What Are The Alternative Financing Channels For SMEs?

By PEARL LIM

The Singapore’s Government has for a long time been trying to cultivate a spirit of entrepreneurship among Singaporeans. But it recognises the difficulties SMEs may face in securing financial aid from banks; hence it has come up with a host of schemes to assist SMEs.

Government Assistance Schemes

There exists a number of loan and insurance schemes co-funded by the Government [specifically, IE (International Enterprise) Singapore and Spring Singapore] and administrated by participating financial institutions. For more information visit the EnterpriseOne website.

But here, we present you the gist of these schemes. Table 1 summarises them and the specific areas they can be used for.

Table 1

Source: EnterpriseOne, “Loans”

Spring Singapore

Micro Loan Programme (MLP)

• Singapore-registered firm and at least 30% local shareholdings and maximum sale turnover is $1 million OR 0 – 10 employees
• Further maximum group turnover is $100 million OR 0 – 200 employees
• Maximum loan of $100,000
• May be used for daily operations or automating and upgrading factory and equipment
• Minimum interest of 5.50 % p.a. for loan tenure <=4 years

Local Enterprise Finance Scheme (LEFS)

• At least 30% local shareholdings and maximum group sale turnover is $100 million OR 0 – 200 employees
• Maximum loan of $15 million
• Factory Loan
• Machinery Term Loan / Machinery Hire Purchase
• Min interest of 4.25% p.a. for loan tenure <=4 years and min interest of 4.75% p.a. for loan tenure >4 years

Loan Insurance Scheme (LIS) and Loan Insurance Scheme Plus (LIS+)

• For both local and overseas facilities
• LIS insures your loan against default risks. Insurance premiums co-shared between the government and your firm
• For domestic trade: at least 30% local shareholdings and maximum group sale turnover is $100 million OR 0 – 200 employees
• For overseas trade: Singapore-based, at least 3 strategic business functions in Singapore and maximum group turnover is $500 million ($300 million) for trading (non-trading) company.
• For LIS, 50% of premium is payable
• For LIS +, 1.5% p.a. of premium is payable

IE (International Enterprise) Singapore

Internationalisation Finance (IF) Scheme

• Company’s size: for trading (non-trading) company’s maximum group turnover is $500 million ($300 million)
• Maximum loan of $15 million
• Asset-based financing: up to 90% loan quantum. Maximum loan duration of up to 15 years (Land/Factories/Buildings) and 6 years (Other fixed assets)
• For raising working capital for secured overseas projects/confirmed overseas sales orders
• Structured loan: loan duration and quantum up to 3 years and 90% respectively
• Banker’s guarantee: loan duration and quantum up to 5 years and 100% respectively

Trade Credit Insurance Scheme (TCIS)

• Singapore-based exporter
• LIS insures your goods against non-payment from buyers. Insurance premiums co-shared between the government and your firm
• Singapore-based, at least 3 strategic business functions in Singapore, maximum group turnover is $100 million, at least $50,000 paid-up capital, annual total business spending of at least S$250,000 over the past three years and at least three managerial staff who are Singapore citizens or PRs
• 50% co-sharing of insurance premiums between the Government (with a cap of $100,000) and your firm

Alternative Avenues

Still short of funding after applying for all the eligible loans? Try getting funding from business angels or venture capitalists through Dealflow Connection.

Established by Spring Singapore in 2007, Dealflow Connection (and now managed by DP Information Group) matches SMEs with individuals or entities that have funds to offer, such as business angels or venture capitalists.

Visit the Dealflow Connection to find out more.

For advice on a new home loan.

For refinancing advice.

Download this article here.