Singapore SME loans: Singapore government SME funding

The year 08 and much of the 1^st quarter of 09 saw the global economy facing an almost unprecedented worldwide recession. Singapore was not spared the spill over effects by the double whammy of liquidity crunch and falling global demand either.

Faced with the worst recession in Singapore's history, the Government had to devise extraordinary measures to keep our well-oiled economy in good shape. The Finance Ministry Budget for FY '09 unveiled a record $20.5 billion 'resilience package' that required presidential assent to be delivered in full. Among the slew of job saving and economy boosting initiatives, Spring Singapore introduced major enhancements to increase liquidity and boost lending to the sudden risk adverse banks.

The most eye-catching tweaks done to the existing Bridging and Micro loan was to increase government risk sharing from 50% to 80%-90%. This would encourage the now sudden risk adverse banks to lighten up on their lending. The maximum loan quantum was also increased from $500,000 to $5 million. Most banks would not over gear on 1 company. With the increased loan quantum, companies can apply through more than 1 bank for the Bridging Loan programme.

Most local SMEs lauded the above initiative as in an adverse downturn, unsecured loans amounting to cold hard cash was what small businesses need to survive and remain viable. Most companies would not seek to expand with weakening demand, therefore machinery loans & complex trade facilities are not as seeked after as a simple unsecured term loan. This form of financing would provide working capital and transactional buffer and is a vital lifeline for SMEs to ride out the crisis.

The Bridging/Micro Loan programme by Spring S’pore was launched in December 08, with the government body pumping in $2.3 billion to aid funding. There is no certainty as yet whether if Spring would continue the government assisted funding once the $2.3 billion has been fully drawn down. There remains the possibility that the programme might be discontinued when there are visible signs of the economy picking up. The program was introduced in the face of the global economic downturnin the first place. If and when the loan programe is eventually discontinued, small businesses might have to revert back to traditional unsecured bank loans and facilities again.

The biggest difference between commercial unsecured business loans and the Bridging/Micro loans would be the interest rates charged. Spring, being essentially a Government body, aims to lower the cost of credit for businesses as part of the overall package to address the business community's financing needs, inject liquidity and preserve jobs (SMEs hire almost half of Singapore’s workforce)

You can talk to a Standard Chartered Banker about these loans.

scb.ben@propertyBUYER.com.sg

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29.10.2009. 03:16