About Us Enterprise funding in the time of COVID-19
Enterprise grants in the time of COVID-19
Posted on May 20, 2020
Thanks to most of us cooperating with Government directives and staying indoors during this Circuit Breaker, the number of local COVID-19 transmissions within the community has reduced significantly – a testament to the fact that these measures were tough but necessary. We remain hopeful that these numbers will continue to decline, allowing lives to return to normalcy.
Unfortunately, a hefty price was paid in exchange for these positive statistics in local transmissions. Most businesses were made to stop operations or adopt vastly different working conditions within a short period of time, pushing many SME owners into the brink of anguish and desperation.
However, not all is lost. SMEs can apply for government-supported low-interest funding packages to tide them over during this difficult period. We’ll be breaking the above mentioned funding packages down for discussion in this article.
Enterprise Financing Scheme – Temporary Bridging Loan
The Temporary Bridging Loan Programme (TBLP) was announced at the Solidarity Budget 2020. This low-interest funding scheme is to assist SMEs in obtaining working capital for business needs during these harsh times. With the TBLP, eligible enterprises may borrow up to $5 million, with the interest rate capped at 5% p.a.! This is much lower than in-house bank loans that can reach as high as 13% p.a. before the COVID-19 period.
What so good about this loan? First of all, this loan does not have an “early repayment penalty”, unlike the regular in-house bank loan, which carries a repayment penalty of as high as 3% of the repayment amount. On top of that, risk-sharing was also increased to 90% (from 50% and 70% for young companies). But what does this mean for companies? For a start, risk-sharing between Enterprise Singapore and banks helps allay the fears various Participating Financial Institutions (PFIs) have about lending in this current economic climate. 90% risk-sharing means that in the event of default, the government will bear 90% of the loan to the banks. This move encourages banks to loosen their credit criteria, which induces lending appetite.
Applicants will also be able to apply for a deferred principal payment programme of up to 1 year, where the total loan tenure is up to 5 years. However, do note that all applications on interest rates, quantum and payment structure will be subject to assessments and approvals by PFIs.
Enterprise Financing Scheme – SME Working Capital Loan
Yes, we agree, that name is a mouthful! But after you’ve exhausted the limits of the TBLP, the SME Working Capital Loan can serve as a supplement if your company requires more funds. Announced at the Solidarity Budget 2020, an enhancement of the original SME Working Capital Loan (WCL) was made. The maximum loan amount was raised from $300,000 to $1 million, with interest rates varying between 3.75% to 6% p.a. Like the TBLP, the government will provide 90% risk-share on these loans for new applications initiated from 8 April until 31 March 2021. Additionally, the enterprises under this enhanced version of the WCL may apply to defer their principal repayment for up to 1 year with the maximum loan tenure of 5 years, a move that will allow some SME owners to manage their debt and loosen their company’s cashflow.
The criteria for applying for any of the 2 schemes mentioned above are as follows:
- To be a business entity that is registered and physically present in Singapore
- Have at least 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s), determined by the ultimate individual ownership
- The Maximum Borrower Group revenue cap is at S$500 million for all enterprises
- For “SME Working Capital”, the SME definition refers to Group revenue of up to S$100million, or maximum employment of 200 employees
The application will also be further subjected to the PFI’s internal credit criteria. Different PFIs have their own distinctive set of parameters and risk appetites on lending. Moreover, interest rate packages vary from bank to bank. These myriad factors have to be taken into account, and can often lead to an unfavourable result or painful but avoidable higher interest expense.
Uncertain on how to approach or tap on these funding programmes by the government?
No fear – we’re here!
We know what you’re thinking. Despite the fact that these grants have been enhanced to help you out during this time of need, applying for one, given the current state of the world’s economy, might seem daunting. But it doesn’t always have to be.
Trinexis – One Team For Your One Stop Needs
Here at Trinexis Consultants, we consider ourselves a one-stop hub for your SME financing and corporate secretarial needs.
We understand that most SME business owners find the range of financial products offered by various banks quite perplexing, and are often unsure which financing tool is the best fit for their business needs. We simplify the loans application process for you thanks to our combined years of expertise, to assist your company in pairing the most suitable and economical required. Our stellar track record also speaks for itself: Trinexis has achieved over 1,200 successful applications across diverse industries. We also maintain strong relationships with established banks and financial institutions, enabling us to support your financing decisions better. In fact, Trinexis is a trusted partner of several banks and has received multiple awards thanks to these partnerships.
Let us worry about financing while you focus on your business. Send over your preliminary documents for a free review today.
Email us your contact at enquiry@trinexis.sg and we will get in touch with you soon!