally assesses whether it can be repaid in this particular situation — what security exists, what the cashflow looks like, whether the transaction makes sense. A short trading history can be fatal to the first question and survivable in the second.
Generally, yes. Non-bank lenders raise their own funding at a higher cost than a deposit-taking bank does, and they price files a bank has already declined. The gap is real, and it is the reason the facility exists at all. What matters is whether what you do with the money produces more than the cost of carrying it, over a repayment period that is usually shorter.
Usually not, and this is where the answer matters most. If the shortfall is a timing gap with a known inflow behind it — an invoice raised, a milestone due — short-term funding is doing the job it exists for. If the business is simply not covering its costs, expensive money adds an instalment to a company that already cannot afford the ones it has. It buys weeks and removes options.
Check the lender is licensed and regulated in Singapore before you sign anything, and verify it yourself rather than accepting an assurance. Then read the facility letter: the amount, the repayment period, the total repayable, every fee, the security or guarantee taken and what happens if you miss a payment should all be written in it. A lender unwilling to put the full cost and the default terms in writing has told you what you need to know.
Sometimes, and it is a reasonable plan — short-term funding now, refinanced to bank pricing once the record supports it. It works only if the refinance is treated as a possibility rather than a certainty, because the new lender assesses you fresh and can decline. If the only thing that repays a facility is a refinance nobody has committed to, you do not have an exit, you have a hope.
Last reviewed .
Tell us what the money is for and what repays it. If a non-bank facility is the wrong instrument for you, we would rather say so now than place it.
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