Ravi Chandran
SME Micro Loans are targeted at small companies that are just starting and offers funding of up to $100,000 to help business owners better manage daily operations and cashflow. To make the loan more accessible to new companies set up in three years or less, Enterprise Singapore shares the risk of loan defaults with Participating Financial Institutions in the event of company insolvency.
Enterprise Singapore is a statutory board under the Ministry of Trade and Industry (MTI). It was formed on 1 April 2018 to support Singapore SMEs development, upgrade capabilities, innovate, transform, and internationalise. It also supports the growth of Singapore as a trading and startup hub, and continues to be the national standards and accreditation body.
The scope of the SME Micro Loans are to support daily operations, and automating and upgrading factory and equipment. Applicants can get a loan quantum of up to $100,000, and have a loan repayment period of up to 4 years.
Companies applying for the SME micro loan scheme should be registered and operating in Singapore, have at least 30% local shareholding, and an annual sales of up to S$1 million or have up to 10 employees.
Different financial institutions offer the SME micro loan with different interest rates and it is subject to their assessments of risks involved. But realistically, business owners can expect the interest rate on SME Micro Loan to hover around 6 – 8.75% per annum (effective interest rate). In Singapore, there are 9 financial institutions that are participating in this SME Micro Loan scheme.
In order to get the best interest rate from the SME Micro Loans, business owners need to send in an application to every financial institution and view their offer. However, most SMEs often cannot afford the luxury of time to do that, and this is where iCompareLoan’s team can come in to help business owners compare all the financial institutions’ to help you get the best deal.
Lesser known among SME Loans is the Working Capital Loan for small business (SME) owners. The objective of the SME Working Capital Loan is to give business owners greater access to unsecured working capital loans of up to $300,000.
Launched in June 2016, the loan acts as an additional financing option by helping eligible companies cope with larger working capital and cash flow needs.
Enterprise Singapore partners Participating Financial Institutions and co-shares 50% of loan default risks in the event of company insolvency, but the loan programme will only be available till 31 May 2019. The best way to pre-assess your eligibility to access this loan before it expires is to speak to a mortgage consultant.
Applicants who are successful with their Working Capital Loan will have up to 5 years to repay their loan. Different financial institutions offer the SME micro loan with different interest rates and it is subject to their assessments of risks involved.
To be eligible for the SME Working Capital Loan companies should be registered and operating in Singapore, have at least 30% local shareholding, with group annual sales of up to S$100 million or group employment size of not more than 200 employees. Annual sales turnover and employment size will be computed on a group basis (i.e. all levels for corporate shareholders holding > 50% of total shareholding of the applicant company and any subsequent corporate parents, and subsidiaries all levels down).
Besides these 2 loans there are other SME Loans and insurances owners of small enterprises can have access to, including alternative venture debt financing for innovative, high-growth companies of up to S$5 million for their business expansion; and financing of up to S$15 million to purchase equipment, machines or selected factory properties.
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.
In order to qualify for SME Micro 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 Micro 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 Micro 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 Micro Loan program is subjected to the participating financial institutions’ risk assessment process. You can realistically expect the interest rate on your SME Micro Loan to be between 6-8.75% per annum (effective interest rate). This means that each bank might offer SME Micro Loan with different interest rate.
In order to get the best interest rate on your SME Micro 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 Micro Loan to expand your business.
