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Uprise - Business Insights - How SMEs in Singapore benefit from the Enterprise Financing Scheme (EFS) Amid COVID-19 pandemic?

How SMEs in Singapore benefit from the Enterprise Financing Scheme (EFS) Amid COVID-19 pandemic?

Uprise - 2020/05/06


When small and medium-sized enterprises (SMEs) in Singapore are in need of funding to overcome unexpected challenges resulting from the COVID-19 pandemic, loans offered by the government might be the best go-to options as the interest rates are relatively low, with a high chance of approval. The Enterprise Financing Scheme (EFS), streamlined in the Singapore Budget 2020, covers six areas - trade, working capital, fixed assets, venture debt, mergers and acquisitions, and project financing - allowing SMEs to have a higher chance to gain access to lines of credit from financial institutions to deal with fund-related challenges they are facing. Before tapping on the application button, you are highly recommended to read to to find out which type of financial assistance under the EFS suits your firm the best.

Who can apply EFS?

To qualify for the EFS, your company needs to be a business entity that is registered and physically present in Singapore. What is more, at least 30% of the share must be held directly or indirectly by Singapore residents.

As the scheme is meant for assisting small-scale businesses, a maximum borrower group revenue cap of S$500 million for all companies is inserted. For “SME Working Capital” and “SME Fixed Assets” loans (introduced below), SMEs, as defined by Enterprise Singapore, refer to companies with a group revenue of S$100 million or maximum employment of 200 employees.

2. Loans available under EFS

The EFS is an integrated, government-supported financing scheme that offers 6 areas of financial assistance supporting Singaporean enterprises to grow and internationalise. The maximum loan quantum is S$10 million and the Government's risk-share is 80 per cent.

I. SME Working Capital

  • Objective: for daily operational cash flow needs
  • Maximum loan quantum: S$1 million
  • Maximum loan tenor: 5 years

The SME Working Capital Loan is available to SMEs across all industries to help them access funds for their business needs. As announced at Solidarity Budget 2020, this loan is enhanced to $1 million, up from S$ 300,000, to help SMEs with their working capital needs during the coronavirus outbreak. Risk-share has also increased to 90% (from 50% and 70% for young companies) for new applications initiated from 8 April 2020 until 31 March 2021.

II. SME Fixed Assets

  • Objective: for investment of domestic and overseas fixed assets.
  • Maximum loan quantum: S$30 million
  • Maximum loan tenor: 15 years

For those who need to purchase specialised equipment, manufacturing machinery or even physical properties to improve their workflow, expand their business or to reduce the need of having to rent a property, the SME Fixed Assets Loan will help them finance their fixed asset purchases via a loan of up to 90% of the valuation or purchase price of the asset, whichever is lower, with a loan repayment period of up to eight years.

III. Venture Debt

  • Objective: for the growth of innovative start-ups.
  • Maximum loan quantum: S$5 million
  • Maximum loan tenor: 5 years

Venture Debt is particularly tailor-made for high growth start-ups that do not have significant assets to be used as collateral under traditional bank lending. The enterprises may use the Loan to undertake new projects, grow and expand existing capacity, augment working capital needs or undergo merger and acquisitions, etc.

IV. Trade Loan

  • Objective: for trade needs.
  • Maximum loan quantum: S$ 10 million
  • Maximum loan tenor: 1 years

The Trade Loan aims to provide enterprises with better access to trade financing amid the current business environment. As announced at Solidarity Budget 2020, the Singapore government is enhancing the maximum loan quantum from S$5 million to S$10 million. The risk-share is also increased to 90% (from 50% and 70% for young companies) for new applications initiated from 8 April 2020 until 31 March 2021.

V. Project Loan

  • Objective: for fulfilment of secured overseas projects.
  • Maximum loan quantum: S$ 50 million
  • Maximum loan tenor: 15 years

If you need financing for an secured overseas project, you can get an Overseas Project Loan to help you with the working capital required, equipment or machines you may need to purchase for the project and any project guarantees you might be required to put up.

VI. Mergers & Acquisitions Loan

  • Objective: for the acquisition of target enterprises with the intent of internationalisation.
  • Maximum loan quantum: S$50 million
  • Maximum loan tenor: 5 years

Businesses that are looking to expand via mergers and acquisitions with the goal of internationalisation can tap on this loan to help finance these corporate actions.

3. Limitations of EFS

Although SMEs in Singapore from all sectors are eligible for the EFS, all applications are still subject to the approval of Participating Financial Institution (PFI) (Click here to see the list of PFIs). If you are not optimistic about the outcome of application, you are strongly advised to approach as many PFIs as possible as multiple attempts for the EFS with different banks are allowed.

For e-businesses, there are still risks of being rejected as the Scheme only eligible for business entities that are registered and physically present in Singapore. Once again, companies with less than a 30% local shareholding are out of the pool of beneficiaries. Businesses that base fully online should thus approach the loan offering parties for more particulars of EFS before applying for it.

4. Conclusion

While government-financed loaning schemes are seemingly the best offers, SMEs should not rule out other financing channels. Some private lenders may sometimes provide lines of credit with high flexibility to cater for your company needs. If you are interested in knowing more details of financial services offered by Uprise, call us at +65 3138 4088 or drop us an email for a consultation. Visit our ‘Blogs’ to grow your online brand with us.

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