Finance is a crucial determinant in the success of any business, gaining an understanding of the loan options available would be highly beneficial for businesses in Singapore. This is especially where government assistance can lubricate start-ups and midsized businesses alike.
The different government-assisted loans and insurances available are:
- Enterprise Financing Scheme;
- SME Loans;
- Internationalisation Finance Scheme;
- Loan Insurance Scheme.
Enterprise Financing Scheme
The Enterprise Financing Scheme provides support for enterprises’ financing requirements across different stages of growth, for both domestic and overseas activities. Under this scheme, the government shares the risk of lending with banks and financial institutions, allowing interest rates to be cheaper than in regular bank loans. For smaller loans, the risk-sharing enables providers to provide the loans without seeking security. Interest rates and availability of these loans remain subject to Participating Financial Institutions’ assessments of risks involved.
The Enterprise Financing Scheme aims to streamline previous loans to make them more accessible. These includes the creation of SME Loans and the Internationalisation Finance Scheme. Some of these loans benefit from increased maximum quantum and risk-sharing due to the Solidarity Budget 2020.
SME Loans
The following is a list of SME Loans that have been integrated into the Enterprise Financing Scheme.
| Type of Loan | Financing Capital | Purpose | Maximum Repayment Period |
| SME Micro Loan | $100,000 | Daily operational cashflow needs | Up to 4 years |
| SME Working Capital Loan | $1 million | Daily operational cashflow needs | Up to 5 years |
| Venture Debt Loan | $5 million | Investment in high-growth start-ups that do not have significant assets to be used as collateral under traditional bank lending | Up to 5 years |
| SME Fixed Assets Loan | $30 million | Investment of domestic and overseas fixed asset | Up to 15 years |
To be eligible for these loans, Companies must:
- Be registered and operating in Singapore;
- Have a minimum of 30% local shareholding;
- Maximum Borrower Group revenue cap of S$500 million for all enterprises;
- In most cases, they must have a Group revenue of up to S$100 million or maximum employment of 200 employees.
Some Participating Financial Institutions can be found below:
| Name | Entity Type | Website address | Contact No. |
| BEA | Bank | www.hkbea.com.sg | 6602 7702 |
| CIMB | Bank | www.cimbbank.com.sg | 6333 7777 |
| DBS | Bank | www.dbs.com.sg | 6327 2265 |
| HSBC | Bank | www.hsbc.com.sg | 6216 9008 |
| Maybank | Bank | www.maybank2u.com.sg | 6533 5229 |
| OCBC | Bank | www.ocbc.com/group/gateway | 6363 3333 |
| UOB | Bank | www.uob.com.sg | 6222 2121 |
| Funding Societies | Crowdfunding | www.fundingsocieties.com | 6221 0958 |
| Moolahsense | Crowdfunding | www.moolahsense.com | 6871 8780 |
| Coassets | Crowdfunding | www.coassets.com | 6532 7008 |
| Ethoz Capital | Financial Institution | www.ethozgroup.com | 6319 8000 |
| Hitachi Capital | Financial Institution | www.hitachi-capital.com.sg | 6734 1222 |
| Hong Leong Finance | Financial Institution | www.hlf.com.sg | 6579 6777 |
| Singapura Finance | Financial Institution | www.singapurafinance.com.sg | 6880 0688 |
Predicting your chances
The topmost reasons that hindered SMEs from securing financing include having a small annual revenue size of less than $300,000 or a weak cash flow position of less than $10,000 in average cash balances (Linkflow Capital). These factors may make nearly 51% of users unqualified for business financing.
Furthermore, company directors are legally required to provide personal guarantees for all unsecured corporate loans. The director’s personal credit score would therefore have a heavy influence in getting the best SME loans, especially for smaller establishments. To predict your chances, you may obtain your credit score from creditbureau.com.sg.
Users who have difficulties in obtaining loans, government-assisted or otherwise, are advised to consider trade factoring or invoice financing options. Start-ups without a prior operational track record or proven profitable business model discouraged from exploring conventional business loans.
CONCLUSION
This was a brief overview of the loans that start-ups and midsized businesses may receive when they are incorporated in Singapore. Stay tuned. Next week we explore Part II of Government-Assisted Loans and Insurance for companies in Singapore.
At Silvester Legal, we work extensively with start-ups to understand our clients’ needs. We want our clients to take full advantage of the opportunities available to them as they pursue their business ventures.
Disclaimer: The materials prepared here are for general information purposes only to inform you about Silvester Legal LLC, our services and related matters. The information presented is not legal advice and is not to be acted on as such.
