Support for SMEs

Banks and finance companies in Singapore have committed to help ease the financial strain on SMEs arising from the need to make principal repayments on their loans during this period, in view of the temporary cashflow constraints that many may face.

MAS has worked with financial institutions in Singapore to offer options for SMEs in need to lower their short-term repayment obligations for their loans and to stay insured despite facing financial difficulties. SMEs should enquire on the associated costs and benefits before taking up any of the options.

Managing Cashflow

Defer Payment of Principal on SME Loans

Before You Apply

As any deferment of principal repayments will result in higher overall interest costs, SMEs should carefully consider the additional interest cost they will eventually have to bear, and balance this against their need for temporary cashflow relief.

Special Financial Relief Programme

SMEs were able to apply to their lender to defer 100% of principal repayment of their secured loans until 31 December 2020. SMEs were also able to extend the tenure of their loans by up to the corresponding principal deferment period if they wished.

How To Apply

The industry-wide application window for SMEs to defer 100% of principal repayment of their secured loans has closed on 31 December 2020. SMEs who continue to face financial difficulties are encouraged to approach their lenders early for assistance.

Extended Support Scheme

SMEs who are unable to resume paying their loan instalments in full after 31 December 2020, and are in need of further relief, should first consider the Extended Support Scheme – Standardised (ESS-S).

Under this scheme, SMEs may apply to their respective bank or finance company to defer 80% of principal payments for fully secured term loans, as well as loans granted under Enterprise Singapore’s (ESG) Enhanced Working Capital Loan Scheme and Temporary Bridging Loan Programme. The ESS-S is expanded to cover ESG’s loan schemes and will provide broader support to affected SMEs.

The duration of the deferment depends on the sector in which the SME operates in, and when the SME applies for the deferment. SMEs operating in Tier 1 and 2 sectorsThe determination of the borrower’s Tier is established via the Job Support Scheme (“JSS”) notice(s) or other documentation from IRAS. Tier 1 sectors include aviation and aerospace, tourism, hospitality, conventions and exhibitions, built environment, licensed food shops and food stalls (including hawker stalls), qualifying retail outlets, arts and entertainment, land transport, and marine and offshore. Tier 3A and 3B sectors refer to all other sectors that are not in Tier 1 and Tier 2. may obtain a deferment up to 30 September 2021 under the latest extension announced on 24 June 2021.

SMEs in Tier 3A and 3B sectors were able to obtain a deferment up to 31 March 2021. SMEs in Tier 3A and 3B sectors that continue to face cashflow challenges are encouraged to approach their lenders to work out longer term repayment solutions.

How To Apply

The ESS-S is currently available for SMEs in Tier 1 and 2 sectors only. To qualify for the ESS-S, the SME should not be more than 30 days past due on all loan payments. The SME should also not have overdue interest payments for loans which have already been granted principal moratorium. SMEs who meet these criteria can apply with their respective bank or finance company for assistance. The application period will end on 30 September 2021.

Customised Multi-Lender Restructuring Schemes

SMEs who find that the ESS-S is not suitable for their cashflow needs should first engage their respective bank or finance company to explore bilateral restructuring solutions. SMEs with multiple lenders may also apply for the Extended Support Scheme – Customised if they need their lenders to work together to restructure their loans.

Under the ESS-C, banks and finance companies will have a protocol to facilitate the restructuring of a SME’s loans across multiple financial institutions. The ESS-C complements other restructuring assistance schemesRefer to Ministry of Law’s media release entitled “Simplified Insolvency Programme” dated 5 October 2020. under the Ministry of Law Simplified Insolvency Programme (SIP) for micro and small companies and Credit Counselling Singapore’s (CCS) scheme for sole proprietors and partnerships (“SPP Scheme”).

Restructuring Schemes MinLaw’s Simplified Insolvency Programme Credit Counselling Singapore’s Sole Proprietors & Partnerships Scheme (“SPP Scheme”) Extended Support Scheme – Customised (“ESS-C”)
Eligibility Qualifying micro and small companiesMSCs with an annual revenue of less than $1 million and $10 million respectively, subject to other further eligibility criteria as prescribed in the legislation., with single or multiple creditors and liabilities up to S$2 million.
Sole proprietors and partnerships, with multiple creditors and unsecured debt up to S$1 million. All SMEs with multiple creditors that do not qualify for the other restructuring programmes
Nature of Assistance Restructuring or Winding Up Restructuring only Restructuring only
Creditors in Scope All creditors Banks, finance companies, participating FIs under ESG loan schemes Banks and finance companies
Products in Scope All debts Unsecured business loans only All credit facilities
Legally binding outcome? Yes No. Scheme is voluntary. No. Scheme is voluntary.

