SMEs have applied for $1.9b in loans since early March

Empty roads leading to the Central Business District during the circuit breaker period. Education Minister Ong Ye Kung said more than 2,500 applications by SMEs to defer principal payments on secured loans have been processed as of April 30, with mos
Empty roads leading to the Central Business District during the circuit breaker period. Education Minister Ong Ye Kung said more than 2,500 applications by SMEs to defer principal payments on secured loans have been processed as of April 30, with most of the applications approved.ST PHOTO: KELVIN CHNG

Amount is six times the value of credit given out in same period last year: Ong Ye Kung

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

The value of these loans, taken out under Enterprise Singapore's (ESG) financing schemes, is 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 Monetary Authority of Singapore (MAS) board member, in Parliament yesterday.

Mr Ong 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 coronavirus pandemic.

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

Mr Ong noted that the Government takes a 90 per cent risk share on 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.

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 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 last month ranged from 2 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 indicated that processing times for loans are "still quite considerable", with some SMEs in distress and in 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.

A version of this article appeared in the print edition of The Straits Times on May 05, 2020, with the headline 'SMEs have applied for $1.9b in loans since early March'. Print Edition | Subscribe