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COVID-19: How can Singapore's SME relief measures help businesses during this pandemic?
Since the first Covid-19 outbreak started in China in November 2019, we have seen the impact of the current COVID-19 pandemic surpassing that of the previous SARS outbreak. The immediate slowdown of the Chinese economy has caused a ripple effect in Singapore as well, especially since both countries have close relations with one another. For one, the tourism and transport sectors are seen as taking the brunt of the force, while related financial consequences are seen to ripple throughout other sectors since the beginning of 2020.
With almost S$100 billion pumped in as Singapore government’s financial support to fight the impact of Covid-19 on our economy and to prepare for tough times ahead, Small and Medium Enterprises (SMEs) are subject to a list of varying relief initiatives that help businesses with operational and financial aspects like employee retention and liquidity constraints.
If you’re looking for financial aid and relief for businesses in Singapore, it seems that there are plenty of options.
Temporary Bridging Loan Programme
In a nutshell, the Temporary Bridging Loan Programme enables enterprises to borrow up to S$5 million with interest rates capped at 5% from participating Financial Institutions.
As an added measure, the government has increased its risk-sharing to 90% for business loan applications initiated from 8th April 2020 to 21st March 2021. The maximum repayment period is 5 years, and eligible applicants may also apply for up to 1-year deferral of principal repayment in order to help manage any outstanding debt.
The Temporary Bridging Loan Programme is targeted at all SMEs in all sectors, as a way of reinforcing their ability to cope with short-term liquidity issues. Businesses can use this loan to cover labour wage costs, rental expenses and other financial obligations to safeguard them from the immediate impact of the pandemic. It focuses on cash-flow management for the most part and helping SMEs stay afloat while global supply chains are compromised.
Companies need to be locally incorporated and have at least 30% local shareholding to be eligible for application.
SME Working Capital Loan
Another government-assisted financing scheme from recent government efforts is the enhanced SME Working Capital Loan, which grants access of up to S$1 million working capital for SMEs in Singapore. The enhanced Working Capital Loan can be acquired and utilized to finance urgent cash flow obligations. SMEs that require help beyond the S$5 million Temporary Bridging Loan Programme can tap on the enhanced Working Capital Loan.
Similar to the Temporary Bridging Loan Programme, there is also a 90% risk-sharing by the government. Companies also need to be locally incorporated and have at least 30% local shareholding to be eligible for application.
This loan also allows up to 5 years for repayment. Credit criteria and interest rates may vary depending on which bank you approach with no cap on interest rate, but all the same, the funding is meant for SMEs to expand and scale their business post Covid-19.
Digital Business Loan
Supported by Resilience Budget 2020, the Digital Business Loan from DBS allows small businesses to find effective and hassle-free financing with access to up to S$200,000. This initiative is in line with the new relief assistance supported by the government's efforts to ramp up SME strength. Its repayment period can also stretch up to 5 years, similar to other SME business loan options available right now. The cash flow support for SMEs was actually boosted as DBS decided to upsize the Digital Business Loan. The original quantum was S$50,000 when the relief measure was first introduced in February. Since then, it was doubled up to S$100,000 and finally pushed even further to S$200,000.
The idea is to provide a collateral-free loan option to smaller businesses that need access to substantial working capital and extra cash flow support without all the added hassle that usually comes as criteria for standard loan applications.
Rental reliefs for SMEs
There's also the development of a rental relief framework for SMEs to help businesses, individuals and organisations that aren't able to fulfil their contractual obligations during this Covid-19 pandemic. Businesses and individuals who are facing financial concerns and uncertainties will be able to apply for a government-assisted rental relief programme.
This gives about 2-4 months' relief of rental costs incurred by SME tenants who hold qualifying leases and licenses. Applicants with not more than S$100 million in annual turnover will be able to apply for this programme.
The Inland Revenue Authority of Singapore (IRAS) will issue notices of cash grant to qualifying property owners from early August 2020 to inform them of the rental waivers they should provide to their tenants.
The government is aware of the multiple financial and legal issues being faced by those in the property industry right now, which is why more rental relief and support measures are in the works for SMEs, landlords, individuals and tenants alike. Covid-19 has put a pressure specifically on the physical locations, stores, offices, shop lots and commercial projects in Singapore - similar to many other parts of the world.
Help from all sides
Overall, the Singapore government - in collaboration with many other parties and financial institutions - has come up with a comprehensive response plan for SMEs and organisations in Singapore to capitalise on as quickly as possible. Time is of the essence, and the pandemic has affected a wide array of different sectors, aspects and industries. So far, relief efforts cover loans and funding initiatives for those in the tourism, property and retail industry among others. Rental and property relief plans are in the works, and capital financing plans are in place to help businesses with heavy overheads and short-term financial obligations.