DBS dangles bridging loans for SMEs awaiting government grants

DBS will look to fund small and medium enterprises (SMEs) that are specifically waiting on claims through all forms of government grants, it said on Tuesday.

These bridging loans can stretch up to four years, and are typically between S$50,000 and S$100,000, the bank told The Business Times. These collateral-free loans, which DBS calls "business capabilities loans", can be used to cover the SMEs' expenses incurred before the grant reimbursement from the respective schemes.

This comes as the bank observed that while SMEs can tap on government grants, which are designed to defray costs associated with skills upgrading, innovation and productivity-related projects, product development, or overseas expansion, such reimbursements usually only kick in when a project is completed.

"With the economic outlook getting tougher, we hope that the new DBS capabilities loan will be a cost-effective way to help alleviate the strain on SMEs' cash flows, thereby encouraging them to embrace innovation and grow new sources of revenue," said Joyce Tee, regional head of SME banking at DBS.

SMEs will get access to preferential interest rates, as well as annual and early pre-payment fee waivers, the bank added. From March 15 to June 30, 2016, DBS will also waive the S$1,000 processing fee for all applications.

UOB said it created a business loan in 2013 specifically to help SMEs tide over a short-term cashflow squeeze.

This, known as UOB BizMoney, is often used by SMEs as a bridging loan to complement their government grants, a UOB spokeswoman said. In the last 12 months, UOB's BizMoney loans grew more than 20 per cent as more clients required financing to help them manage their cashflow and invest in initiatives to enhance productivity, she added.

OCBC's head of emerging business Eric Ong said that the bank's collateral-free facilities can be used for a variety of purposes, including for bridging financing purposes.

"Our facilities do not require customers to provide evidence of government grant obtained," he noted.

Its business term loan offers financing of up to S$500,000 and up to five years, while its business overdraft offers a loan quantum of up to S$200,000.

Maybank Singapore on Monday set out ambitions to likewise target smaller businesses in Singapore, as it aims to grow this loan portfolio by 40 per cent. It was looking to expand the loan book coming from businesses with revenues of up to S$20 million under what it calls its retail SME business.

Businesses polled by the Singapore Chinese Chamber of Commerce and Industry (SCCCI) this year have made calls for the government to take on a more comprehensive review of rising costs. The study showed SMEs have also extended beyond a routine call for breathing room in foreign-worker quotas in Budget 2016, to push more strongly for greater subsidies to boost innovation, and in hiring older workers.

For one thing, the most popular wishlist from the survey participants for Budget 2016 is to extend the Productivity and Innovation Credit (PIC) scheme. And this came as nearly 70 per cent of those polled by SCCCI made use of PIC credit in 2015. This is up from about 40 per cent in 2013.

The president of the Association of Small and Medium Enterprises warned recently that SMEs here - many of which remain in traditional businesses - risk going bust. Kurt Wee told BT that SMEs have, since Chinese New Year last year, "more or less" stopped filling vacancies; they have been facing problems in collecting accounts receivables since mid-2015.

leejamie@sph.com.sg

This article was first published on March 16, 2016.
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