Enterprise Financing Scheme allows local businesses right access to cash

DBS beefs up its support for social enterprises such as Boxgreen to help protect jobs and alleviate cashflow woes amid Covid-19 (Image: DBS)

Enterprise Financing Scheme gives cash access to corporate financing more readily for businesses throughout their various stages of growth.

Enterprise Financing Scheme

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Whether you are planning to develop new capabilities, create new products or expand your business footprint overseas, having access to the right financing is crucial to realise your growth ambitions.

And Enterprise Financing Scheme gives business owners this access to the right kind of cash for the company’s growth and sustainability.

In 2019, Enterprise Singapore’s various financing schemes were streamlined into one umbrella scheme known as the Enterprise Financing Scheme (EFS). EFS aim is to enable Singapore enterprises to access financing more readily throughout their various stages of growth.

It covers seven areas to address enterprises’ financing needs. Through this Scheme, Enterprise Singapore (ESG) will share the loan default risk in the event of enterprise insolvency with the Participating Financial Institutions.

  1. Green
  2. SME Working Capital Loan
  3. SME Fixed Assets Loan
  4. Venture Debt Loan
  5. Trade Loan
  6. Project Loan
  7. Mergers & Acquisitions Loan

With its streamlining, Enterprise Singapore will also consider a higher risk share for the following:

  1. Young enterprises formed within the past 5 years with at least 1 employee, and more than 50% equity owned by individuals; and
  2. Markets with S&P rating BB+ and below, including non-rated countries.

What is the Enterprise Financing Scheme Green?

EFS-Green enables better access to green financing for enterprises that are Project Developers, System Integrators and Technology & Solution Enablers which develop enabling technologies and solutions to reduce waste, resource use or greenhouse gas emissions, especially in sectors of Clean Energy, Circular Economy, Green Infrastructure and Clean Transportation. This is part of the Enterprise Sustainability Programme.

The efforts are aligned to the Singapore Green Plan 2030, which identifies a focus on helping local enterprises develop capabilities, build track-record and capture growth opportunities within the green economy to develop a strong pool of enterprises within these sectors, with the aim to generate economic value-add, positive environmental impact and good jobs for Singaporeans.

ESG will provide 70% risk-share to catalyse the lending from partner FIs. But EFS-Green is only open for applications for a limited time – from 1 Oct 2021 until 31 Mar 2024. All applications must reach ESG and be approved by a partner Financial Institution (FI) by 31 Mar 2024.

The Working Capital Loan of the Enterprised Financing Scheme provides help to finance the operational cashflow needs of companies.

MAXIMUM LOAN QUANTUMS$300,000 / borrower

Note: Borrowers are subject to an overall borrower group limit of S$5 million for EFS-WCL. In addition, there is an overall loan exposure limit of S$50 million per borrower group across all facilities.
MAXIMUM REPAYMENT PERIOD5 years
ESG RISK-SHARERisk share is at 50%. Young enterprises may receive a risk share of 70%.
The borrower is responsible to repay 100% of the loan amount. When defaults occur, the Participating Financial Institutions (PFIs) are obligated to follow their standard commercial recovery procedure, including the realisation of security, before they can make a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share.
INTEREST RATESubject to PFIs’ assessment of risks involved.

The SME Fixed Assets scheme on the other hand supports the financing of investment of domestic and overseas fixed assets, including:

  • Purchase of equipment and machines for automation and upgrading, include new or resale assets
  • Construction or purchase of government and commercial built factories and business premises, include new or resale assets
MAXIMUM LOAN QUANTUMS$30 million / borrower

Note: Borrowers are subject to an overall borrower group limit of S$30 million for EFS-FA. In addition, there is an overall loan exposure limit of S$50 million per borrower group across all facilities.
MAXIMUM REPAYMENT PERIOD15 years
ESG RISK-SHARERisk share is at 50%. Young enterprises or enterprises operating in a challenged market may receive a risk share of 70%.

