ANEXT Bank Business Loan Review

ANEXT Bank, launched in 2022, is one of the newest banks in Singapore. It holds a digital wholesale bank license from MAS (Monetary Authority of Singapore) and is a wholly owned subsidiary of Ant Group.

Ant Group is a digital financial services company that is affiliated with Alibaba from China. Most Singaporeans might be more familiar with Alibaba as the owner of Taobao, China’s preeminent e-commerce platform.

With the digital wholesale bank license, ANEXT’s primary target segment are SMEs and corporate accounts. ANEXT is poised to disrupt and revolutionize the SME business loan landscape.

In this comprehensive review, we'll explore the key features, benefits, and potential drawbacks of the ANEXT Business Loan, helping you determine if it's the right financing solution for your business.

Business loan products from ANEXT

ANEXT offers 2 main loan products

Pay-Per-Use

A revolving credit line with loan terms up to 6 months. It functions as a credit line where you can draw down any amount within the credit limit granted. It also offers flexibility in repayment term, where you can choose between 1 to 6 months to repay.

Repayment works somewhat like an interest servicing repayment model, where a monthly flat fee is charged during the repayment period, with a balloon repayment of full principal outstanding on the last month.

Pay Monthly

This works exactly like a plain vanilla term loan product, which most other banks are offering. It is a non-revolving term loan where fixed equal monthly installments are repaid (principal + interest) over a maximum loan tenure of 5 years.

 

ANEXT loan interest rate

Interest rate for the Pay Monthly business term loan product starts from 8.8%. This is a competitive rate and is just a tad higher than the average SME loan interest rate.

Based on our SME financing survey for 2023, average business loan interest rate for loans raised through our platform was about 8.16% p.a. The government assisted SME Working Capital Loan interest rate ranges between 7.25% to 8.5% p.a.

ANEXT’s business loan interest rate should be seen as competitive and aligns with market rates.

For the Pay-Per-Use loan product, effective interest is harder to derive as ANEXT charges a monthly fee throughout the repayment period. Based on our experience, this fee is about 0.83% per month on the principal loan amount, but there might be variance on a case-to-case basis.

Image credit: Linkflow Capital

The above repayment schedule is an illustration of how a $50K Pay-Per-Use loan drawdown for a 4-month repayment term might look like.

An illustration projecting 0.83% fee per month with principal repaid at the end of an assumed max 6-month repayment period yields an effective interest rate of about 10% p.a. This is still quite an attractive rate, considering most banks’ unsecured overdraft revolving facilities would be priced upwards of at least 10% p.a. and above.

ANEXT’s Pay-Per-Use loan also allows the flexibility to repay fee only throughout the repayment period, with a balloon repayment with full principal due only on the last month. This feature is not common with most lenders and indeed innovative on ANEXT’s product team.

 

Which loan product should I choose?

This is a simple question to answer. First, clarify the purpose of financing. If you’re seeking funds for a capital-intensive project that is expected to return a positive ROI over a mid to long term period, choose the Pay Monthly term loan option.

Examples would be renovations for a new outlet, purchase of equipment or expansion plans into new products or markets.

Pay Monthly is suitable for such purpose, as monthly repayments are spread over a longer period of up to 5 years.

Derived effective interest is lower for the Pay Monthly term loan than the Pay-Per-Use option, and you should opt for the former if purpose of funding is capex (capital expenditure) in nature.

If the purpose of funding is more for short term usage, such as inventory financing, trading purposes or plugging short-term working capital gaps, Pay-Per-Use facility would be more appropriate due to its short-term repayment nature.

 

Repayment of loan

ANEXT requires borrowers to repay loans through an ANEXT business account, which they open for all successful loan applications. The borrower only needs to fund the month’s due payment in ANEXT’s business account for automatic deduction.

This arrangement is similar with most other non-digital banks as well. Unlike most other banks’ current accounts though, ANEXT’s business account bear’s interest.

