Complete Guide To Enterprise Financing Scheme – Fixed Asset Loans (EFS-FA) In Singapore

Some businesses require the use of expensive machinery such as forklifts or cranes, manufacturing machinery, or scientific machines such as lab equipment. Businesses that need such equipment need a high amount of capital in order to start up or expand, and this is where the Enterprise Financing Scheme – Fixed Asset Loans comes into play, since it is able to help these businesses minimise its capital outlay.

The EFS-FA is a government-backed loan, which allows businesses to purchase new or used assets for local or overseas facilities. This also allows companies to finance their purchase or construction of government- and commercial-built factories and business premises.

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To be eligible for this loan, the company must be registered and operating in Singapore, with at least 30% local shareholding held by a Singaporean or PR.

To qualify as a SME, the company should not have a Group revenue exceeding $100 million and have no more than 200 employees.

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Loan Details

Each borrower is limited to borrowing $30 million, and this limit is shared between the company and other parent or subsidiary companies (also known as the borrower group). The borrower group is further subject to a total loan exposure limit of $50 million.

The maximum repayment limit is 15 years, and the interest rate is subject to the financial institution’s assessment of risks involved.

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How Risk Sharing Works

Government-backed loans are still administered by financial institutions, but the risk is 50% shared with EnterpriseSG. For young companies (less than 5 years from date of incorporation), or companies operating in challenged markets (countries with an S&P rating of BB+ and below), EnterpriseSG may take on a risk share of 70%.

One common misconception is that this reduces the liability of the borrowers, which is untrue. Risk sharing does not absolve the company from any debt – in the case of a default, debt collection proceedings will still be performed first before the lending institution can make claims on the outstanding remainder from EnterpriseSG.

Risk sharing merely helps financial institutions to lower the risk of giving out the loan, thereby enabling these institutions to give out more favourable terms for the loan.

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Comparison With Other Loans

The SME Fixed Asset Loans are not the only option for business financing; however the other loans limit the borrower to a much smaller sum, with a shorter repayment period.

The Enterprise Financing Scheme – Project Loan (EFS-PL) allows for a borrower group limit of up to $15 million for domestic projects, which is only half of the maximum limit of $30 million of the EFS-FA, even though it covers the same categories. This loan is more useful for companies who are intending to expand overseas, since the loan limit for overseas projects is $50 million.

The Enterprise Financing Scheme – Green (EFS-Green) offsets the same loan amount for equipment and machinery or factories related to green initiatives, but EnterpriseSG provides a 70% risk-share for this category.

Read Also: [2024 Edition] Complete Guide To SME Business Loans In Singapore

Financing For Fixed Assets

OCBC Equipment and Machinery Financing is a loan which allows you to finance up to 90% of the valuation or purchase price of equipment and machinery for a period of up to 8 years. The interest rate is between 4-6%, and companies can get a loan approved within 48 hours.

Companies must be incorporated in Singapore for at least 2 years, and at least 30% owned by Singapore citizens or Permanent Residents.

This loan offers the option of tapping on a government-assisted scheme. While government-assisted schemes may offer more favourable loan terms, there may be more steps for application.

Need Financing Support During This Period?

Enjoy fast access to funds and receive your loan approval status instantly when you apply online with OCBC.

For SMEs that are just six months into operations, secure up to S$100,000 with the OCBC Business First Loan . If your SME is above two years old, secure up to S$700,000 with the OCBC Business Term Loan – good for funding business operations or expansion. Terms and conditions apply.

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