Working Capital Loan Programme for SMEs

Editorial Staff Funding, SMEs

SPRING Singapore, an organization that promotes entrepreneurship in Singapore, recently launched the SME Working Capital Loan Programme. Starting from June 1, 2016, this programme will provide financial assistance to local enterprises in Singapore by extending unsecured working capital loans to Small and Medium Enterprises (SMEs).

Initially introduced during Singapore’s 2016 Budget, the programme will encourage business growth and restructuring activities in the SME sector. The objective of the programme is to enable the growth of viable SMEs who may otherwise be unable to grow due to working capital needs.

This blog post highlights the financing difficulties faced by SMEs in Singapore and the features of the Working Capital Loan Programme that will help address this issue.

Financing Difficulties Faced by SMEs

A recent Singapore Business Federation (SBF) National Business Survey reveals that a majority of Singapore’s SMEs require funds to solve cash flow problems and to fund their working capital. Interestingly, the survey discovered that three out of five companies have business expansion plans which are not being executed due to financial needs. The survey outlines the following financing difficulties that the local enterprises in the country are facing:

  1. Delay in projects and payments from customers which increase the cash flow challenges,
  2. Expensive bank loans,
  3. Difficulty in renewing finances, and
  4. Cautious lending by Singapore banks.

Emphasising on the struggles faced by SMEs in the country, the SBF-led SME Committee highlighted the financing issues in the Budget Recommendations for 2016. Its recommendations included the introduction of a Working Capital or Restructuring Loan Scheme to help local enterprises in their working capital requirement for “transformation and restructuring.”

SME Working Capital Loan Programme

The SME Working Capital Loan Programme is a S$ 2 billion (US$1.45 billion) loan programme which aims to support SMEs over a period of three years. According to this programme, SMEs will be eligible to receive loans up to the amount of $S 300,000 (US$218,000). SPRING, which helps promote Singapore’s local enterprises, will share 50% of the loan default risk along with the Participating Financial institutions (PFIs). The 12 PFIs include DBS Bank Ltd, Standard Chartered Bank, United Overseas Bank etc. The repayment period of the loan is up to five years and the interest on the loan depends on the risk assessment by the PFIs.

SPRING, through its press release, stated that the loan will be an additional financing channel for SMEs. With the launch of this programme, SMEs will directly have greater access to financing and will be able to meet their short-term expenses and liabilities.

Eligibility Criteria

SME’s will be eligible for this loan if:

  1. The enterprise is registered in Singapore,
  2. It has a minimum of 30% local shareholding and
  3. The annual sales of the company’s group do not exceed $100 million or their group employment size does not exceed 200.

Boost to SMEs

The Working Capital Loan Programme is in line with SPRING’s mission – “Helping Singapore enterprises grow and building trust in Singapore products and services”. The programme will provide timely finance to SMEs to help them fund their business growth.

SBF Chief Executive, Ho Meng Kit stated that, “SMEs, by virtue of their scale, often face obstacles obtaining credit from banks and financial institutions. Despite their financing challenges, SMEs are keen to expand and restructure. The SME Working Capital Loan offers a welcome relief for some of these SMEs, enabling them to address their immediate financial concerns as they look for growth opportunities.”

With the assistance of these Government-backed loans, local enterprises can now meet their financing needs with ease.