In Singapore, at least, the Covid-19 pandemic looks to be under control as we enter Phase 3 of our re-opening and carrying out vaccinations. This could all change in a blink of an eye, of course. New variants of the virus have sprung up in multiple countries, and the risk of widespread infection continues to be very real if we lose our vigilance.
Similarly, for the economy, Singapore is said to be turning the corner, but a full recovery is still far in the distant future, and still largely dependent on how our major trading partners are dealing with the coronavirus within their own borders.
In other words, we look set to remain in uncertain times well into 2021.
Government support
Prescient as always, our government first rolled out a multitude of loans and grants early into the pandemic when we first entered into our circuit breaker phase. These have then been tweaked, enhanced, and expanded upon as the coronavirus situation continued to unfold. It has now been reported that more than 20,000 businesses took up the option of government-backed loans through the Enterprise Singapore (ESG) scheme, to the sum of some S$17.4 billion, from March to December 2020. This is more than 13 times the amount that was extended through ESG in 2019, reflecting both the dire straits that businesses have found themselves in during this crisis and also how committed and steadfast the authorities have been in supporting these enterprises.
Of the approved government-backed loans, one-fifth of them went to the wholesale trade industry, which accounts for 12 per cent of Singapore’s gross domestic product. Other sectors which have benefited heavily from these loans include manufacturing, retail, and service sectors.
Enterprise Financing Scheme (EFS) loans
The Enterprise Financing Scheme is the umbrella under which all financing assistance from Enterprise Singapore is organised. The ESG was formed in 2018, and the EFS was developed in 2019, thus predating the advent of Covid-19. However, the loans offered under the EFS have been enhanced to help businesses cope with the economic crisis. We have covered some of them previously when discussing government support for SMEs. The loans offered under the EFS are as follows:
Temporary Bridging Loan
The Temporary Bridging Loan Programme allows eligible businesses to take a loan of up to S$5 million, with a repayment period of up to 5 years. The programme also caps interest rates at 5% per annum. Depending on the company’s financial performance and credit history, Participating Financial Institutions (generally banks) might offer an interest rate of as low as 3% per annum.
In addition, the government will take on 90% of the risk-share on these loans. This means that in the event a company has to default on the loan, Enterprise Singapore can be liable for 90% of the amount that needs to be recovered.
This will be applicable from loans initiated from 8 April 2020 to 31 March 2021. Subsequently, a company will still be able to apply for loans up to S$3 million, with up to 70% risk-sharing by the Government until 30 September 2021.
To find out more about the Temporary Bridging Loan, here are some common questions from SMEs that we answered.
SME Working Capital Loan
The SME Working Capital Loan is a pre-Covid scheme that used to allow businesses to borrow up to S$300,000, which could be repaid over a period of five years. It was announced in the Solidarity Budget 2020 that the maximum loan quantum has been raised to S$1 million. Risk-share was also increased to 90% (from 50% and 70% for young companies) for new applications initiated from 8 April 2020 until 31 March 2021.
SME Fixed Asset Loan
This loan is meant to finance the purchase of domestic or overseas fixed assets such as equipment, machine upgrades, and the construction or purchase of factories and business premises. Under this scheme, businesses can get a loan of up to 90% of the valuation or purchase price of the fixed asset they are looking to invest in, which can be repaid over a period of up to 15 years. Risk-share is set at 50% (and 70% for young companies or companies operating in a challenged market).
Project Loan
This scheme originally aimed to finance firms for the fulfilment of secured overseas projects, with loans of up to S$50 million and 50% risk-sharing by the Government. The loan supports the investment in factories, buildings, land, equipment, machineries, vessels and other fixed assets. It can also be taken up as a form of working capital loan.
The Project Loan has since been enhanced to support domestic construction projects undertaken by companies in the construction sector starting from 1 January 2021 to 31 March 2022. Construction companies can take loans of up to S$30 million for secured domestic projects, with at least 50% risk-sharing by the government.
Trade Loan
The EFS Trade Loan covers trade financing for SMEs’ domestic and overseas transactions such as inventory or stock financing, overseas working capital, as well as for short-term import, export, and guarantee needs.
The maximum loan quantum under the enhanced EFS Trade Loan has been raised from S$5 million to S$10 million, and risk-share was also increased to 90% for new applications initiated from 8 April 2020 to 31 March 2021.
The scheme has also been extended by another six months from 1st April 2021 to 31st September 2021 with a lowered risk-sharing of 70% from the government. The maximum loan quantum remains at S$10 million.
Eligibility
The eligibility criteria for these loans vary slightly. However, they all require the applying company to be:
1) A business entity that is registered and physically present in Singapore
2) Having at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s)
Many of these loans will also require the company to not have Group Annual Sales Turnover exceeding a certain amount, or have employment size capped at a fixed number, to denote their status as an SME.
Participating Financial Institutions (PFIs)
ESG has partnered with 15 participating banks and financial institutions, who can be approached to apply for the loans mentioned above. The PFIs are:
· CIMB Bank Berhad
· DBS Bank Ltd
· Ethoz Capital Ltd
· Hong Kong and Shanghai Banking Corporation
· Hong Leong Finance Ltd
· IFS Capital Ltd
· Maybank Singapore Ltd
· ORIX Leasing Singapore Ltd
· Oversea-Chinese Banking Corporation Ltd (OCBC Bank)
· Resona Merchant Bank Asia Ltd
· RHB Bank Berhad
· Sing Investments & Finance Ltd
· Singapura Finance Ltd
· Standard Chartered Bank
· United Overseas Bank Ltd
