SMEs which have successfully applied for government grants can now tap on DBS Bank's bridging loans to cover their interim expenses.

It will be the first bank in Singapore to offer such bridging finance to support government grant schemes, DBS said in an announcement yesterday.

The loans are collateral-free and the small and medium-sized enterprises (SMEs) will also enjoy preferential interest rates, as well as annual and early pre-payment fee waivers, it added.

Government grants for SMEs help defray costs associated with skills upgrading, innovation, productivity-related projects, product development or overseas expansion. However, such reimbursements usually kick in only when a project is completed.

DBS said its business capabilities loan, acting as bridging finance, can be used to cover project expenses incurred before the SME gets reimbursed.

Ms Joyce Tee, DBS' regional head of SME banking, said, "With the economic outlook getting tougher, we hope that the new DBS capabilities loan will be a cost-effective way to help alleviate the strain on SMEs' cash flows, thereby encouraging them to embrace innovation and grow new sources of revenue."

DBS said it will waive the $1,000 processing fee for all applications made up to June 30 for these loans.