The COVID-19 pandemic has indeed brought undeniable changes around the world, leaving many businesses unstable and causing lasting economic scars. True enough, people’s lives worldwide will never be the same again.
In the hope to stop the COVID-19 pandemic, most governments across the globe have implemented strict lockdowns and travel bans. Due to this, many businesses were forced to shut down, while others have resorted to investing in digital transformation.
Business Loans for SMEs in Singapore
The Singapore Government is giving its best to provide support to the business sector, specifically to small and medium-sized businesses (SMEs) as they face financial difficulties amidst COVID-19. We’ve rounded up a list of some of Singapore’s business loan initiatives to help businesses in these challenging times.
Enhanced SME Working Capital Loan
The SME Working Capital Loan (under the Enterprise Financing Scheme) has been enhanced to support SMEs with their working capital needs. For $300,000, the loan quantum was raised to the maximum amount of $1 million. For new applications initiated from 8 April 2020 until 31 March 2021, the risk-share was increased from 50% and 70% for your companies to 90%.
Maximum repayment period: 5 years
Eligibility requirement:
- A business entity that is registered and operating in Singapore
- At least 30% local equity held directly or indirectly by Singaporean and/or Singapore PR(s)
- Maximum Borrower Group revenue cap of S$500 million for all businesses
- Group revenue of up to S$100 million or maximum employment of 200 employees
Temporary Bridging Loan Programme
As announced at the Solidarity Budget 2020, eligible SMEs can borrow a maximum amount of $5 million under the Temporary Bridging Loan Programme (TBLP) with an interest rate capped at 5% from Participating Financial Institutions (PFIs). The government will also provide 90% risk-share for new applications initiated from 8 April until 31 March 2021.
To help SMEs reduce their monthly cash outflow, they may also apply for a deferral of principal repayment under the TBLP. Note: This is subject to assessment by the PFIs.
The TBLP will be extended for 6 months from April 2021 to 30 September 2021.
Maximum Loan Quantum:
To 31 March 2021: S$5 million per borrower group
From 1 April 2021 to 30 September 2021: S$3 million per borrower group
Maximum Repayment Period: 5 years
Eligibility requirement:
- A business entity that is registered and operating in Singapore
- At least 30% local equity held directly or indirectly by Singaporean and/or Singapore PR(s)
Enterprise Financing Scheme (EFS) – Trade Loan
Enterprise Financing Scheme (EFS) – Trade Loan covers enterprises’ domestic and overseas transactions including:
- Inventory / stock financing
- Structured pre-delivery working capital (revolving working capital)
- Factoring (with recourse) / bill of invoice / AR discounting
- Overseas working capital loan
- Bank Guarantee (capped at 2 years tenure
To provide better support to enterprises for their trade financing needs, the maximum loan quantum was raised from S$5 million to S$10 million. Furthermore, the risk-share for new applications initiated from 8 April 2020 to 31 March 2021 was also raised from 50% and 70% for young companies, to 90%.
Maximum repayment period: 1 year
Loan Insurance Scheme
Loan Insurance Scheme (LIS) allows eligible enterprises to secure short-term trade financing loans from Participating Financial Institutions (PFIs). As announced at Supplementary Budget 2020, support for the LIS insurance premium will be increased from 50% to 80% until 31 March 2021.
Eligibility requirement:
- A business entity that is registered and operating in Singapore
- At least 30% local equity held directly or indirectly by Singaporean and/or Singapore PR(s)
- Group revenue of up to S$100 million or maximum employment of 200 employees
Why Business Should Consider Taking Loans
Given the vast number of competitors in the Singapore market, improving your business is extremely necessary. Apart from the challenges SMEs are facing today, SMEs also have to deal with high rental and operational costs. To address these problems, taking up a business loan can be highly beneficial.
Here are 3 of the most common reasons why businesses should consider taking up a business loan:
Ability to expand and grow
Investing in business expansion is necessary for business success. But to be able to grow and diversify, what you need is to have enough and sufficient cash flow. . By considering business loans, you’ll get to expand quickly and move into the new market, bringing your business to the next level.
Open new business opportunities
A business loan will not only help businesses grow and expand, it will also open new and exciting opportunities ahead of you. Moreover, it will allow SMEs to grab opportunities as they come, instead of letting them pass by.
Deal with unforeseen expenses
A piece of equipment shutting down or a client choosing not to push through with a commitment with you can cost your business a signifiant amount. In times like this, a business loan could be your best defense.
Enterprise Singapore Enhances Grants, Loan Schemes to Provide Support to Businesses amidst COVID-19
As announced on Monday (Oct 12), Enterprise Singapore will expand and extend various grants and loan schemes to continuously support SMEs as they recover from the COVID-19 pandemic.
According to Enterprise Singapore, these grants aim to help companies improve their digital capabilities and expand their businesses to the global market.
“All the schemes that we are rolling out is not just to help our companies tide through the cyclical challenges. More importantly, we hope that our companies, our retailers, will be able to use this help to help them pivot to new products, new markets, so that they can have a new growth trajectory beyond COVID-19,” said Trade and Industry Minister Chan Chun Sing.
Read the entire article at https://www.channelnewsasia.com/news/business/enterprise-singapore-to-enhance-grants-loan-schemes-to-support-13261442
How Short-Term SME Loans Can Benefit Your Business
Short-term loans allow SMEs to borrow a certain amount of money and pay it back with interest at regular intervals. Unlike long-term loans, short-term loans only range from 3 to 18 months.
Short-term loans are quick and easy to process
Unlike applying for long-term loans that involve a pile of paperwork and numerous meetings and appointments, short-term loans only require a quick and easy application process. In fact, some short-term loans can now be applied online.
Short-term loans can be obtained faster
Compared with small business funding from traditional lenders such as banks that can take a significant amount of time to be approved, short-term loans can be obtained the fastest way possible.
Delays caused by the processes involved in obtaining the funds will not only cause stress to the business owner, but can also put the entire business in jeopardy.
Short-term loans can be effective during seasonal uncertainties
Unexpected changes and sudden fluctuations can happen in any business regardless of the size and industry. While some of these problems can be minor, they still have the ability to affect your overall sales. Having access to a different source of funds can be of great help in this matter. Short-term loans can provide a capital injection to businesses in times of seasonal uncertainties.
The Takeaway
SMEs consider taking business loans for various reasons. While some find efficient ways to deal with high operational costs, others are looking for ways to grow and expand their business. If you find yourself in these situations, taking a business loan can be your best bet.
