This is a continuation of our previous article “COVID-19: Singapore SMEs Can Now Apply To Defer Payments On Their Property Loans”.
To recap, the Monetary Authority of Singapore (MAS) announced on 31st March 2020 that SMEs can now opt to defer principal payments on their secured term loans until 31st December 2020.
However, SMEs will still have to service interest payments on the loans.
Local banks DBS and OCBC have gone one step further than the MAS directive, by either:
As the name suggests, interest-servicing-only repayment plans will allow borrowers to pay only the interest portion of their loans.
Most loans in Singapore (business or consumer loans) are amortized, which is an accounting technique used to pay off debts through the regular principal and interest payments over time. This can be represented through an amortisation table/schedule.
By servicing only interest payments, an SME’s total debt (or loan principal) will not be reduced.
However, it will allow the SME to pay a much lower monthly repayment amount. This helps to preserve the cash flow of the business.
Loan Terms
Loan Repayment Details
Loan Amortization Schedule (Normal Loan Repayment)
| Month | Monthly Repayment | Interest | Principal | Balance |
|---|---|---|---|---|
| 0 | - | - | - | $50,000.00 |
| 1 | $4,274.65 | $197.92 | $4,076.73 | $45,923.27 |
| 2 | $4,274.65 | $181.78 | $4,092.87 | $41,830.40 |
| 3 | $4,274.65 | $165.58 | $4,109.07 | $37,721.33 |
| 4 | $4,274.65 | $149.31 | $4,125.33 | $33,596.00 |
| 5 | $4,274.65 | $132.98 | $4,141.66 | $29,454.33 |
| 6 | $4,274.65 | $116.59 | $4,158.06 | $25,296.28 |
| 7 | $4,274.65 | $100.13 | $4,174.52 | $21,121.76 |
| 8 | $4,274.65 | $83.61 | $4,191.04 | $16,930.72 |
| 9 | $4,274.65 | $67.02 | $4,207.63 | $12,723.09 |
| 10 | $4,274.65 | $50.36 | $4,224.29 | $8,498.80 |
| 11 | $4,274.65 | $33.64 | $4,241.01 | $4,257.79 |
| 12 | $4,274.65 | $16.85 | $4,257.79 | $0.00 |
| Total | $51,295.80 | $1,295.80 | $50,000.00 | - |
Disclaimer: Data presented in this table are estimates and meant solely for general information purposes.
Disclaimer: Data presented in this table are estimates and meant solely for general information purposes.
Due to the lack of space, we shall not explain the mathematical formula used to derive this table of information. If you would like to create your own tables, please search for “loan amortisation tables”.
For more information about amortisation tables, please feel free to contact us.
Loan Terms
Loan Repayment Details
Loan Amortization Schedule (Interest-Servicing for 6 Months)
| Month | Monthly Repayment | Interest | Principal | Balance |
|---|---|---|---|---|
| 0 | - | - | - | $50,000.00 |
| 1 | $197.92 | $197.92 | 0 | $50,000.00 |
| 2 | $197.92 | $197.92 | 0 | $50,000.00 |
| 3 | $197.92 | $197.92 | 0 | $50,000.00 |
| 4 | $197.92 | $197.92 | 0 | $50,000.00 |
| 5 | $197.92 | $197.92 | 0 | $50,000.00 |
| 6 | $197.92 | $197.92 | 0 | $50,000.00 |
| 7 | $8,449.16 | $197.92 | $8,251.24 | $41,748.76 |
| 8 | $8,449.16 | $165.26 | $8,283.90 | $33,464.85 |
| 9 | $8,449.16 | $132.47 | $8,316.69 | $25,148.16 |
| 10 | $8,449.16 | $99.54 | $8,349.62 | $16,798.54 |
| 11 | $8,449.16 | $66.49 | $8,382.67 | $8,415.88 |
| 12 | $8,449.16 | $33.31 | $8,415.85 | $0.00 |
| Total | $51,882.48 | $1,882.48 | $50,000.00 | - |
Disclaimer: Data presented in this table are estimates and meant solely for general information purposes.
Disclaimer: Data presented in this table are estimates and meant solely for general information purposes.
Advantages
Disadvantages
At this point in time, with COVID-19 raging on and the upcoming recession, we believe that SMEs should take this deal (if offered) to stabilise their cash flow in order to allow business operations to continue.
Find out about the record low interest rates for Enterprise Singapore’s SME Working Capital Loan and Temporary Bridging Loan!
While borrowers may have to pay a higher total interest, this is offset by the record low interest rates offered by the banks.
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.
