Even as Singapore readies itself for post-pandemic life and further opens up the economy, there are various government risk-share loans that business owners can tap on. Photo credit: Unsplash
It has been two years since the COVID-19 pandemic first hit Singapore’s shores. Since then, it is safe to say that the pandemic has disrupted everyone’s lives on some level.
Needless to say, business owners were not spared from the fallout, including those who own high-performing SMEs and more established startups. But the good news is, help is still available, even as the economy opens up more and COVID-19 measures are relaxed.
As outlined in Budget 2021, the Enterprise Financing Scheme (EFS) by Enterprise Singapore (ESG) includes an enhanced version of the Venture Debt Programme, a loan which supports the growth of later-stage enterprises.
The loan quantum was raised from S$5 million to S$8 million for new applications initiated from 1st April 2021.
In addition, in Budget 2022, various government risk-share loan programmes were extended.
Maximum loan quantum: S$8 million per borrower.
Borrowers are subject to an overall borrower group limit of S$20 million for EFS-VD. There is also overall loan exposure limit of S$50 million per borrower group across all facilities.
The term “borrower group” refers to i) the borrower; ii) corporate shareholders holding more than 50% shareholdings at all levels up; iii) subsidiaries where the applicant company holds more than 50% shareholding and subsequent subsidiaries at all levels down; and iv) subsidiaries where the applicant’s ultimate parent company holds more than 50% shareholdings and its subsidiaries at all levels down.
Maximum repayment period: 5 years
ESG risk-share proportion: 50%. Young enterprises (i.e. companies formed within the past 5 years with at least 1 employee, and more than 50% equity owned by individual) may receive a risk share of 70%.
The EFS-VD programme finances the growth of innovative enterprises through venture debt and warrants.
It is especially suitable for high-growth startups that do not have adequate assets that can be used for collateral. As such, warrants, or the rights to purchase equity, make up for the relatively higher risk of loan default.
In general, the EFS-VD loan can be used by businesses to:
● Grow and expand their current capacities
● Diversify product lines
● Increase working capital
● Take on new projects and ventures
● Merge with or acquire other companies
Important note: You must repay 100% of the loan amount. In the event of a default, participating financial institutions (PFIs) are required to follow their standard commercial recovery procedures.
This includes the realization of security, before they can make a claim against ESG for the unrecovered amount in proportion to the risk-share.
● Your business needs to be a physically located and registered in Singapore
● At least 30% of the local equity of your company needs to be held directly or indirectly by Singaporeans or permanent residents – determined by the ultimate individual ownership
● Your group annual sales turnover must not exceed S$500 million
Check this table to find financiers that are offering the EFS-VD loan. At the moment, these include DBS Bank, Innoven Capital, OCBC Bank and United Overseas Bank, which all fall under the stable of PFIs for the EFS.
If you own a high-growth startup or SME, the EFS-VD could very well be the loan you’ve been looking for – especially if you have little or no assets to pledge as collateral.
It can be the shot in the arm that you need after scaling your business, not unlike what a good business incubator or accelerator can do.
No one knows how much longer the pandemic will drag on – it is very likely that it is here to stay on some level – so you might as well make use of this loan while it is still available to you.
The loan criteria are clearly listed out, along with its terms and conditions, so you should have a fairly clear idea of what to expect.
Although the maximum loan quantum of S$8 million is quite a hefty amount, remember that you are still responsible for paying back 100% of the loan – despite the risk-sharing arrangements with ESG.
At any rate, it is far better than knocking randomly on the doors of any financier – which is almost like looking for a needle in a haystack since different types of lenders and financiers operate quite differently, and have their own pros and cons, not to mention constraints.
Or check your loan eligibility using this free tool before you make your decision.
Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore for free. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.
Get more loan options now. We have 45 lenders onboard our digital business loan marketplace to help you.
Belinda loves thinking about random stuff, and collecting useless bits of facts and trivia. She often roots for the underdog, and believes the world needs more happy endings.
