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Government Supported Financing Schemes for SMEs

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6 years ago

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Running a SME in Singapore is challenging. High rental costs, tight manpower market and no easy access to bank financing are some of the pertinent challenges most SME owners face when trying to scale their operations.

Heading into the last quarter of 2018, the economic outlook for 2019 is still murky with the prospects of the US-China trade war looming heavily on global trade prospects.

Third quarter 2018’s economic growth slowed to 2.6% YOY compared to 4.1% expansion in the previous quarter.  For the first three quarters of 2018, Singapore’s economy registered growth of 3.8%.

What is notable about this 3.8% statistic is that this is the best 9 months performance since 2013. Economists expects growth to further moderate at a slower but steady pace for 2019.

Singapore’s growth prospects could unravel next year due to global trade tensions between US and China and the spill over effect it will cause to the global economy if simmering tensions does boil over in 2019.

Singapore is one of the most expensive city in the world to conduct business in and local SMEs constantly have to grabble with high overheads and costs. Fortunately, there are a myriad of grants and government aided financing schemes SMEs can tap into to help alleviate working capital and cash flow pressure.

SMEs made up 99% of all enterprises in Singapore, contributing almost 50% of GDP and employs about 70% of the workforce. Due to lack of resources, information and time, most small business owners might not be aware of the various grants and financing schemes SMEs can tap into.

Most of the government assisted financing schemes for SMEs are administered by Enterprise Singapore, a combined entity that merged both Spring Singapore and IE Singapore, to champion the growth of SMEs.

Most of the financing schemes, administered in the form of term loans, have some form of risk sharing between the government and participating financial institutions. This will help encourage banks and financial institutions to spur credit lending to SMEs which traditionally are considered high risk segment to banks due to lack of credit information and higher default rates. Securing a business loan in Singapore is no easy feat for most SMEs and supporting financing schemes definitely helps to improve approval chances.

With the risk sharing element from the government, banks participating in these schemes might also offer lower interest rates on a SME loan as well since the risk of default is now co-shared.

These government financing schemes will also help to improve funding liquidity in the banking credit ecosystem as most banks will generally slow down lending to mitigate risks during a downturn. With the engines of funding access being throttled, SMEs will face a double whammy with declining revenue and working capital squeeze. The government funding schemes therefore aims to encourage bank lending and lower financing costs for SMEs.

There are more than 13 banks and financial institutions participating in some of the government aided financing schemes. Every bank and financial institution have their own credit risk assessment, interest rates and criteria which might vary widely at times.

SMEs are encouraged to do their own research or engage competent finance consultants to find out which schemes are suitable for their requirements.

Below is a summary of the various government financing schemes SMEs can tap on to expand their business:

SME Micro Loan

  • For local SMEs with annual turnover $1M or less OR employees 10 or less
  • Suitable for smaller companies just starting out
  • Minimum 30% local shareholdings (Singaporean or PR)
  • Maximum funding amount $100K
  • Repayment period up to 4 years

SME Working Capital Loan

  • For local SMEs group annual turnover <$100M or group employment size < 200
  • Minimum 30% local shareholdings (Singaporean or PR)
  • Maximum funding amount $300K
  • Repayment period up to 5 years
  • Available till March 2021

Loan Insurance Scheme (LIS)

  • Credit insurance for SMEs to obtain trade finance facilities from financial institutions
  • A portion of the credit insurance is supported by Enterprise Singapore
  • Minimum 30% local shareholdings (Singaporean or PR)
  • Financing of inventory, factoring/receivables discounting & pre-delivery working capital

SME Equipment & Factory Loans

  • Automating/upgrading of equipment or purchasing HDB/JTC premises
  • Up to $15M funding
  • Minimum 30% local shareholdings (Singaporean or PR)

Internationalisation Finance Scheme (IFS)

  •  Asset based financing scheme for purchase or construction of factories/production facilities overseas
  • Structured financing loans for funding of working expenses of secured overseas projects
  • Banker’s guarantee, performance guarantee, merger & acquisition financing for overseas expansion

Aside from the above schemes, Enterprise Singapore offers many other financing schemes and grants to support local startups. One grant SMEs should look at is the Enterprise Development Grant.

The grant can be tapped into to help SMEs grow and transform their current business model in this age of technology and disruption. Targeted at 3 main key pillars, the grant aims to help SMEs deepen their core capabilities, spur innovation and productivity and to improve access to overseas markets.

On the financing aspect, SMEs sourcing for funding should definitely explore the SME Working Capital Loan scheme if not already done so. The scheme is scheduled to end in May 2019 and allows up to maximum financing amount of up to $300K per company, subject to participating financial institutions’ credit approval.

