COVID-19 Relief Measures For SMEs: 3 Ways Banks & Finance Companies Are Helping Businesses Manage Cashflow Constraints

The Covid-19 pandemic is increasing in intensity. To contain the virus, stringent measures such as social distancing are in place. Around the nation, alternating seats are marked, often in tape, to remind customers to stay 1 meter apart.

The pandemic has severely curtailed economic activity. With a sudden decline in demand and disruption in supply chains, the economy is expected to remain weak, according to the Monetary Authority of Singapore (MAS).

To help SMEs tide over such tough times, MAS worked with the Association of Banks in Singapore, the Life Insurance Association, the General Insurance Association, and the Finance Houses Association of Singapore on the package of measures.

Additionally, MAS has collaborated with bank and finance companies to ease financial strain for businesses.

The relief measures for SMEs are on an opt-in basis.

#1 Deferred Principal Payments on Secured SME Loans

SMEs can opt to defer principal payments on fully secured term loans, up to 31 December 2020. This is subjected to the banks’ and finance companies’ assessment of the quality of the SMEs’ security.

Certain SMEs can also choose to extend loan term by up to the corresponding period of deferment. For instance, MAS explains that if you opt into the relief measure on 1 July 2020, and the loan tenure ends on 1 September 2020, you can choose to extend the loan tenure by 6 months, till end-February 2021.

It is applicable only for SMEs who continue to pay interest and are in good standing with their banks and finance companies. That means borrowers who are not 90 days past due on loan repayments as of 6 April 2020.

It is estimated that more than $40 billion of loans are likely to qualify for this relief scheme.

This measure only applies to term loans, but for other types of loans, banks and finance companies will “make efforts to support their customers”.

SMEs who wish to adjust loan repayment schedules of other types of loans can consider reaching out to their respective banks and finance companies.

Deferring payment loans does not absolve businesses and individuals of their obligations to pay them.

MAS warns that ‘deferring payment increases future obligations’. Repayment deferments and tenure extensions will result in a higher total interest cost over the course of the loan. You should weigh your options carefully before applying for deferment.

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#2 Lower Interest On SME Loans

Eligible SME borrowers can soon expect lower interest rates on loans.

Banks and finance companies can enjoy low-cost funding through a new MAS SGD Facility, until end December 2020. This means that banks and finance companies pay less in order to acquire funds, provided they pass on the savings to their SME borrowers.

This is applicable for loans granted under Enterprise Singapore’s SME Working Capital Loan scheme and Temporary Bridging Loan Programme.

MAS states that this will potentially lower the interest rates charged to SME borrowers.

Read Also: Retrenchment Should Be The Last Resort: 4 Options Companies Can Consider To Reduce Cost First

#3 Assistance with Insurance Premium Payment

SMEs can seek for instalment payment plans their company’s general insurance policies. (e.g. property, trade credit, vehicles)

General insurance companies will work with SMEs to allow premiums to be paid in smaller amounts, while still enjoying coverage for the paid-up period. This is instead of having to pay a lump sum premium for the entire policy period at the start.

The General Insurance Association have announced that insurers will work closely with impacted SMEs to review their financial difficulties and to consider suitable installment payment plans or other options to reduce insurance cover.

For instance, businesses who are Great Eastern’s general insurance customers can apply for assistance with installment plan payments.

Applications open April 1 for insurers and on April 6 for banks.

Further details will be released at a later date. Stay tuned to more updates from Dollars And Sense on this news.

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