Small firms in financial distress due to Covid-19 will receive help from two new schemes launched yesterday - as concerns grow that companies in badly hit industries may be plunged into bankruptcy once earlier support measures taper off.
One initiative will assist sole proprietors or partnerships to restructure unsecured debt such as credit card bills or loans secured without collateral. Another will help small and medium-sized enterprises (SMEs), which employ 65 per cent of workers, work out their credit facilities across multiple banks and finance companies all at once.
The schemes were launched by the Association of Banks in Singapore (ABS).
The Law Ministry had introduced several measures to alleviate the impact of the crisis on businesses, including a moratorium on legal action over rents and contracts and raising thresholds for bankruptcy and insolvency proceedings.
The Sole Proprietors and Partnerships scheme from the ABS aims to complement this by focusing on businesses that are struggling to service loan commitments but are likely to recover given time and revised repayment terms. It was developed with the support of several ABS member banks, the Monetary Authority of Singapore and Enterprise Singapore, among others.
The scheme will allow businesses to work with Credit Counselling Singapore, a non-profit organisation, to help restructure unsecured debt owed to 17 participating lenders, including all the main banks here. Firms can work towards securing lower monthly instalment payments for unsecured borrowings by extending the loan repayment period up to a maximum of eight years.
Interest rates for the restructured debt will be based on the loan's original contractual terms, subject to a maximum of 7 per cent a year. A firm can qualify if its total unsecured debt does not exceed $1 million and it owes unsecured debt to two or more of the participating lenders. Approval will be at the sole discretion of the lenders.
The other ABS initiative, the Extended Support Scheme - Customised, is available to SMEs with viable businesses. It has been devised with the support of the Finance Houses Association of Singapore and led by United Overseas Bank and other major banks to help restructure a firm's credit facilities across multiple banks and finance companies.
ABS director Ong-Ang Ai Boon said: "The intent is to facilitate a more holistic restructuring of an SME's loans compared to if the SME had to approach its lenders individually."
Association of Small and Medium Enterprises vice-president Ang Yuit noted that many SMEs have already looked at bringing down costs since the coronavirus crisis hit eight months ago.
"For those who are looking to soldier on, the extra help in access to capital is good," he said, adding that it is the outstanding debts incurred before Covid-19 that businesses need help with. He noted that the schemes would help companies wind down their businesses that may no longer be viable.
Both schemes will be open for application from today.
This week, Parliament will debate proposed changes to the Insolvency, Restructuring and Dissolution Act, that include a scheme to help distressed firms with annual revenues from $1 million to $10 million restructure debt or wind up.