In a recessionary economy, there will usually be a merger and consolidation phase. It is vital for businesses to ensure sufficient access to credit sources to ride out the slowdown. Cash flow is the life line of a business and strong funding sources will ensure stable cash flow to tap into opportunities in a down market and to restructure operations.

Small business owners should also take some time to educate themselves on the nuances of SME financing and the financing instruments most suitable to deploy. Financing is not rocket science, however most SME owners are too time-starved to find out more on the available options in the market.

SMEs can consider tapping into the available government supported financing schemes listed here as part of their overall financing strategy and tap into opportunities for growth.

This was first published on Linkflow Capital’s website, “Government Supported Financing Schemes for SMEs“

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Income Insurance respects government’s decision to halt Allianz deal, reviews next steps

Income Insurance Limited has acknowledged the Singapore government’s concerns and decision to halt its proposed partnership with Allianz Europe B.V. The company expressed respect for the government’s direction and emphasised its commitment to reviewing next steps while considering upcoming amendments to the Insurance Act.

Published

2 days ago

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15 October 2024

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Income Insurance Limited has responded to the Singapore government’s decision to halt its proposed transaction with Allianz Europe B.V., a deal that would have seen Allianz acquire a 51% stake in the insurer for S$2.2 billion (approximately US$1.6 billion).

On 14 October 2024, the company stated it “respects the Government’s direction” and appreciates the recognition of its strategic efforts, noting that it will work closely with stakeholders to evaluate its next steps in light of forthcoming changes to the Insurance Act.

In its statement, Income Insurance said, “Income Insurance notes and respects the Government’s direction. Income Insurance appreciates the Government’s understanding of the strategic purpose behind Income Insurance’s corporatisation exercise in 2022 and acknowledgement that the partnership with Allianz was to strengthen Income Insurance’s position for the long run.”

The company acknowledged the government’s concerns about the structure of the transaction and the need for legislative amendments to provide a clear statutory basis for reviewing similar applications in the future.

The company further recognised the conditional nature of Allianz’s voluntary cash offer, noting that it is “pre-conditional and subject to regulatory approval.”

Following the latest developments, Income Insurance committed to reviewing the proposed amendments to the Insurance Act and stated, “Income Insurance will review and take into consideration the forthcoming amendments to the Insurance Act and work closely with relevant stakeholders to study and decide on the next course of action.”

Government’s Concerns

The government’s decision to block the deal was relayed by Edwin Tong, Singapore’s Minister for Culture, Community, and Youth, who cited concerns over how the transaction might affect Income Insurance’s ability to fulfil its social mission.

While the government acknowledged the strategic importance of Income’s corporatisation in 2022, it expressed concerns about the proposed capital extraction that would follow Allianz’s acquisition.

This capital reduction could significantly reduce Income Insurance’s capacity to continue providing affordable insurance to low-income Singaporeans.

Mr Tong highlighted that Income’s corporatisation in 2022 was enabled by an exemption from Section 88 of the Co-operative Societies Act, which allowed the company to retain an S$2 billion surplus for financial strengthening.

However, the proposed Allianz deal’s capital reduction seemed to contradict this intention. Without a clear, legally binding plan to safeguard this surplus for Income’s social mission, the government was unwilling to approve the deal.

Despite blocking the current transaction, the Singapore government has left the door open for future partnerships involving Income Insurance and potential external investors. Mr Tong clarified that the government’s objection was not to Allianz itself but to the terms and structure of the proposed deal, particularly its impact on Income’s ability to fulfil its social mission.

“The government’s view is not that NTUC Income should not seek partnerships or external capital; rather, we must ensure that any deal preserves NTUC Income’s ability to fulfil its social mission and does not undermine the cooperative movement as a whole,” Mr Tong stated.

Public Response and Opposition

The public and several prominent figures had voiced concerns following the announcement of the deal in July 2024. The proposal for Allianz to acquire a majority stake in Income Insurance raised fears that the insurer’s social objectives could be undermined by profit-driven motives typical of large multinational corporations.

The public outcry centred on concerns that Allianz, as a global insurer, might not share the same commitment to affordable insurance as Income Insurance, which had been serving Singapore’s working-class population for decades.

Critics were particularly worried that Allianz’s ownership could lead to increased insurance premiums, which might put essential services out of reach for Income’s lower-income clients.

Former NTUC Income CEO Tan Kin Lian expressed concerns about the potential shift in NTUC Income’s priorities, stating that the proposed deal could undermine its original purpose.

