On the 18th of February, Deputy Prime Minister Heng Swee Keat announced in his Budget 2020 speech a slew of measures designed to help business owners in Singapore overcome challenges from the global economic slowdown due to the COVID-19 virus. These include corporate tax rebates, rental waivers, enhancement of the government-supported working capital loan, and other targeted measures.
Under the new Enterprise Financing Scheme, the government pledged more financial assistance to SME business owners in Singapore by increasing the maximum loan quantum of the government-supported SME Working Capital Loan from $300,000 to $600,000, and the government risk-share on these loans from 50-70% to 80% for one year.
This pledge is considered to be very generous in comparison with the government’s previous initiatives, which demonstrates its commitment towards supporting the SME sector.
Here is a look at some of the support schemes in the past.
Under the umbrella Enterprise Financing Scheme (EFS), the loans are administered through Enterprise Singapore’s official list of participating financial institutions (PFIs).
This means that instead of applying directly to Enterprise Singapore, business owners must instead apply through these PFIs. When the loan is approved, the PFI will lodge the loan with Enterprise Singapore directly.
There are pros and cons in this arrangement. SME owners can apply to any of the 14 PFIs. They may also take advantage of their existing banking relationships for an expedited process, or simply choose their preferred institution to work with.
However, as the credit evaluation criteria differs widely between these institutions, SME owners may encounter different evaluation results, and thus different loan offers, as a result.
Previously in our blog, we talked about the ways that SMEs can improve their chances of obtaining business loans. However, these are long-term techniques that an SME owner can use to build a credible business record over time.
If you are a business owner, here are 3 quick ways to improve the credit rating of your business. Do these before applying to any PFI.
During application, all financial institutions will require the submission of a standard set of documents: company ACRA information, profit and loss statement, bank statements, directors’ notice of assessments, and credit bureau reports.
Make sure these documents are updated as much as possible, especially if the company has grown since the last financial year.
If the latest audited profit and loss statement was more than 6 months ago, consider submitting a management account of the profit and loss statement for the last 6 months to highlight the company’s growth and increased profitability.
One key credit evaluation criteria is the company directors’ /guarantors’ balance-to-income (BTI) ratio. This ratio evaluates one’s ability to repay any additional debt by comparing one’s current debt versus one’s current income.
This means that the more personal debt the directors/shareholders have, the lower their personal credit rating will be, because of the higher level of indebtedness.
Since the directors/shareholders are usually also guarantors for the company’s business loans, a lower personal credit rating will thus lower their company’s overall credit rating.
So consider clearing these personal debts (as much as possible) to present a better overall picture of the company and its directors’/shareholders’/guarantors’ financial health.
As mentioned above, different financial institutions possess different credit evaluation criteria that may change over time. Just because the company was able to obtain a business loan with one financial institution previously, doesn’t mean that it can get another business loan now.
Since business loan applications and credit evaluation take time, roughly around 1 – 2 weeks each, it will be a tedious effort to apply directly with multiple institutions in the event that the first business loan application is rejected.
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders and what their rates are, in a very short time.
Moreover, the applicant’s contact details are obscured and business information anonymized to maintain privacy. Only core business information such as revenue, profit or industry are revealed and evaluated by lenders.
If you expect the application process to drag on and wish to minimize any delay, consider using Lendingpot’s free Business Loan Marketplace service.
This is a great opportunity for small business owners to get the critical funds they need to survive this business downturn. We are here to help. Don’t hesitate to contact us for more information!
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
Eric Koh is passionate about helping SMEs grow and has spent years interacting with business owners at OCBC and IFS Capital. He is interested in 70s rock ‘n roll, the odd novel and copious amounts of historical trivia.
