A lot of mid-sized enterprises have been hit hard by the COVID-19 pandemic. Different sectors have been suffering from funding problems. So how can SMEs alleviate their cash flow needs?
The Singaporean government introduced a funding scheme that provides affected businesses access to immediate cash. This scheme is known as the Temporary Bridging Loan Programme (TBLP). There are around 19 participating financial institutions and one of them is United Overseas Bank (UOB).
In fact, UOB tapped the Monetary Authority of Singapore (MAS) SGD Facility to provide relief assistance for clients through much-needed funding at lower rates. So what does this mean for local businesses? It means more loan cost savings for its clients.
What Is a Temporary Bridging Loan
First introduced in Budget 2020, it is an initiative by Enterprise Singapore. It aims to help local small enterprises gain unsecured working capital financing under the Enterprise Financing Scheme. SMEs can borrow up to $1 million with an interest rate capped at 5% per year.
However, in October 2020, the applications for TBLP are extended from April 1, 2021 to September 20, 2021. For applications within this period, the maximum loan amount is around $3 million.
The eligibility requirements may vary depending on the financial institution. For UOB Temporary Bridging Loan, local enterprises are eligible if:
- Sole Proprietor, Partnership or Private Limited Company
- Minimum 3 years in business
- At least 30% local shareholding
- Registered and operating in Singapore
With the UOB Temporary Bridging Loan Programme, local companies can enjoy lower interest rates. They also offer a repayment period of up to 5 years.
Features of a Temporary Bridging Loan Programme
Depending on which financial institution you apply for, you may enjoy flexibility and options. Here are the features you need to know about.
Loan Amount:
For applications made between April 1, 2021 and September 30, 2021, the loan amount is capped at $3 million.
Interest Rate:
The TBLP interest rates depend on the financial institution. However, it is capped at 5% per annum.
That said, depending on your business’ credit history as well as financial performance, you may enjoy lower rates.
Repayment Period:
Repayment for bridging loans can be spread out for a maximum of 5 years. Borrowers can apply for a 1-year deferral of principal repayment. However, this will be subject to assessment and approval by the financial institution.
Monthly repayments:
The monthly repayments are fixed. That said, it’s easier for SMEs to create a budget and pay for this type of loan. Additionally, financial institutions, like UOB, provide local enterprises with a loan repayment schedule that will suit their needs.
Here’s a sample monthly repayment for TBLP:
| Loan Amount | $550,000 |
| Loan Tenure | 5 years |
| Interest rate | 2.88% |
| Estimate repayment[R1] | $9,854 |
Funds Disbursal:
The approval process will vary according to your bank and financial institution. Participating financial institutions (PFIs) will assess the application before deciding whether or not to grant you a loan. Then they’ll submit your application to Enterprise Singapore to get it approved.
That said, it may take 1 to 2 weeks while others may take up to 6 weeks. UOB has digitized the entire loan application process. In doing so, they hope that their clients will receive their funds in a week.
Who Can Apply For This Loan
- Sole Proprietor, Partnership or Private Limited Company
- Minimum 3 years in business
- Registered and operating in Singapore
When Will The SME Be Eligible To Repay The Loan?
Small and medium enterprises are affected by the pandemic. That said, SMEs may not be able to repay the principal amount until they regain stability.
With TBLP, companies can request to defer their principal repayment for up to a year. This means that you don’t need to pay the principal amount during the first year. Instead, you can stabilize your cash flow first so you can tide over the current situation. However, the PFI will have to assess your current financial situation first before making a decision.
Benefits of Taking Up UOB’s Temporary Bridging Loan
Although the UOB Temporary Bridging Loan Programme is a short-term loan, it still offers several benefits.
1. Have Cash On Hand For Immediate Expenses
Bridging loans can be used for your business’ immediate expenses. For example, if your equipment suddenly breaks down, you can use the money for repairs or for buying a new one. That said, bridging loans can help you get cash during business emergencies.
2. Interim Financing
Bridging loans also help “bridge the gap” while your business is waiting for long-term funding. This means you can use the loan amount to cover your business expenses during that period.
3. Lesser Cash Flow Issues
If you’re experiencing cash flow difficulties, the UOB temporary bridging loan programme can help. For instance, if you need cash flow to pay your employees’ salaries, you can apply for the TBLP. You can also use bridging loans to pay for expenses like rent, utilities, inventory, and other emergency expenses.
4. Expand Your Business and Upgrade Your Business Environment
Bridging loans are also beneficial for funding your expansion plans. For example, if you’re planning to move offices, then TBLP can cover it.
Additionally, with the pandemic, your business may need to follow new COVID-19 guidelines and restrictions. This means you need to adapt and upgrade your business environment. For instance, you may need to provide personal protective equipment like masks and gloves or even add barriers between cubicles.
Other Financial Options Available To SMEs/ Businesses In Need Of Financing
Aside from banks, you can also reach out to other private financial institutions that offer TBLP. But what if your business does not qualify for the TBLP?
You can also consider other funding options. Here are the most common alternative funding for SMEs.
1. Government Schemes and Grants
The Singaporean government is offering a series of financial schemes that aim to support SMEs amidst the pandemic. These schemes and grants are perfect for start-ups.
- SME Working Capital Loan
- SME Micro Loan
- SME Equipment and Factory Loan
- SME Venture Loan
- Technology Enterprise Commercialization Scheme
- Action Community for Entrepreneurship (ACE) Start-ups grant
2. Venture Capital and Angel Investment
Angel investors are individuals or firms who are willing to fund start-ups. With this alternative funding option, investors are looking for a return or share of your business.
This type of funding is perfect for industries like tech, medical, and online. If you’re thinking of tapping this scheme, make sure to have a solid business plan.
3. Crowdfunding
This is another alternative source of funding which is perfect for product launches. This option involves pooling small amounts of capital from individuals who are interested in funding your product launch or business venture. That said, crowdfunding is also a great way to test the market.
There are various crowdfunding platforms. That said, you need to know how each platform differs. Some platforms only allow funding for a limited time. Some may require you to meet your goal to receive the funds. So be sure to read the guidelines before making a decision.
Conclusion
TBLP helps meet SMEs’ financial obligations by providing them with immediate cash flow. Since it was introduced, the success rate for applications is over 90%. That said, more than 20,000 loan applications have been approved by the PFIs.
Key takeaways:
- The maximum loan amount is $3 million for applications made between April 1, 2021 and September 30, 2021.
- The interest rates are capped at 5% per annum.
- Repayment for a bridging loan can be spread out for a maximum of 5 years.
Looking for short-term loan options aside from banks? Consider getting a bridging loan from a licensed moneylender. Loan Advisor provides a comprehensive bridging loan comparison between licensed moneylenders. Use this information to make smarter financial decisions.
