SME Bridging Loans Singapore Help Businesses Amid Inflation

Despite its strong economic position, Singapore has not been spared from the effects of global inflation. This situation has led to significant financial setbacks for many small and medium-sized businesses. And, as the race for economic recovery continues, enterprises, especially SMEs, need all the support they can get to survive.

With the ripple effect of this pandemic, inflation may continue to persist with uncertainty. Given this, SMEs will continue to face added challenges, such as rising interest rates and high operating costs. One of the best ways for businesses to deal with these is through SME loans.

SME loans will help businesses stay in their game by helping them put a contingency fund in place and boost cash flow. Check out our post as we feature some of the best SME bridging loans in Singapore today.

Government-Assisted Business Loan Schemes

One government-assisted loan scheme designed to help Singapore businesses is the Temporary Bridging Loan Programme (TBLP). As announced in Budget 2022, this scheme is extended and will run for six months, from April 1, 2022, to September 30, 2022. Afterwhich, it will be superseded by the SME Working Capital Loan.

Singapore government, particularly Enterprise Singapore (ES), and major financial institutions have partnered to support SMEs across Singapore through these various loan schemes. These programs provide quick access to working capital at low interest rates. Let’s take a quick look at these two business loan schemes:

The Temporary Bridging Loan Programme (TBLP)

This scheme was launched in 2020 to help SMEs cope with the impact of the pandemic. You can avail of this loan from any participating financial institution (PFI). The interest rate is capped at 5.5%, subject to the PFI’s credit criteria and risk assessment on the borrower. 

Note that while the government risk share is at 70%, the borrowing business is still responsible for 100% personal guarantee on the outstanding loan in case of default. If this happens, PFIs must follow the standard commercial recovery procedure before claiming the unrecovered amount against ES.

To be eligible SMEs, the business must be registered and physically present in Singapore, with at least 30% local shareholdings.

SME Working Capital Loan (WCL)

As the applications for TBLP expired last September 30, 2022, another option for SMEs is the WCL. This loan is an umbrella scheme under ES Enterprise Financing Scheme (ES-EFS). 

The borrowing business should have a group revenue of S$100M or a maximum of 200 employees to be eligible for the 50% government risk share. Young SMEs or those under five years old can still apply and may receive a risk share of 70%. 

The previous loan offer was S$300K and was further enhanced to S$500K to help businesses finance operational cash flow needs and combat the rising inflation rates.  

Both schemes have a maximum repayment period of five years. Loan approval and interest rates will depend on the participating financial institution.

Participating Financial Institutions

You may check the list and respective contact details of participating financial institutions on Enterprise Singapore’s website.  

How Can SME Loans Help Businesses Cope With Inflation?

Even when Covid-19 restrictions have been eased and Singapore’s economy is showing a glimpse of recovery, uncertainties remain for many businesses. More so, for young start-ups who have a more limited working capital and cash flow.

As inflation will likely persist in Singapore for a few more years, SMEs will need financing tools to tide them over. Here are some reasons why an SME loan can help your business cope with inflation:

1. Government-assisted loan schemes are offered at very low interest rates

The featured government-assisted TBLP have interest rates capped at 5.5%. Meanwhile, WCLs are offered by PFIs at competitive rates ranging from 6.5% to 9.75%. Borrowers with good credit scores or histories may even get a lower interest, depending on the PFI.  

2. May be used as a contingency fund

With inflation, businesses may experience increased business expenses and lower profit. Having a contingency fund in place, the business has a higher chance of continuing to operate and may prevent:

• Reducing employees or employee benefits
• Business closure
• Piling up of debts

3. For stocking up on inventory

Inflation signals a shortage of raw materials and increased supply costs. Inventory is essential in most businesses and having sufficient inventory on hand is crucial. You can use an SME loan as working capital to secure inventory in advance and keep up with customer demand. 

4. Scaling up your business

Growing your business will also mean growing your expenses as you aim for higher gains. Thus, an SME loan will be useful for business expansion purposes, whether it be purchasing new equipment, investing in tech solutions, or branching out and hiring additional staff. 

5. Growing your creditworthiness

Taking up a loan, and paying it diligently is a good way to build a good credit score, especially for new businesses. This allows access to more funding opportunities in the future. It could also mean lower interest rates and better repayment terms.

Other Business Loan Options

These government-assisted loans may not be suited for all types of borrowers. Should your business not qualify for such, there are other excellent options to look at. 

Bank Business Loans

Featured below are the 5 best bank business loans for SMEs this 2022:

1. OCBC Business First Loan

Best Feature/s:

• No paperwork needed (get up to 50% off your facility fee if you apply online)
• Fast response and loan processing

Eligibility:

• Business must be registered and operating in Singapore (six months to two years in operation)
• With 30% local ownership
• Have 10 or fewer employees and annual turnover is less than S$1M
• At least one guarantor (Singapore Citizen or Permanent Resident aged between 21 to 62 and with a minimum annual income of S$30,000)

2. StanChart Business Installment Loan

Best Feature/s:

• Collateral-free
• Simple application process with no business financial statements required

Eligibility:

• Business must be registered and operating in Singapore (minimum of three years in operation)
• With 50% local ownership
• Minimum annual turnover of S$750K

3. DBS Digital Business Loan

Best Feature/s:

• 12-months service only interest
• Paperless online application
• Get approved in as fast as five business days

Eligibility:

• Business must be registered and operating in Singapore
• With 30% local ownership

4. UOB BizMoney Loan

Best Feature/s:

• 1-day response and fast disbursement
• No collateral required

Eligibility:

• Business must be registered and operating in Singapore (minimum of three years in operation)
• With 30% local ownership

5. Maybank Business Term Loan

Best Feature/s:

• Fixed monthly repayments over a fixed period of up to five years
• No collateral required

Eligibility:

• Business must be registered and operating in Singapore (minimum of three years in operation)
• With 30% local ownership

Alternative Option: Licensed Moneylenders Business Loans

Another convenient alternative to borrowing working capital for SMEs is from licensed moneylenders. They offer business loans with flexible terms, lower interest rates, and fast fund disbursements. Check the table below for its features:

Eligibility:

• Business must be registered and operating in Singapore (minimum of one year in operation)
• Has a minimum annual turnover of $60,000

Depending on your business needs, you can also tap personal loans. With banks, you can get a personal loan of up to ten times your monthly income. Alternatively, you can apply from a licensed moneylender and get up to six times your monthly income.

Closing

The temporary bridging loans and various SME loans offered by the government and various financial institutions provided relief to many business owners. With these loans, you won’t miss out on business opportunities along the way and help push your business forward.   

Key Takeaways

• A boost in cash flow provides an opportunity for a company’s healthier financial position.
• Government-assisted schemes have helped many businesses gain access to quick funds and leverage on opportunities.
• Licensed moneylenders are also a great alternative as they offer business loans without stringent requirements.

Whatever your financial needs may be, 1 Fullerton Credit is always ready to assist you. We are a trusted and reliable moneylender in Singapore that offers a wide array of loan options and values our clients’ needs. Contact our office today for a free consultation.