In recent years, the globe has encountered major worldwide issues, and one area that has suffered substantially is the business sector. Therefore, access to correct funding is critical to realising your development objectives, whether you want to build new capabilities, test out new enterprises, or expand your existing business presence overseas.
A lot of businesses have been able to grow recently, thanks to Enterprise Singapore’s sensible growth strategy. Since October 29, 2019, Enterprise Singapore’s previous financing programs have been consolidated under a single umbrella plan called the Enterprise Financing Scheme (EFS). EFS has, in many ways, made it easier for Singapore businesses to obtain financing at various phases of their development.
What is Enterprise Financing Scheme?
Enterprise Singapore (ES), a regulatory board under Singapore’s Ministry of Trade and Industry, is in charge of managing the Enterprise Financing Scheme (EFS). IE Singapore has combined with Spring Singapore to become an enterprise scheme.
The scheme’s purpose is to allow banks and lending institutions to give business loans to Singapore-based companies based on minimum qualifying requirements. Furthermore, Enterprise Singapore’s risk-sharing offers assurance to lenders, as banks do not have to worry about writing off poor loans since Enterprise Singapore will pay off the proportion of the loan amount designated as risk-share. Some regulated banks that can provide loans through their association with Enterprise Singapore (ES) include DBS Bank Ltd, CIMB Bank Berhad, IFS Capital Ltd, and others.
As a result, the EFS will provide complete assistance for firms’ financial needs at all phases of growth, for both local and international operations. Apart from EFS, start-ups can also take advantage of specific grants and schemes designed for their needs.
Who is Eligible to Apply for EFS?
Like many government initiatives for individuals, the Enterprise Financing Scheme (EFS) is intended for firms that require the most financial assistance. For example, the SME Working Capital and SME Fixed Asset loans are designed for enterprises with group revenues of $100 million or less and company size of up to 200 people.
Enterprise Singapore administers the Enterprise Financing Scheme (EFS), which is aimed at helping local enterprises. Formal registration and physical presence in Singapore are requirements for businesses that want to take advantage of the plan.
Furthermore, Singaporeans or Singapore PRs must own at least 30% of the company’s shares, either personally or indirectly.
EFS will be available to businesses in all industries, subject to the following conditions:
- Be registered and operating in Singapore.
- Have at least 30% local ownership.
- Have a group annual sales turnover of less than SGD 500 million.
7 Loans For SMEs Under EFS
Certain reputed lenders have been eager to extend their hands to SMEs under the Enterprise Financing Scheme. Some of the types of loans they are offering include:
Enterprise Singapore has developed an Enterprise Finance Scheme – Green (EFS – Green) with partner financial institutions. This is geared towards providing access to green financing for firms creating technology and solutions to reduce waste, resource consumption, or greenhouse gas emissions in order to assist Singapore businesses in seizing new possibilities in the green economy. Clean Energy, Circular Economy, Green Infrastructure, and Clean Transportation are particularly important. These fall under the umbrella of the Enterprise Sustainability Programme. This scheme’s sole international bank participant is HSBC.
SME Working Capital Loan
The SME Working Capital Loan (WCL) is a government-backed loan made available under the Enterprise Financing Scheme (EFS-WCL). The WCL is intended to assist SMEs by financing their everyday operating expenses.
From October 2022 to March 2023, SMEs can borrow up to $300,000, with a maximum loan amount of $500,000. In addition, enterprise Singapore collaborates with partnering financial institutions to share risks between 50%-70%.
19 financial institutions are giving support to this initiative. Credit requirements and interest rates may differ between institutions. We can give you a straight comparison of all banks’ SME Working Capital Loan rates and terms.
SME Fixed Asset Loan
Certain organisations may need to use specialist equipment, manufacturing machines, or even physical assets to enhance their productivity, expand their business, or eliminate the need to rent a building. A loan may be necessary to make these capital-intensive one-time purchases. The SME Fixed Asset Loan will assist firms in obtaining the money needed to expand and finance fixed asset purchases through a loan of up to 90% of the asset’s valuation or purchase price, whichever is lower, with a loan payback duration of up to eight years.
Venture Debt Loan
The Enterprise Financing Scheme – Venture Debt (EFS-VD), launched as a trial initiative in October 2015, intends to encourage the use of venture debt in Singapore. Venture loans and warrants can help to finance and accelerate the expansion of creative, high-growth businesses that may lack large assets to serve as security for regular bank lending. Companies can utilise the loan to grow and extend existing capacity, diversify into new product lines, supplement working capital needs, embark on new initiatives, and engage in mergers and acquisitions.
The EFS-VD requires Participating Financial Institutions (PFIs) to share 50% of the risk on qualified loans, with the option of sharing 70% of the risk on loans to young enterprises.
Venture debt and warrants are used to fund the expansion of innovative businesses. This type of funding is often appropriate for high-growth firms that lack large assets that may be used as security in regular bank loans. The warrants, or equity purchase rights, are intended to compensate for the increased risk of loan failure.
Trade loans assist firms in financing short-term import, export, and guarantee needs. These assist organisations with inventory management, factoring, and international working capital requirements. It finances trade requirements such as:
- Inventory/stock financing.
- Factoring (with recourse)/bill of invoice/AR discounting.
- Structured pre-delivery working capital (revolving working capital).
- Overseas working capital loan.
- Bank Guarantee (capped at two years tenure).
If you already have a secured overseas project, you can seek an Overseas Project Loan to aid with the working capital, equipment, or machinery you may need to acquire for the project.
The supportable loan types include those for:
- Factory/Building/Land (including Purchase/Renovation/Construction).
- Working Capital Loan.
- Equipment/Machinery/ Vessels/Other Fixed Assets/Machinery Hire Purchase.
Merger and Acquisition
A successful merger or acquisition may bring enormous value to a company, but ensuring that each stage of the transaction process, from appraisal to negotiation and completion, is successful requires professionalism, thoroughness, care, great expertise, and understanding.
A Merger and Acquisition loan can help fund organisations that want to develop by internationalisation through mergers and acquisitions. From April 1 2022 to March 31 2026, the Enterprise Financing Scheme – Merger & Acquisition (EFS – M&A) will be expanded to encompass domestic M&A activities.
This enables organisations to expand and develop through M&A, including ventures into related businesses and emerging industries.
Globally, small and medium-sized firms (SMEs) contribute considerably to economic growth and development. Yet, several roadblocks exist that impede their growth and development. Also, private enterprises face fast changes in the economic and social environment at home and abroad and growing survival pressure when it comes to survival. For most SMEs, getting a loan is not a simple task. Hence, these government financing programmes, acting as a stabiliser, help to increase funding liquidity in the banking credit ecosystem since most banks would typically slow down lending to reduce risks during an economic downturn.
Singapore Government has several support grants and schemes in place to help SMEs to stay stable and grow even during uncertain times. However, if you are not aware of them or unsure of your eligibility, you should appoint an experienced corporate service provider who would ensure you are always up to date about all the different loans and schemes your company is eligible for and take advantage of them at the right time.