How To Apply

The ESS-C offered by banks and finance companies is available from 2 November 2020 to 31 December 2021, for SMEs with multiple lenders and for whom the MinLaw’s Simplified Insolvency Programme and CCS’ SPP Scheme are not suitable. SMEs can approach any of their lenders to assess if they would benefit from a multi-lender restructuring under the ESS-C.

For more information, please refer to the Association of Banks in Singapore’s media release entitled “Financial Institutions in Singapore launch industry’s first customised debt restructuring programme to help SMEs overcome impact of COVID-19” dated 1 November 2020, and MAS’ media release entitled “MAS and Financial Industry Further Extend Support Measures for Individuals and SMEs in Tier 1 and 2 Sectors” dated 24 June 2021.

Lower Interest on SME Loans

SME borrowers will benefit from lower interest rates on their loans obtained under the following Enterprise Singapore (ESG)’s Enhanced Enterprise Financing Scheme:

MAS will also provide lower-cost funding to participating financial institutions to support their lending at lower interest rates to SMEs under the ESG Loan Schemes through the MAS SGD Facility for ESG Loans.

Staying Insured

Assistance with Insurance Premium Payment

Corporates, including SMEs, may apply to their insurer to pay their company’s general insurance premiums (e.g. property, trade credit, vehicles) in instalments.

Temporary Protection

MAS has supported the scoping of the COVID-19 (Temporary Measures) Act 2020 to provide temporary protection to SMEs for a six-month period, from 20 April to 19 October 2020. This will not impair the interests of banks and Singapore’s role as an international financial centre.

The Act covers only contracts that are scheduled. For financial institutions, it would cover only SME loans with specific security located in Singapore, namely commercial or industrial property in Singapore, or plant, machinery or fixed assets in Singapore that are used for business purposesThe Act also applies to enforcement or legal actions by financiers under hire-purchase agreements, where the goods hired are commercial vehicles or plant, machinery or fixed asset used for business purposes. Financiers include leasing companies and financial institutions..

Secured Loans Agreements to SMEs
The Act covers loans to an enterprise that is secured against:
  • Any commercial or industrial immovable property located in Singapore (e.g. factory premises, retail space)
  • Any plant, machinery or fixed asset located in Singapore that is used for manufacturing, production or other business purposes

During the six-month period, your creditor cannot:

  • Enforce the security (e.g. over commercial or industrial property, plant or machinery used for business) located in Singapore
  • Start or continue court or insolvency proceedings against you
Hire-purchase Agreements
The Act covers hire-purchase agreements and conditional sales agreements of:
  • A plant, machinery or fixed asset that is used for manufacturing, production, or other business purposes
  • A commercial vehicleA commercial vehicle is a goods vehicle (e.g a truck used to transport goods); An excursion bus, private bus, private-hire bus, omnibus or school bus; A private hire car; A taxi; or An engineering plant (e.g a tractor, road roller, excavator, forklift).

During the six-month period, your financing company cannot:

  • Repossess the plant, machinery or fixed asset that is used for business, or repossess your commercial vehicle
  • Start or continue court or insolvency proceedings against you

The contractual rights of banks are not affected, other than the right to enforce the security or commence legal action for a default on a loan covered under the Act for a six-month period, from 20 April to 19 October 2020. Banks’ contractual right to charge fees and interest for non-payment or late payment of loan obligations due is unaffected, save for unilateral increases or impositions that are not expressly specified.

Before You Apply

SMEs considering to seek the protection of this Act for their security should bear in mind that they may incur late charges and higher interest, and end up paying more in the future. SMEs who face cash flow difficulties should actively engage their banks to explore the options available under the package of relief measures announced by MAS, which include the deferment of principal repayment, with a corresponding waiver of late charges.

How To Apply

To learn how to apply, or read the FAQs on Secured Loans Agreements to SME and Hire-purchase Agreements relating to the Act and Regulations, you may visit The Ministry of Law’s website .