Author: Lee Shuen Min
Written at: 11 Oct, 2024
Have you ever seen ads for loan types like Tech Startup Loan, Nail Salon loans, Medical loans, Fashion Boutique loans and Aquarium Shop loans?
These are just clickbaits.
Just like investors diversify their portfolios by investing in various industries, lenders need to diversify their customer base and do not want to attract borrowers from only a particular sector lest something happen to the sector and all the borrowers default.
Take, for example, Fashion Boutique Loan. Can you remember during Covid many non-essential services were required to be closed? How are they going to then bring in the customer and service their loans during that many months?
Loan brokers and small lenders use these fancy names to appeal to different business owners. What’s marketed as a "Nail Salon Loan" or "Aquarium Shop Loan" is, in reality, usually a working capital loan or business term loan designed to meet general business needs. However, these catchy names are crafted to make loans sound more specialized and tailored to certain industries.
A “Pet Shop Loan” might seem like it’s specially designed for someone who owns a pet store, but in essence, it’s no different from a generic business loan that could be used for any type of business—whether it’s for inventory, renovations, or payroll.
Even as an industry player, once an RM from a lender reached out to partner with us and tried to give us the BS that they have this new medical loan meant for our customers that run clinics, aesthetic centers, etc.
When I asked him, what documents were required, it was exactly the same as a Working capital loan. I then asked, is the assessment going to be different just because the borrower is a clinic? No, he replied. And if he or she also applies for a working capital loan, will it be more expensive or cheaper? It will be the same, he replied.
Starting to see the problem? I called out his BS and hung up the phone.
These industry-specific names can make potential borrowers feel like the loan is tailored to their unique needs. It's a psychological tactic that can lead to higher click-through rates on ads and websites because business owners naturally gravitate toward something that appears customized for them, where in truth, many of these "specialized" loans are just working capital loans with a fresh coat of paint.
But they can be very harmful when a borrower thinks that this is a specialized loan and does not go on to compare his or her options with other lenders that offer working capital loans and can end up paying thousands of dollars extra.
Buy-now-pay-later or BNPL is another often misused term. BNPL is generally meant to be interest fee and late fees apply. But because of its popularity among consumers, even some smaller business lenders have started marketing invoice financing and term loans as BNPL.
Reach multiple lenders in one single application and compare easily with Singapore's 1st loan marketplace. To learn more about us, click here.
To read about the other ways lenders and brokers clickbait you? Check out another article of ours here.
And if you want to know just how ridiculous they can go? Here is a list of fancy loan types that don't exist that we have seen on some brokers' websites.
Food Truck Loan
Craftsman Loan
Bicycle Shop Loan
Coffee Shop Loan
Tattoo Parlor Loan
Home Bakery Loan
Yoga Studio Loan
Photographer's Loan
Juice Bar Loan
Freelancer’s Equipment Loan
Luxury Spa Loan
Boutique Hotel Loan
Music Studio Loan
Art Gallery Loan
Gaming Cafe Loan
Sustainable Fashion Loan
Wedding Planner Loan
And these are the ones that perplex us.
Dog Daycare Loan - because it can also seem like it can be marketed to dog owners to get a loan to send their dogs to daycare.
Vegan Cafe Loan - what about the non-vegan? And does the business have to be vegan or the borrower?
Car Wash Loan - I need to borrow money to wash my car!
Wedding Loan - Wedding not stressful enough? Still have to deal with the creditor later?
Seen some ridiculous loan-type names yourself? Share it with us on social media and tag us!
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