Similarly, ambassador-at-large Tommy Koh and former Group CEO of NTUC Enterprise Tan Suee Chieh voiced their opposition.

Mr Tan Suee Chieh went as far as to call the deal a “breach of good faith” and urged government regulators to intervene.

NTUC Income, Singapore’s one and only insurance co-operative, was corporatised in 2022 into Income Insurance Limited “to achieve operational flexibility and gain access to strategic growth options to compete on an equal footing with other insurers locally and regionally”.

Shareholders were assured at the 2022 annual general meeting that NTUC Enterprise will continue to be the majority shareholder of the new company post-corporatisation.

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OrangeTee, JustCo partner to empower agents and clients with coworking solutions

OrangeTee & Tie has partnered with JustCo to provide property advisers with enhanced access to flexible workspaces. The collaboration, formalised on 27 September 2024, aims to equip advisers with industry insights and access to JustCo’s network of coworking centres, enabling them to better serve commercial clients.

Published

3 days ago

on

14 October 2024

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Singapore’s leading proptech agency OrangeTee & Tie (OrangeTee) has signed a Memorandum of Understanding (MOU) with JustCo, Asia’s leading flexible workspace provider.

The partnership between both parties was inked on 27 September 2024 at the BMW Eurokars Experience Centre.

The collaboration between OrangeTee and JustCo further opens doors to creating more opportunities for OrangeTee’s property advisers, enabling them to “thrive and deliver greater value to their clients”, said a media release issued on 8 October.

As part of the partnership, there will be a series of seminars hosted by JustCo, focusing on the latest trends within the coworking space industry.

These seminars would equip OrangeTee agents with valuable insights to better serve their clients who are interested in flexible office solutions.

This partnership between both parties aims to benefit the property advisers focusing on the commercial client sector as they delve deeper into the industry insights of the office leasing sector in Singapore.

Beyond knowledge sharing, the property advisers will also have access to JustCo’s network of coworking centres across the Asia Pacific to get first-hand experience of the benefits of coworking spaces such as networking opportunities, greater flexibility, and access to a wide range of amenities.

Justin Quek, CEO of OrangeTee said, “This partnership goes beyond business.

“It empowers our property advisers to provide more comprehensive and flexible solutions to their clients, aligning with the evolving needs of modern workspaces.

“By offering JustCo’s vibrant and collaborative environments, our agents can help clients find the ideal spaces for their different business requirements.”

OrangeTee’s property advisers can enjoy a range of perks as part of the partnership.

This includes preferential rates for JustCo’s membership plans which will give them access to over 40 JustCo centres in Singapore and APAC.

With the flexibility to work from anywhere, JustCo’s membership is a dynamic alternative to support their business needs and provides them with opportunities to network and collaborate within the larger commercial community.

Kong Wan Long, Co-founder and Chief Commercial Officer of JustCo said, “Partnering with OrangeTee expands our agency network, allowing us to work with experts who thoroughly understand the property market in Singapore.

“This will allow us to tap into a wider base of potential clients, providing them with greater access to premium coworking spaces that foster productivity and collaboration.

“This collaboration reinforces our commitment to making workspaces more accessible and empowering businesses of all sizes to thrive in an environment tailored to their needs.”

JustCo has the largest footprint in Singapore with 20 coworking spaces in the Central Business District, East and West regions, including the prestigious Marina One office development and Changi Airport Terminal 3.

From January to September 2024, JustCo experienced a 20% increase in enquiries compared to the same period in 2023, highlighting a growing demand for coworking spaces in Singapore. Earlier this year, JustCo also opened a new centre at Hong Leong Building and 108 Robinson Road.

Chipson Ma, one of the long-service property advisers with OrangeTee since 2000, said, “Founded in 2000, OrangeTee has empowered property advisers with cutting-edge technology for over two decades.

“Tools like our online agent portal (Work@Home) and AgentApp allow agents to work seamlessly from anywhere. Our partnership with JustCo further enhances flexibility, providing agents access to coworking spaces they can also market to clients.

“This added convenience elevates the value of our services.”

The partnership with JustCo is the latest to be announced by the proptech leader.

Only recently, OrangeTee also partnered with automotive technology solutions, Motorist, which allowed OrangeTee clients to gain more leverage on their personal vehicle via Motorist while allowing agents and their clients to have access to various perks from the Motorist Premium membership.

This includes car refinancing options to reduce their clients’ total debt servicing ratio and improve their property loan eligibility.

In mid-September, OrangeTee was also the presenting sponsor for The Home Expo 2024 which brought together more than 12,000 property agents, homeowners, industry experts, and exhibitors to the Suntec City Singapore Exhibition and Convention Centre.

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