Low Interest Government Business Loans

Low Interest Government Business Loans – To address the economic challenges caused by COVID-19, the Singapore government has launched a series of government-backed business loans to support businesses in Singapore.

Managed by Enterprise Singapore (ESG) and Participating Financial Institutions (PFI), these loans are attractive to SMEs as they include up to 90% government risk sharing.

Low Interest Government Business Loans

However, based on our interactions with business owners in the field, this “up to 90% government risk share” clause is often misinterpreted.

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Check out this article for a detailed table of all costs, cash and credit support offered by the government for all 3 budgets in 2020!

Misconception 1: “If the government bears 90% of the risk, does that mean that if I default on the loan, I will only have to pay back 10%?”

Although the government provides 90% risk sharing, this risk sharing is between the bank and the government, not between the government and the borrower.

This means that the borrower is still responsible for repaying 100% of the loan amount obtained from the bank.

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In the event that the borrower is unable to make payments, the bank must exhaust all collection methods before claiming the outstanding amount from the government according to the risk sharing percentage.

Collection methods may include the execution of any collateral such as foreclosure (if applicable) or bankruptcy suits and proceedings against personal guarantors.

Misconception 2: “I will apply for a SGD 1M working capital loan with 5 different banks and hope to get a SGD 5M loan in total.”

Each SME can receive a maximum of SD 1 million for ESF-WCL and SD 5 million for TBLP.

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This is because the ESG is the guardian of the total number of approved government-backed loans for each SME.

Therefore, even if an SME applies for multiple PFIs, the maximum loan amount available to the SME is capped by the facility limit set by the ESG.

Learn the most common reasons for rejection and improve your business to have a better chance of getting your dream loan.

Misconception 3: “Since the government is giving away free money, you should start a business quickly and apply for this loan.”

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The government provided a high risk-sharing percentage to encourage lenders to continue to provide capital to businesses, and a low-cost source of funds to lower the interest rate on these loans.

While they do what they can to ensure that SMEs have access to finance, this does not mean that banks are obliged to open the door and provide finance to anyone who asks for it.

In fact, lenders still account for 10% of business loans and are therefore cautious about providing finance to businesses that may not be able to make payments.

This means SMEs will still need to meet certain criteria such as profitability, positive cash flow, decent income and at least 2 years in business before they can be approved for these government backed loans.

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Learn about historically low interest rates for Enterprise Singapore SME Working Capital and Temporary Bridge Loan!

We hope our explanation can explain the government’s risk-sharing mechanism and the risks involved in adopting these facilities.

Runs the Business Loan Marketplace, which allows SMEs to connect with multiple lenders through a single app, so they can know who their potential lenders are and what rates they are offering at a glance.

Eric Koh is passionate about helping SMEs grow and has spent years dealing with business owners at OCBC and IFS Capital. He’s interested in 70s rock’n’roll, quirky novels and lots of historical trivia. Disclaimer: This article is based on information received informally from partners. Interest rate information is generally not published on bank websites. All information is believed to be accurate; however, no representations, promises or warranties are made regarding the accuracy, completeness or adequacy of the information. All information, comments, recommendations or opinions contained in this article are for informational purposes only. We make no claims to power. If there are any errors in our report, please contact [email protected] to correct them.

Budget 2020: Combat The Business Downturn With These Sme Business Loan Support Schemes

In response to the government’s appeal to Singapore’s financial institutions to provide urgent assistance to businesses, several Singaporean local and foreign banks have lowered the effective interest rates on loans to government-backed businesses.

Rates will be effective April 1, 2020 and will apply to the Temporary Bridge Loan (TBLP) and Enhanced Business Financing Program – Working Capital Loan (EFS-WCL) offered by Enterprise Singapore’s Partner Financial Institutions (PFIs).

As part of the Solidarity Budget announced on April 6, 2020, the government announced that banks and financial firms can apply for low-cost funding through the new Singapore Dollar line from the Monetary Authority of Singapore (MAS), for new ESF-WCL and TBLP loans. .

The reduction in the cost of funds will reduce the cost of interest on new government-backed loans issued through PFI.

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On April 20, 2020, MAS and Enterprise Singapore (ESG) announced that a new facility would lend Singapore dollars at an interest rate of 0.1% per annum to eligible financial institutions.

PFIs are expected to pass on the cost savings to SMEs by reducing the costs of the government-backed ESF-WCL and TBLP.

This is the main reason why new government-backed loans have been offered at such low interest rates since early April.

Not only will this be helpful for struggling SMEs trying to get cash flow to weather this crisis, but it is also a great opportunity for better placed SMEs to raise affordable capital for expansion opportunities for the eventual economic recovery from the COVID-19 pandemic 19. .

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This is in addition to other initiatives already announced for SMEs in Singapore, such as higher limits on government-backed commercial loans (announced in the Supplementary Budget on March 26) and the possibility for SMEs to defer capital repayments on real estate loans (announced by MAS on March 31) . March).

Runs the Business Loan Marketplace, which allows SMEs to connect with multiple lenders through a single app, so they can know who their potential lenders are and what rates they are offering at a glance.

Eric Koh is passionate about helping SMEs grow and has spent years dealing with business owners at OCBC and IFS Capital. He is interested in 70s rock and roll, strange novels and many historical curiosities. Raffles Credit Pte Ltd is a licensed lender (Licence No. 58/2022) listed in the Singapore Ministry of Justice Register of Lenders. .

The COVID-19 outbreak has brought with it a series of precautionary measures in hopes of slowing the spread of the pandemic. However, these actions have also resulted in a reduction in the income streams of small and medium-sized enterprises. Given this, survival has become the number one issue for many SMEs.

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Many small and medium-sized businesses are struggling to pay rent, vendors, staff, and struggling to stay afloat in the face of the economic crisis. Some SME owners have started to diversify their products to find other sources of income. Others have taken other jobs to fill the gap in these difficult times.

Fortunately, a business loan or grant can help. With the help of Enterprise Singapore, the government is offering special aid loan packages to help SMEs obtain the funds they need to continue their operations. Besides, local banks and financial institutions also offer a wide range of loan products.

SME owners can apply for a business loan to get the financing they need. There are different types of loans. Some financial products are offered for any business needs, such as cash flow management or rent payments. Other financial products are offered for specific needs, such as real estate loans or machinery/equipment.

It is an unsecured business loan, meaning no collateral such as real estate or equipment is required. This type of loan is popular with SMEs because of its flexibility. You can use this to fund your day-to-day operating needs such as:

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In addition, in the case of traditional loans for SMEs, you can choose a repayment period of up to 5 years. You can apply for this type of loan at all major banks, such as DBS, OCBC or UOB.

When the pandemic broke out, the Singapore government launched government-backed business loans to help SMEs in the country. Led by Enterprise Singapore and participating financial institutions (FIs), they offer affordable loans that appeal to SMEs. These types of loans cover the government’s risk share of up to 90%.

The Small and Medium Business Working Capital Loan is one such government-backed business loan offered to local SMEs with up to 200 employees. The Singapore government works with banks to offer loans of up to $1 million per borrower. The loan period is from 1 to 5 years.

This is another government-backed business loan to help businesses bridge the gap in these challenging times. This type of loan is offered not only to SMEs. It is open to any company registered in Singapore that is at least 30% locally owned. Businesses can borrow up to $5 million with a repayment period of up to 5 years.

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Sometimes called a “first business loan,” this is an unsecured loan designed for young start-ups. think about it

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