The borrower is responsible to repay 100% of the loan amount. When defaults occur, the Participating Financial Institutions (PFIs) are obligated to follow their standard commercial recovery procedure, including the realisation of security, before they can make a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share.
INTEREST RATESubject to PFIs’ assessment of risks involved.

In Budget 2021, the Government announced that Enterprise Financing Scheme Venture Debt Programme will be enhanced to support the growth of later-stage enterprises. The maximum loan quantum will was then raised from S$5 million to S$8 million for new applications.

The aim of this Scheme is to finance the growth of innovative enterprises using Venture Debt and Warrants. This form of financing is typically suited for high growth startups that do not have significant assets to be used as collateral under traditional bank lending. The warrants, or rights to purchase equity, is to compensate for the higher risk of loan default.

Enterprises may use the Loan to:

  • Grow and expand existing capacity
  • Diversify into other product lines
  • Augment working capital needs
  • Undertake new projects
  • Undergo merger and acquisitions
MAXIMUM LOAN QUANTUMS$8 million / borrower

Note: Borrowers are subject to an overall borrower group limit of S$20 million for EFS-VD. In addition, there is an overall loan exposure limit of S$50 million per borrower group across all facilities.
MAXIMUM REPAYMENT PERIOD5 years
ESG RISK-SHARERisk share is at 50%. Young enterprises may receive a risk share of 70%.

The borrower is responsible to repay 100% of the loan amount. When defaults occur, the Participating Financial Institutions (PFIs) are obligated to follow their standard commercial recovery procedure, including the realisation of security, before they can make a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share.
INTEREST RATESubject to PFIs’ assessment of risks involved.

To support companies with cash flow needs, the Temporary Bridging Loan Programme (TBLP) and the Enhanced Enterprise Financing Scheme – Trade Loan (EFS-TL) were both be extended by the Government in Budget 2022, until Sep 30, 2022.

EFS-TL is intended to help companies finance trade needs, including:

  • Inventory / stock financing
  • Structured pre-delivery working capital (revolving working capital)
  • Factoring (with recourse) / bill of invoice / AR discounting
  • Overseas working capital loan
  • Bank Guarantee (capped at 2 years tenure)

EFS Trade Loan covers enterprises’ domestic and overseas transactions.

MAXIMUM LOAN QUANTUMUp till 31 March 2022: S$10 million / borrower From 1 April 2022 – 30 September 2022: S$5 million / borrower

Note: Borrowers are subject to an overall borrower group limit of S$20 million for EFS – TL. In addition, there is an overall loan exposure limit of S$50 million per borrower group across all facilities.
MAXIMUM REPAYMENT PERIOD1 year
ESG RISK-SHARERisk share is at 70%

The borrower is responsible to repay 100% of the loan amount. When defaults occur, the Participating Financial Institutions (PFIs) are obligated to follow their standard commercial recovery procedure, including the realisation of security, before they can make a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share.
INTEREST RATESubject to PFIs’ assessment of risks involved.

Budget 2022 also saw Enhanced Enterprise Financing Scheme – Project Loan, which was conceived to support domestic construction projects, extended for one year up till March 31, 2023.

In his Budget 2022 speech, the Finance Minister also announced enhancements to two components in the EFS. He said the scheme’s merger and acquisition (M&A) loan programme will be expanded to include domestic M&A activities from April 1 this year to March 31, 2026.

“This will support companies to grow and expand through mergers and acquisitions,” Finance Minister Lawrence Wong said.

“There are so many schemes under the Enterprise Financing Scheme for business owners who need Corporate Financing to access the right kind of cash, but it can be all too confusing,” said Mr Paul Ho, chief officer at iCompareLoan.

“It is important that they do the research on what kind of financing scheme is the most appropriate for them, and if they are not sure, they should speak to a professional financial consultant,” he added.

“Even if they are not able to get their hands on the Government’s EFS, there are other loan schemes available in the market to help Companies, and a financial consultant is best placed to help such businesses find the right kind of cash access,” Mr Ho said.

Written by Ravi Chandran

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