UPDATED 23th April 2020
On Tuesday (21st April 2020) evening, United Overseas Bank (UOB) announced that it will be offering pre-approved loans of up to S$200,000 to ease the short-term liquidity woes of small businesses hit by the Covid-19 pandemic.
UOB has approved three times more loans to small businesses in March 2020 compared to January 2020.
These pre-approved collateral-free loans will be offered to the bank’s small business customers to help them during this crisis, especially those from Retail and Food and Beverage sectors which are badly hit. Those with a good repayment track record and at least a 12-month borrowing relationship with UOB will be offered the loan. UOB will contact all eligible customers by the end of the week.
Customers who take up the pre-approved loan also have the option to service only the interest on their loan until 31st December 2020.
Sounds like a good deal??
A customer of Smart Towkay was contacted by UOB to take up the pre-approved loan. He let us in on the terms and conditions offered*:
*Do note that as this loan is for existing UOB clients, terms and conditions may vary with regards to individual SME (Small and Medium-sized Enterprise) financial profile.
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Type of Loan
|
UOB Pre-approved Temporary Bridging Loan
|
Other banks’
Temporary Bridging Loan
|
|
Loan Quantum
|
Up to S$200,000
|
Up to $5,000,000
|
|
Loan Tenure
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ONLY 5 years loan tenure allowed
|
Up to 5 years loan tenure
|
|
Interest Rates
|
2.75% p.a. EIR
|
As Low As 1.5% EIR for some Banks offered to their existing clients
|
|
Processing Fee
|
Nil
|
Nil
|
|
Annual Fee
|
S$688
|
Nil
|
|
Partial Repayment /
Full Redemption Fee
|
3.88%
|
No Lock-In
|
|
Moratorium**
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Up to 9 months
(until 31/12/2020)
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Up to 12 months
|
**Moratorium is on Principal, customers only need to service Interest payment.
Disclaimer: The information, materials and contents herein are on best effort basis to verify the rates and terms and conditions from our trusted source. Such information, materials and contents are provided for general information only and you should seek verification with the respective banks and financial institutions at all time and obtain independent verification of the information, materials and contents contained herein before making any decision based on any such information, materials or contents.
For the above comparison, do note that pre-approved loans are extended to UOB existing customers thus disbursement time will be faster compared to new applications with other banks. And as minimal documents are required (and from our understanding), only selected few companies are approached for this scheme.
For SMEs that are in need of urgent funds and are approached by UOB, this scheme might be beneficial to them to ease their short term working capital requirement. But do note that the biggest difference is the cost of financing which is the annual fee of S$688 per annum, and also the lock-in period for the pre-approved scheme.
In addition, Temporary Bridging Loan generally does not come in with a lock-in period for other Banks, i.e SMEs have the flexibility to do partial or full redemption as and when they would like to throughout the loan tenor without any penalty. Hence by committing to the UOB scheme, SMEs are required to fulfill the full 5 years loan tenure so as not to incur the penalty fee.
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Let’s do the sum, given an apple to apple comparison based on 2.75% EIR (effective interest rate) on a $100,000 loan:
UOB: Interests & Costs incurred for the full 5 years:
S$7,146.86 (Interest) +S$3,440 (Annual Fees: $688 X 5 yrs) = $10,586.86
Other Banks:
Interests & Costs incurred for the full 5 years: S$7,146.86 (Interest)
Net Loss Of: $S$3,440 (0.06%)
Thus the actual cost of financing with UOB pre-approved package is 2.81% EIR.
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It seems UOB have heard us, below are the latest updates:
(Updated 23rd April 2020)
|
Type of Loan
|
UOB Pre-approved Temporary Bridging Loan
|
Other banks’
Temporary Bridging Loan
|
|
Loan Quantum
|
Up to S$200,000
|
Up to $5,000,000
|
|
Loan Tenure
|
ONLY 5 years loan tenure allowed
|
5 years loan tenure
|
|
Interest Rates
|
2.75% p.a. EIR
|
As Low As 1.5% EIR for some Banks offered to their existing clients
|
|
Processing Fee
|
Nil (0.88% on loan amount, Min: S$500)
|
Nil
|
|
Annual Fee
|
S$688 (WAIVED)
|
Nil
|
|
Partial Repayment /
Full Redemption Fee
|
3.88% (WAIVED)
|
No Lock-In
|
|
Moratorium**
|
Up to 9 months
(until 31/12/2020)
|
Up to 12 months
|
So if you are offered the pre-approved loan by UOB, don’t jump straight into it. Not sure if you are entitled to better deals? Contact us at Smart Towkay! And if you need more help in the loan application, contact our team to assist in your application via Email or WhatsApp.
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Not sure whether your company can be qualified for bank loans or alternative lending? Try our A.I assisted loan, and Smart Towkay team will send you a lending report within 24 hours' time. With the lending report, we aggregate and recommend the highest chance of approval be it with BANKS / FINANCIAL INSTITUTIONS or Alternative lenders like Peer to Peer Lenders or even B2B lender!
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