How The Enterprise Financing Scheme (EFS) Can Help SMEs

This article is written in collaboration with OCBC Business Banking. Views expressed in the article are the independent opinion of

The Singapore Budget 2020, delivered on 18 February, contain a slew of initiatives to help business owners in Singapore overcome near-term challenges resulting from the Covid-19 virus as well as to help them strengthen their business capabilities for the future.

One of the initiatives being announced is the enhancement to the Enterprise Financing Scheme (EFS). To be clear, the EFS is not a new scheme. Formed on 29 October 2019, the EFS streamlined a whole series of existing financing schemes under Enterprise Singapore into one umbrella.

The Enterprise Financing Scheme (EFS) help business owners deal with funding related challenges which is a problem which is likely faced by almost all businesses.

Read Also: Why Cash In Bank (And Not Profit) Is The Number One Priority That Business Owners Need To Care About

But what exactly does the Enterprise Financing Scheme (EFS) cover, and more importantly, what kind of support can business owners receive?

Eligibility Criteria For Companies To Qualify For Enterprise Financing Scheme (EFS)

The Enterprise Financing Scheme (EFS) is designed to support local businesses and is administered by Enterprise Singapore. Businesses that wish to tap on the scheme will need to be legally registered and physically present in Singapore. In addition, at least 30% of the company’s shares must be held directly or indirectly by Singaporeans or Singapore PRs.

Similar to many government schemes for individuals, the Enterprise Financing Scheme (EFS) is meant for businesses that are most in need of financing support. For example, both the SME Working Capital & SME Fixed Asset loans are meant for businesses with group revenues of $100 million or less or company size of up to 200 employees.

Types Of Loans Available Under EFS

There are currently six different types of loans under the Enterprise Financing Scheme (EFS). Each of these loans covers specific areas in which businesses may need financing support.

#1 SME Working Capital Loan

The SME Working Capital Loan helps businesses finance daily operational cash flow. In total, each business can borrow up to $300,000, which can be repaid over a period of five years. This is likely to be the loan which most businesses will find themselves wanting to tap on because working capital requirement is an area that every business would face.

[Update] From 1 October 2022 to 31 March 2024, the SME Working Capital Loan will be enhanced, allowing businesses to borrow up to $500,000, an increase from the current level of $300,000. Though the Enterprise Singapore risk-share on these loans is at 50% and 70% for Young Enterprises, the borrower is fully responsible for the 100% repayment of the loan.

#2 SME Fixed Assets Loan

Some businesses may need to purchase specialised equipment, manufacturing machinery or even physical properties to improve their workflow, expand their business or to reduce the need of having to rent a property. To make these capital-intensive one-off purchases, a loan may be required. The SME Fixed Assets Loan will help businesses finance their fixed asset purchases via a loan of up to 90% of the valuation or purchase price of the asset, whichever is lower, with a loan repayment period of up to eight years.

#3 Business Venture Loan

The Business Venture Loan is suitable for high-growth start-ups that do not have significant assets that can be used as collaterals under traditional financing means. The loan comes with warrants, also known as the right to purchase equity, which is used to offset the lack of collateral. If you are running a high growth start-up that needs a bridging round to tide you through your next fundraising round, then this is an option you can tap on.

#4 Trade Loan 

Trade loans help businesses finance short-term import, export and guarantee requirements. This helps businesses with their inventory management, factoring and overseas working capital requirements.

[Update]: As part of Budget 2023, the trade loan enhancements for the maximum loan quantum will remain extended from $5 million to $10 million from 1 July 2022 to 31 March 2024. The government will continue to provide a 70% risk-share of the loan during this period.

#5 Overseas Project Loan 

If you need financing for an overseas project you already secured, you can get an Overseas Project Loan to help you with the working capital required, equipment or machines you may need to purchase for the project and any project guarantees you might be required to put up.

#6 Mergers & Acquisitions Loan

Businesses that are looking to expand via mergers and acquisitions with the goal of internationalisation can tap on Mergers & Acquisition loan to help finance these corporate actions.

Read Also: Start Digital Pack: The Government Wants SMEs To Embrace Digital Solutions. Here’s How You Can Tap On It

How Does The Enterprise Financing Scheme (EFS) Work? 

Enterprise Singapore works with Participating Financial Institutions (PFIs), such as OCBC, to disburse these loans under the Enterprise Financing Scheme (EFS).

This means that Enterprise Singapore will share the loan default risk, of up to 50% with the PFIs. For young enterprises (firms formed within the last five years with at least one employee, and more than 50% equity owned by individuals), co-sharing risk can be increased to 70%.

If your business needs a loan and you are eligible for any of the six types of loans mentioned above, you can consider applying via OCBC Business Banking.

You can find out more about products from OCBC such as the SME Working Capital LoanSME Fixed Assets LoanBusiness Venture Loan or Overseas Project Loan and apply through them if you wish to tap on these government support schemes.

Read Also: Expanding Your Business? Here Are 3 Types Of Business Loans That You Can Consider

This article was originally published on 25 February 2020 and has been updated with new information.

Any opinions or views expressed in this article are those of third parties and not those of OCBC Bank. No representation or warranty whatsoever (including without limitation any representation or warranty as to accuracy, usefulness, adequacy, timeliness or completeness) in respect of any information provided herein is given by OCBC Bank and it should not be relied on a such. OCBC Bank does not undertake any obligation to update the information or to correct any inaccuracy that may become apparent at a later time. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein.

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