In the recent article in the Business Times, entrepreneurs in South-east Asia where governments have fallen short in supporting companies hit by COVID-19 seek speedier and more direct loans with borrowers looking for speedier access to cash.
Businesses in Singapore are fortunate to have support from the government, banks and finance companies to help ease the financial strain.
Temporary Bridging Loan Programme
One of the most viable government-backed business financing options to lower short-term repayment obligations is the Temporary Bridging Loan Programme (TBLP) announced at Solidarity Budget 2020.
This programme offers all Singapore-registered companies that are at least 30% owned by Singaporeans / Permanent Residents, an unsecured business loan of up to:
- $5 million from 8 April 2020 to 31 March 2021
- $3 million from 1 April 2021 to 30 September 2021
Here’s an overview of the TBLP:
|Period||8 April 2020 to 31 March 2021||1 April 2021 to 30 September 2021|
|Maximum loan quantum||$5 million per borrower group||$3 million per borrower group|
|Maximum repayment period||5 years||5 years|
|Interest rate||Capped at 5% p.a.||Capped at 5% p.a.|
While interest rates vary from each Participating Financial Institutions (PFIs), FinanceGuru has processed applications for interest rates of as low as 1.3% p.a. simple rate (2.5% effective rate p.a.). Want to know how? Talk to us today.
Other attractive features of the TBLP
Government provision of 90% risk-share for new applications initiated from 8 April until 31 March 2021. For applications submitted from 1 April 2021 to 30 September 2021, the government will take up 70% risk-share.
It’s worthwhile to note that you’re still required to provide a 100% Personal Guarantee, and you and your guarantors are still responsible for repaying 100% of the loan amount.
The risk share featured in this instance is a guideline for PFIs when defaults occur.
According to Enterprise Singapore, PFIs are obligated to follow their standard commercial recovery procedure. This includes the realisation of security before making a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share.
Deferral of principal repayment
Upon qualification, businesses under this scheme may apply for up to 1-year deferral of principal repayment to help reduce their monthly cash outflow, subject to PFIs’ assessment.
While banks may not commence legal action for a default on a loan during the prescribed 6-month period, they’re still able to charge fees and interest for non-payment or late payment of loan obligations.
Enterprise Financing Schemes
Besides TBLP, eligible companies can apply for the following at the same time:
- Enterprise Financing Scheme – SME Working Capital Loan (EFS WCL)
- Enhanced Enterprise Financing Scheme Trade Loan (Enhanced EFS-TL)
- Other EFS loans
The Enhanced EFS-WCL has been further enhanced to support loans of up to $1 million, and interest rates are not subject to a cap.
Find out more about other available COVID-19 business support measures here.
Is it possible for business loans to be unsuccessful?
While there are many types of business loans and funding available in Singapore, not every application for a business loan application is always successful.
Financial Institutions typically look at 4 key business financing criteria:
1. Operational history
Financial institutions often require a business to be in operation for at least 6 months to qualify.
Newly launched businesses will find securing a business loan to be a challenge.
2. A strong financial track record
To ascertain how established the business is, banks often request documents that feature their annual revenue and average daily bank balance.
3. Business owner’s personal credit score
A poor credit score would conjure questions on the business owner’s ability to repay the loan.
In such instances, banks may decide to reject the loan application.
4. Adequate local shareholding
Government-assisted financing is open only to businesses registered in and operating Singapore.
Business entities are required to have at least 30% local equity held by Singaporeans / Permanent Residents. Unless the business meets this criterion, securing a Government-assisted loan is unlikely.
Given the stipulated processing period, businesses can expect the loan application results in two to three weeks. For more complex cases, processing time may take up to a month.
To avoid the waiting time, businesses can apply for the TBLP multiple times with different PFIs. Alternatively, you can delegate the tedious administrative application process to a Loan Specialist like FinanceGuru.
Our specialist knowledge and long-standing relationships with loan providers can provide you with:
- A comprehensive overview of the wide variety of business loan offerings, credit criteria and interest rates among the various banks and financial institutions available to you.
- Recommendation of the most suitable loan providers to your business, saving you time applying to providers who are a bad match.
- A more favourable loan rate from the provider as the aggregated amount FinanceGuru sources from banks is higher than just one sole application.
Read more about why you should consider taking out your mortgage loan through a loan broker in Singapore here.
Risk-free loan assessment
Find out more about what loan packages are available for your business. In addition to helping you navigate the best loan option, the panel of FinanceGuru loan specialists are equipped to help you with:
- Facilitating the approval process of your application
- Expediting the application processing timeframe
- Ensuring the preparation and submission of all the necessary documentation
This way, you can focus your attention on the things that matter. Contact us for a no-obligation, risk-free, ZERO-cost loan assessment today.
If you have any further queries, feel free to contact us for a chat. Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Get a non-obligatory assessment and loan product recommendations here.