Finance operational cashflow needs with SME Working Capital Loan

Finance operational cashflow needs can be overcome with SME Working Capital Loan.

By: Hitesh Khan/

MAXIMUM LOAN QUANTUM S$1 million / borrower

Note: Overall loan exposure limit of S$50 million per borrower group across all areas.

RISK-SHARE 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 RATE Subject to the PFIs’ assessments of risks involved.

(Note: As announced at Solidarity Budget 2020, the Enterprise Financing Scheme – SME Working Capital Loan (EFS-WCL) is enhanced to help SMEs with their working capital needs said Enterprise Singapore. The maximum loan quantum was raised from $300,000 to $1 million to help finance operational cashflow needs of SMEs. Risk-share was also increased to 90% (from 50% and 70% for young companies) for new applications initiated from 8 April 2020 until 31 March 2021. )

Finance operational cashflow needs
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Enterprises under the Enhanced EFS-WCL may apply for up to 1 year deferral of principal repayment to help manage their debt and finance operational cashflow needs, subject to assessment by the PFIs.

Whether you are planning to finance operational cashflow needs, 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.

With effect from 29 Oct 2019, Enterprise Singapore’s existing financing schemes will be streamlined into one umbrella scheme known as the Enterprise Financing Scheme (EFS). EFS will enable Singapore enterprises to access financing more readily throughout their various stages of growth.

It covers six areas to address enterprises’ financing needs. Enterprise Singapore will share the loan default risk in the event of enterprise insolvency with the Participating Financial Institutions.

  • SME Working Capital Loan – Finance daily operational cashflow needs.
  • SME Fixed Assets Loan – Finance the investment of domestic and overseas fixed assets.
  • Venture Debt Loan – Finance the growth of innovative enterprises using Venture Debt and Warrants.
  • Trade Loan – Finance trade needs.
  • Project Loan – Finance the fulfillment of secured overseas projects.
  • Mergers & Acquisitions Loan – Finance the acquisition of target enterprises with the intent of internationalisation.

A higher risk share will be considered for the following:

  • Young companies within 5 years from inception; and
  • Markets with Standard & Poor’s (S&P) ratings of below BBB- or are not rated.
    (In light of COVID-19, the food & beverage, retail and tourism establishments are required to comply with the Safe Distancing measures to be eligible for EFS.)

Mr Paul Ho, chief Mortgage Officer at iCompareLoan, said: “As a high number of applications for SME Loans are unsuccessful, it is important for passionate business-owners to work with trusted hands, and people who know the industry. Personal loans should not be off the list of considerations if they are really passionate about their business and have finance operational cashflow needs.”

In order to qualify for SME Loans, your company needs to be registered and operating in Singapore. In addition, at least 30% of the shareholdings need to be owned by a local or PR. It does not have to be owned by a single local individual. For example, if there are 4 Singaporean shareholders with 7.5% shareholding each, your company will also qualify for SME Loan.

Apart from ownership and registration criteria, your company also needs to have at most 10 employees. Alternatively, if your company’s annual sales turnover is less than $1M, you will also qualify for SME Micro Loan.

Most times, your company also need to be profitable in the latest year or 2 years out of three years. Cyclical downturns in some industries last much longer, this means that

SME Loans are not a guaranteed approval loan. This means that there is still a chance that your application will get rejected. In the event that your application gets rejected, you will not be able to submit another application within the next 3-6 months.

Officially, the interest rate for SME Loan program is subjected to the participating financial institutions’ risk assessment process. You can realistically expect the interest rate on your SME Loan to be between 6-8.75% per annum (effective interest rate). This means that each bank might offer SME Loan with different interest rate.

In order to get the best interest rate on your SME Loan, you need to send in an application to every financial institution and view their offer. However, most SMEs cannot afford the luxury of time to do that.

This is where loan consultants can come in to help you compare all the financial institutions’ to help you get the best deal. Get in contact with us if you are keen to get an SME Loan to expand your business.

New businesses fail within a short period of starting and one of the main reasons why they do so is because they do not have access to credit or SME loan. There were 43,000 start-ups here in 2016, almost double the 22,000 in 2003, and according to the Department of Statistics, half of new businesses fail within the first three years.

Access to SME loans to grow the business is often hindered by the lack the relevant financial knowledge and / or the resources to engage professional business consultancy services to manage and address their obligations and financial liabilities as business owners. The terrain to apply and qualify for SME loan is also uneven because creditors are not just banks but finance companies and other licensed lending entities whose security arrangements may be different or more complicated. This means that you have to work closely with trusted loan consultants to find success.

Written by Ravi Chandran

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