Over the past few years, the business sector has taken a rather substantial knock, and all the uncertainty in these trying times has caused many businesses to suffer considerably. It is absolutely critical for businesses to have or be sourcing for funding so that they are able to invest in development strategies, build new capabilities or explore new expansion opportunities in other countries where they are already operating.
Enterprise Singapore (ES) has been absolutely wonderful at affording small and medium-sized businesses (SMEs) the opportunity to grow with an aggressive strategy by consolidating previous financing programs in one place under the name of the Enterprise Financing Scheme (EFS). The EFS has, in many ways, made it uncomplicated and trouble-free for small and medium-sized businesses to source and obtain financing at various phases of their development.
What is the Enterprise Financing Scheme (EFS)?
Enterprise Singapore (ES), a regulatory board under Singapore’s Ministry of Trade and Industry, is responsible for managing the Enterprise Financing Scheme (EFS). IE Singapore has partnered with Spring Singapore to turn this into a scheme for all types of enterprises.
The scheme’s purpose is to allow banks and lending institutions to give business loans to Singapore-based companies based on a minimum of 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 part of its risk-share obligations. Some of the banks that can provide loans through their association with Enterprise Singapore (ES) are DBS Bank Ltd, CIMB Bank Berhad, and IFS Capital Ltd.
As a result, the EFS will provide complete assistance for firms’ financial needs at all phases of their growth and for both their local and international operations. Apart from EFS, start-ups can also take advantage of specific grants and schemes designed for their needs. There are also a lot of tax benefits offered to new start up to help them grow faster and consistently.
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, SME Working Capital and SME Fixed Asset loans are designed for enterprises with group revenues of $100 million or less and a 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, at least 30% of the company’s shares must be owned by Singapore citizens or PRs, either personally or indirectly.
EFS will be made available to businesses in all industries, subject to the following conditions:
- Be a business registered and operating in Singapore.
- Have at least 30% local ownership.
- Have a group annual sales turnover of less than SGD 500 million.
Types of Loans Available to SMEs Under EFS
There are a few reputable lenders who have been waiting with bated breath to extend their helping hands to small and medium-sized businesses under the Enterprise Financing Scheme. There are seven types of loans being offered, namely;
Enterprise Singapore has developed an Enterprise Finance Scheme – Green (EFS – Green) with partner financial institutions. This is tailored 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 for this sector. 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-assisted loan made accessible 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 will collaborate with partnering financial institutions to share risks of between 50%-70%. Credit requirements and interest rates may differ between such institutions.
SME Fixed Asset Loan
Certain organisations may need to use specialist equipment, manufacturing machinery, or even physical assets or capital to strengthen or complement their productivity, expand their business, or even dismiss the need to rent a building. A loan may be necessary to make these substantial, capital-intensive one-time purchases. The SME Fixed Asset Loan will assist businesses in securing the money required to grow, 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 not have adequately extensive assets to serve as security for regular bank loans. Companies can utilise the loan to grow and expand existing capacity, diversify into new product lines, supplement working capital needs, embark on new initiatives, or 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. The warrants, or equity purchase rights, are intended to compensate for the increased risk of loan failure.
Trade loans assist firms by financing their short-term import, export, and guarantee needs. These can assist organisations in terms of inventory management, factoring, and international working capital requirements. They can finance requirements such as:
- Inventory/stock financing
- Factoring (with recourse)/bill of invoice/accounts receivable discounting
- Structured pre-delivery working capital (revolving working capital)
- Overseas working capital loan
- Bank Guarantee (capped at two years tenure)
If you have already secured an overseas project, you can seek an Overseas Project Loan to help 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 internationally through mergers and acquisitions. From April 1 2022, to March 31 2026, the Enterprise Financing Scheme – Merger & Acquisition (EFS – M&A) will be distributed to embody domestic M&A activities. This will enable organisations to expand and develop through M&A, including ventures into related businesses and emerging industries. The acquiring company can also avail the Mergers and Acquisitions (M&A) Allowance when filling their taxes which they need to share with its target company.
It is a known fact that small and medium-sized firms (SMEs) contribute noticeably to economic growth and development. It is also reasonable to believe that there might be multiple obstructions that can hinder their growth and development. Private enterprises must be able to adapt themselves to an ever-changing economy and be able to withstand financial pressure in order to survive and be competitive.
Therefore, for most SMEs, obtaining funding is not always an easy task and can be a highly stressful matter. Hence, it is utterly important for these government financing programmes, acting as a stabiliser, to help increase funding liquidity in the credit ecosystem since most banks would typically slow down lending to reduce risks during an economic downturn.
The Singapore Government has several support grants and schemes in place to help SMEs stay stable and grow even during uncertain times. However, if you are not aware of these or are unsure of your eligibility, you should appoint an experienced corporate service provider. Such a company would ensure you are always up to date about all the different loans and schemes your company is eligible for, and so be able to take advantage of them at the right time.