Small and medium-sized enterprises (SME) are some of the most affected sectors in this Covid-19 pandemic. Every day has become a matter of survival for Singapore SMEs as they struggle continuing business operations and keeping their workforces.
This year, the Singapore government has allocated $2 billion specifically for SME loans. This gives hope to many young companies that they’ll get the necessary financing they need to survive amid the pandemic.
There will inevitably be instances where businesses will face unprecedented challenges. Now that a pandemic disrupts enterprises’ operations, fortunately, an SME Working Capital Loan might help you weather through.
What is the SME Working Capital Loan?
Say your business faced a setback and you need an immediate amount to finance operational cashflow needs. In this situation, borrowing from banks would make sense-but which type of loan?
SME Working Capital Loan (WCL) is a loan that businesses may find useful in such cases. It is government-assisted financing under the Enterprise Financing Scheme (EFS-WCL). It serves as an additional financing option to eligible companies by giving them access to working capital at low-interest rates.
Maximum $300,000 per borrower, maximum of S$5 million per borrower group.
Maximum repayment period of 5 years.
Interest rates vary across financial institutions and are subject to the assessments and different credit criteria set by banks.
Enterprise Singapore provides risk-sharing with participating financial institutions at around 50% to 70%
What are the participating financial institutions?
Singapore has 17 participating financial institutions where you can apply for this loan. These banks are:
- CIMB Bank Berhad
- DBS Bank Ltd
- ETHOZ Capital Ltd
- Capital Pte
- 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
- Singapura Finance Ltd
- Standard Chartered Bank
- United Overseas Bank Ltd
- Validus Investment Holdings Pte. Ltd.
However, credit assessment, interest rates and approval criteria vary across banks. Make sure to check and compare when applying.
How to Apply?
One of SME Working Capital Loan’s pros is its ease to obtain. Aside from a relatively simple application process, the eligibility criteria for this are the same across participating financial institutions.
Eligibility for SME Working Capital Loan
To qualify for SME Working Capital loan, this criteria set by financial institutions must be met:
Must be registered, operating and physically present in Singapore
Must have at least 30% local equity held by Singaporean(s) and/or Singapore PR(s)
Must have a group annual sales turnover of not more than $500m. For “SME Working Capital”, the SME definition refers to group revenue of up to S$100m or group employment size of 200 employees.
- Group employment size
The company must not have more than 200 workers.
Requirements to secure financing
Like any other financing, most financial institutions require various documents in processing an SME Working Capital loan. Make sure to submit these requirements completely to get your application approved by banks.
- Company financial statements (Latest 2 years)
- Bank statements Minimum (Latest 3 months)
- NRIC and Notice of Assessment of guarantor/s (Latest 2 years)
Once you’ve decided to apply for this loan, do these steps to process your application.
- Know if your company is eligible to secure SME Working Capital Loan.
- Download and access the Enterprise Finance Scheme application form.
- Learn the instructions on compiling all required documents through the application form guide here.
Alternatives to SME Working Capital Loan
What’s next if your company isn’t eligible to apply for SME Working capital loan from banks?
You may apply for similar financing available to SMEs with an employment size of up to 200 workers. These are Temporary Bridging Loan Programme (TBPL) and Business Loan offered by banks.
Temporary Bridging Loan
Enterprises operating locally may consider applying to Singapore’s Temporary Bridging Loan Programme to access working capital. Its features and requirements are pretty similar to SME Working Capital Loan.
- Loan amount
$3 Million per borrower, with a group limit of $20 million
Maximum repayment period of 5 years
- Interest rate
Interest rates across banks are capped at 5% p.a
- Government Risk Sharing
Government risk-sharing sits at 70%
Singapore has as many as 19 participating financial institutions where you can apply for Temporary Bridging Loan.
If your company doesn’t qualify for government-assisted financing, applying for a business loan can be your workaround to secure financing. There are several financial institutions that can help you with this.
Meanwhile, unsecured business loans from licensed moneylenders, like GM Creditz, are also a workable option if you can’t secure loans from banks. With an easy application process and flexible terms, this can provide fast cash to borrowing SMES-even those with bad credit-in as quick as less than an hour.
Here are features you need to know:
|Features||Loan from banks||Loans from moneylenders|
|Maximum amount||S$500,000 per borrower||Up to S$200,000|
|Repayment||Repayable via equal monthly Installments for typically 3-5 years
Installments up to 2 years
|Interest||Ranges at around 7% to 12% p.a||Ranges from 5% to 15% per month|
You may refer to this article for eligibility and other information.
Questions about SME Working Capital Loans
What’s the difference between Temporary Bridging Loan Programme (TPBL) and Working Capital Loan?
The two financing options mainly differ in the maximum amount they offer. TPBL offers a maximum amount of $3 Million while SME Working Capital Loans can only lend a company up to $300,000.
Are there banks that do not require personal guarantees since the government is providing risk-sharing?
Most financial institutions require personal guarantees. This is because a personal guarantee serves as a means of security for banks and it shows commitment by the guarantor(s) to pay their debt.
Can I apply for working capital loan multiple times with different participating financial institutions?
Yes. SMEs can approach different banks to borrow varying amounts under the SME Working Capital Loan. However, the total amount must not exceed the $1 million limit.
As an SME owner, it is crucial to understand financing options available for your company in different situations. SME Working capital loan is one of these.
- SMEs struggling with reduced business activities this pandemic may find SME Working Capital Loan useful to sustain operations.
- It can be used to cover a company’s immediate operational needs, not for financing long-term investments.
- Getting this loan will provide short-term solutions and help you focus on your business. Use this as an opportunity to expand your company.
If your SME can’t qualify for government-assisted loans but you’re in need of fast cash, GM Creditz can help! GM Creditz, as a licensed moneylender, can give you a free loan quote.