SME relief measures provides access to credit and improve cash flows


Singapore’s COVID-19 financing schemes provide SME relief measures which were rolled out to provide them access to credit and improve cash flows

In response to a parliamentary question on SME relief measures, the Government said that the schemes they have rolled out are providing them access to credit and improve cash flows.

SME relief measuresThe parliamentary question on SME relief measures for Covid-19 crisis asked:

“To ask the Prime Minister what is the extent to which businesses have been able to benefit from Singapore’s COVID-19 financing schemes, which were rolled out to provide them access to credit and improve cash flows, with specifics on (i) total quantum of loans dispersed (ii) number of business loan applications approved (iii) approval rates and (iv) average applicable interest rates, for the period ending 30 April 2020.”

In response the the question on SME relief measures, the Government said:

“As SMEs are a vital part of our economy, the Monetary Authority of Singapore (MAS) and Enterprise Singapore (ESG) are working closely with the banking sector to ensure that SMEs continue to have access to the financial support they need to tide through this difficult period. This is done through the ESG loan schemes.

The loan schemes have seen strong interest. Based on ESG’s data, SME borrowers have applied for more than 2,500 loans amounting to about S$1.9 billion since the beginning of March this year. This is about six times the credit extended over the same period last year. The approval rate of these loan applications has been high, at 90% to 95%.

Under the ESG loan schemes, the Government takes 90% of the loss if a loan goes bad, with the banks assuming the remaining 10%. This has helped bring down the credit spread.

The ESG loan schemes were further enhanced when MAS launched a new Singapore Dollar facility for the banks and finance companies. It provides them with fully collateralised funding for two years at an interest rate of 0.1% per annum, for the purpose of their loans under the ESG schemes. This funding differs from the existing five-year, uncollateralised funding provided by the Government.

Together with the earlier enhancements to the ESG loan schemes, this is expected to bring down interest rates for such loans to 2-3% for most borrowers, compared to 6% or more for most other unsecured working capital loans to SMEs.

We have also seen good take-up of the complementary set of relief measures to help SMEs during this period. These measures were announced earlier by MAS and the financial industry. They include enabling SME borrowers with secured loans to defer principal repayments until 31 December 2020. Many SMEs have requested to do so. As of 30 April 2020, more than 2,500 applications have been processed, with nearly all applications approved. More than $4.5 billion of secured loan facilities have benefited from this measure to-date.

MAS and ESG will continue to monitor the effectiveness of our measures.”

Mr Paul Ho, chief mortgage officer at iCompareLoan, said, “at this very difficult time, assistance schemes, especially to amp up cash flow for SME relief measures are very important. The timely and broad-based help they get will determine if the companies die or emerge stronger after this crisis ends.”

He added, “I am happy that the Government remains steadfast in its commitment to standing by its customers and believes that their new round of liquidity relief measures will help alleviate some of the challenges individuals may face in managing their cash flows. Those that want to talk about SME loans, can also talk to loan consultants. Having long term and strategic relationship with various banks, loan consultants would be best placed to help SME owners the best.”

The Monetary Authority of Singapore (MAS) said in a press release on Feb 14 that it welcomes the recent announcements from banks and insurers in Singapore to support their customers who may be facing financial difficulties brought about by the impact of the ongoing 2019 novel coronavirus (COVID-19) outbreak.

The support announced by financial institutions thus far include moratoriums on repayments for affected corporate and individual customers, extension of payment terms for trade finance facilities, and additional financing for working capital.

MAS noted that the measures are in line with guidelines on corporate debt restructuring by the Association of Banks in Singapore (ABS). Insurers in Singapore have clarified that Integrated Shield Plans (IP), IP riders and most other personal and group health insurance policies will cover hospitalisation expenses related to COVID-19.

Some insurers have extended additional benefits to life insurance policyholders diagnosed with COVID-19, such as complimentary lump sum payments upon diagnosis, as well as daily cash payment for the duration of hospitalisation.

MAS said it supports these efforts by financial institutions to work constructively with customers affected by COVID-19 while adhering to prudent risk assessments. The various measures by financial institutions will help corporates and individuals facing short-term cash flow constraints and provide timely insurance coverage for policyholders affected by COVID-19. Taken together, these measures by financial institutions should help to buffer some of the impact on corporates and individuals from the COVID-19 outbreak, said MAS.

UOB one of the financial institutions, announced a $3billion relief assistance especially for SMEs affected by Covid-19. It said in a press release on Feb 12 that it has allocated S$3 billion to provide companies, especially small- and medium-sized enterprises (SMEs), in Singapore with relief assistance to tide over the negative impact of the COVID-19 outbreak on their business.

DBS on April 3rd announced that it will introduce a third round of liquidity relief measures to help individuals and SMEs impacted by the COVID-19 pandemic. These COVID-19 liquidity relief packages closely follow the guidelines as set out in the relief package for borrowers announced by the Monetary Authority of Singapore on 31 March 2020.

Written by Ravi Chandran

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