Parliament: SMEs applied for $1.9b of loans in March and April; approval rates high

Relief measures for SMEs, such as allowing deferment of principal payments on secured loans, have also been taken up by firms.
Relief measures for SMEs, such as allowing deferment of principal payments on secured loans, have also been taken up by firms.ST PHOTO: GIN TAY

SINGAPORE - Small and medium-sized enterprises (SMEs) have applied for around 2,500 loans totalling about $1.9 billion since the beginning of March this year.

These loans, taken out under Enterprise Singapore's (ESG) financing schemes, are about six times the credit extended over the same period of March 2 to April 30 last year.

The approval rate for these loans has been high, at 90 per cent to 95 per cent, said Education Minister Ong Ye Kung, who is a board member of the Monetary Authority of Singapore (MAS), in Parliament on Monday (May 4).

He was replying to a question from Ms Foo Mee Har (West Coast GRC) on the extent to which businesses have been able to benefit from financing schemes designed to help firms with credit and cash flow amid the Covid-19 pandemic.

These schemes include the SME Working Capital Loan and the Temporary Bridging Loan Programme, which is aimed at helping local companies manage their immediate cash-flow needs.

Mr Ong noted that the Government takes a 90 per cent risk share of the loan schemes overseen by ESG, with banks assuming the remaining 10 per cent.

Relief measures for SMEs, such as allowing deferment of principal payments on secured loans, have also been taken up by firms, he added.

More than 2,500 applications to defer principal payments on secured loans have been processed as of April 30, with most of the applications approved, Mr Ong said, benefiting about $4.5 billion of secured loan facilities.

The MAS also launched a new loan facility with an interest rate of 0.1 per cent to support financial institutions in their lending to SMEs last month, he added.

 
 

The facility is expected to help bring down interest rates to about 2 per cent to 3 per cent, compared with 6 per cent or more for most other unsecured working capital loans to SMEs, Mr Ong said.

Addressing a further question from Ms Foo on interest rates, Mr Ong highlighted that the cost of funds is only one component of interest rates, which also depend on the borrower's risk profile and the banks' own costs.

According to the Ministry of Trade and Industry, the interest rate of loans taken up under the ESG loan schemes by over 95 per cent of SMEs which applied for loans in April ranged from 2 per cent to 4.5 per cent per annum.

"It is largely government measures stepping in to lower (the) cost of funds, plus credit spread, that have led to this outcome," Mr Ong said.

 
 

Workers' Party Non-Constituency MP Leon Perera pointed out in a follow-up question that anecdotal feedback from SMEs has indicated that processing times for loans are "still quite considerable", with some SMEs in distress and urgent need of credit.

In reply, Mr Ong said the processing time ranges from one to eight days, with the majority of loans taking about five days to process.

"We will continue to track the schemes to make sure that (they are) processed efficiently and expeditiously," he added.

Correction note: A previous version of this article cited the interest rate of loans taken up under ESG loan schemes as 2 per cent to 4 per cent per annum. The interest rate ranged from 2 per cent to 4.5 per cent. We are sorry for the error.