Enterprise Financing Scheme for SMEs in Singapore

What is the Enterprise Financing Scheme (EFS)

The Enterprise Financing Scheme (EFS) is a scheme administered by Enterprise Singapore (ES), a statutory board under the Ministry of Trade and Industry. ES was formed after a merger of Spring Singapore and IE Singapore.

The Enterprise Financing Scheme consists of 6 separate financing schemes that is grouped under one umbrella, EFS. These financing schemes are supported by various participating financial institutions (PFIs).

Applications for the schemes are assessed and underwritten by these PFIs. ES will share the loan default risk together with the PFIs.

The EFS aims to provide targeted financing instruments to better support Singapore SMEs throughout their various phases of growth. We’ll go through the 6 different schemes under EFS and whom they are relevant for.

SME Working Capital Loan

The SME Working Capital Loan is an unsecured term loan to finance day to day general cash flow requirements. Following the Budget 2020 announcement, the SME Working Capital Loan has been enhanced for 1 year from March 2020 to March 2021.

Under the Enhanced SME Working Capital Loan, the maximum loan amount will be increased to $600K from $300K and the government risk sharing percentage increased to 80% from 50%.

The maximum repayment period is 5 years and there are close to 14 banks and financial institutions participating. Interest rate and credit criteria differs for each financier.

SME Fixed Assets Loan

This facility provides businesses financing for the purchase of local or overseas fixed assets such as equipment and machinery. Construction and development costs of factories and business premises is also covered under this loan.

  • Maximum loan quantum S$30M
  • Maximum repayment period 15 years
  • Up to 50% risk sharing, up to 70% for young enterprises

Such asset based loan is suitable for companies looking to invest in specialized, high tech or customized equipment/machinery that improves operational productivity. The high capex incurred for such purchases can be financed under this scheme.

Venture Debt Loan

Loan for innovative and high growth startups, structured with Venture Debts and Warrants, like a hybrid between debt and equity financing.

With a maximum loan quantum of up to $5M, this scheme is tailored for high growth startups that might not fit the traditional SME lending profile. Venture loans are typically suitable for startups that do not necessarily have positive cash flow or hard assets to use as collateral.

Trade Loan

Trade financing facility to finance import, exports and general trading requirements. This covers essentially the below business activities:

  • Import of inventory / stock financing
  • Structured pre-delivery working capital (revolving working capital)
  • Factoring (with recourse) / bill of invoice / AR discounting
  • Local and overseas working capital and trading transactions

The Loan Insurance Scheme (LIS+) under the Trade Loan also serves as a complement and additional support for commercial trade financing insurers whom might not be able to provide full coverage on approved credit limits.

LIS+ trade loanImage credit to Enterprise Singapore

Project Loan

This loan is primarily targeted to help companies finance overseas projects secured. Aside from working capital loan, funding can also be tapped for financing of fixed assets deployed for the project, such as equipment and machinery.

Combination of trade financing and working capital financing can also be utilized, with a maximum loan quantum of up to $50M under the Project Loan.

Mergers and Acquisition Loan

For mature and larger SMEs and businesses looking to acquire a local or overseas enterprise, the M&A loan could be tapped on for acquisition financing.

The end goal and purpose of the merger and acquisition should be with the intent of internationalization. Maximum loan quantum of $50M is applicable for this loan scheme.

This was first published on Linkflow Capital’s website, “Enterprise Financing Scheme (EFS)

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