In March 2018, Grab announced a joint venture with the Japanese consumer finances company Credit Saison—launching a slew of services to support the growth of micro-entrepreneurs and small to medium enterprises across South-east Asia.
A space traditionally underserved by financial institutions due to the high risks and low predictability, here’s why Grab is taking the plunge and the essential things to know if you’re planning on getting a working capital Grab loan in Singapore.
Why is Grab taking such a risk?
Did you know that SMEs contribute more than 50% of ASEAN’s GDP? Despite that, the largest hurdle SMEs face continues to be business funding and financing. With financial institutions (FI) refusing loans to start-ups that haven’t operated for long, as well as loan sharks that impose high-interest rates due to the risk, SMEs aren’t left with many options.
Grab is zeroing in on this concern and capitalising on it. It’s not as risky as it seems—Grab has collected countless data from SMEs and micro-entrepreneurs over the years. This gives it the leverage to utilise its scale and data insights to better determine and manage the risks involved—and provide a far more competitive price point than other FIs or moneylenders.
Loan types offered
In Singapore, Grab loans differ by type—namely working capital financing and merchant credit line. The difference is obvious. The working capital financing loan is meant to support SMEs and start-ups as they scale in size to either expand their business or move to bigger premises. Expect zero collateral, a short-term tenure of up to a year, with interest rates as low as 1% each month and a hassle-free application procedure.
The merchant credit line, on the other hand, aims to help SMEs and micro-entrepreneurs by providing a funding source for them to draw from when stocking up on inventory to meet seasonal demand or to meet short-term business needs. This flexible loan comes with no upfront cost, quick access to cash and a similarly low-interest rate as with the working capital financing loan.
Taking out a Grab loan does come with its own set of requirements:
- Has to be a limited liability partnership or limited liability company
- The business should be at least 30% owned by either a Singaporean citizen or Permanent Resident.
- The staff size should number less than 200.
- The business needs to have been in operation for a minimum of six months.
Once you are sure that your business is eligible to apply, you’ll just need to take 2 minutes to fill in the online procedure. The simplified and streamlined approval process usually takes up to five working days, with the disbursement of funds occurring within three business days.
You’ll be able to take out a loan of up to $100,000. If you’re worried about your credit rating—there isn’t a need to. Grab utilises data sets such as transport movement, geo-location and transaction data instead of a credit score to determine the creditworthiness of a business.
Additional fees to take note of
Disbursal fee: Capped at 5%, but usually as low as 1% of the total loan amount
Late fee: Twice the amount of the existing monthly interest rate applicable to the facility on the overdue principal amount
Repayment fee: No repayment fee for partial or full prepayment