Borrowers can opt to leave some excess funds in this repayment account to generate some interest rather than leaving them idle in their non-interest bearing main operating account.

 

Key benefits and features of ANEXT’s business loan

Flexible loan amounts

ANEXT offers flexibility in terms of loan amounts, underwriting small micro loans from as low as $5K to more significant amounts up to a maximum of $500K. This flexibility ensures financial inclusivity, where businesses of various sizes can find a loan that meets their specific needs.

Fully digital banking

As a pioneer digital bank in Singapore, ANEXT is built from the ground up to provide a full digital banking experience for its customers.

Without the overheads of legacy systems, ANEXT can provide seamless user experience where the entire loan application, approval, and disbursement process can be handled online, making it convenient and accessible for busy business owners.

Fast access to funds

One of the standout features of ANEXT 's business loans is the fast application process. Leveraging advanced algorithms and a streamlined digital platform, ANEXT can process loan applications quickly, often providing approval status within 24 to 48 hours.

For approved applications, funds can be disbursed almost immediately upon acceptance of loan offer, all completed online. This speed is crucial for businesses that need to act swiftly on opportunities or address urgent working capital gaps.

Drawbacks

Rigid credit underwriting process

The lighting-fast application and credit underwriting process comes with a trade-off. In our opinion, we believe ANEXT could achieve such swift application process in part due to its fully digital setup and reliance on a fully automated programme lending model.

Such lending models can originate SME loans at scale with almost instantaneous credit decisioning. There’s a drawback to such model though. If the applicant business does not fit a predetermined set of narrow credit parameters, application will also be swiftly declined.

For the mainstream non-digital banks, there is usually an avenue of recourse for applications that were rejected, to appeal if there are sufficiently strong mitigations. Other supporting documents such as recently awarded contracts or purchase orders with significant amounts would also be considered.

A competent and experienced business loan consultant could also pre-empt and identify potential credit concerns beforehand by preparing strong mitigations for their clients’ applications submitted to banks.

When a fully automated programme lending model is deployed for credit underwriting decisioning, deserving cases might fall slip through the net without some form of manual credit review on the merits of the case.

Ultimately, every lender will select the credit lending model most suitable for their circumstances, considering market practices, positioning and their business strategy.

Lack of personal touch and service

ANEXT’s fully digital nature means you won’t have access to relationship managers or physical branches, which could be a disadvantage for those who prefer personalized service or require guidance through the application process

 

Is it safe and secure to bank with ANEXT?

ANEXT Bank is licensed and regulated by the Monetary Authority of Singapore (MAS), one of the most stringent financial regulators in the world. This licensing requires the bank to adhere to strict regulatory standards regarding capital adequacy, risk management, and consumer protection. MAS's oversight provides a strong layer of security for depositors and borrowers alike.

As a digital-first bank, ANEXT places a strong emphasis on cybersecurity. The bank uses advanced encryption protocols to protect customer data and transactions. Multi-factor authentication is implemented to ensure that only authorized users can access accounts.

 

Our final take

The ANEXT Business Loan is a compelling option for SMEs in Singapore looking for flexible, cost-effective, and fast financing. Its digital-first approach set it apart from traditional banks, making it an attractive choice for businesses comfortable with online banking.

ANEXT offers competitive interest rates, although still slightly higher than mainstream banks’ SME financing rate. ANEXT’s fast application speed though makes up for the higher rate.

The lack of a physical presence and the need to speak to a dedicated relationship manager or loan officer may be potential drawbacks for some SMEs.

Overall, if you're in the market for a business loan and value speed and flexibility, the ANEXT business loan is an option certainly worth considering.

 

The information provided in this article is intended for general informational purposes only and is accurate as of the date it was written. While every effort has been made to ensure the accuracy of the content, we cannot guarantee that all details are fully up-to-date or free from errors. Financial products and services may change over time, and readers are encouraged to verify any information directly with Anext Bank or consult with a financial advisor before making any decisions based on the content of this review.