Covid-19: Hard-hit SMEs may defer 80% of loan payments from January to June 2021

• SMEs suffering badly may defer 80 per cent of principal loan repayments for six months from Jan 1, 2021
• Banks are developing a customised loan restructuring scheme for SMEs with more than one lender
• The Ministry of Law is also simplifying processes for micro and small firms looking to restructure their debt or wind up

SINGAPORE — Small- and medium-sized enterprises (SMEs) hammered by Covid-19 and seeking further relief may defer 80 per cent of principal payments on their secured loans and those granted by government agency Enterprise Singapore from January to June next year.

This applies to companies in sectors such as aviation, tourism and hospitality, food and beverage, retail, land transport, arts and entertainment, and marine and offshore — industries that have borne the economic brunt of Covid-19. 

Companies in other sectors may also do likewise, but for a shorter period — from January to March next year.

This loan deferment scheme for companies, known as the Extended Support Scheme - Standardised, is an extension of earlier relief measures announced in April by the Monetary Authority of Singapore (MAS). Those measures were due to expire by year’s end. 

In a statement on Monday (Oct 5), MAS also announced the extension of other relief schemes for SMEs still reeling from the economic impact of the pandemic. 

EXTENDED SUPPORT SCHEME - STANDARDISED

• Companies in sectors more badly affected by Covid-19 may apply from Nov 2, 2020 to defer 80 per cent of principal payments of their secured loans between Jan 1 and June 30, 2021

• Firms in other sectors may defer their principal loan payments from Jan 1 to March 31, 2021

• This applies to loans granted by banks or finance companies as well as loans under Enterprise Singapore’s Enhanced Working Capital Loan Scheme, where firms may borrow up to S$1 miilion to finance operational cashflow needs, and the Temporary Bridging Loan Programme, which provides a business with working capital financing of up to S$5 million

• Companies under this extended standardised scheme must still pay the remaining 20 per cent of the principal as well as interests accrued

• Eligible companies cannot have loan repayments more than 30 days past their due when the scheme is rolled out in January 2021 

• To qualify, companies that already have a moratorium on their loans cannot have overdue interest payments on these loans

• There is no need for companies to demonstrate any impact from Covid-19

• Borrowers’ requests will be granted “expeditiously” but may be turned down in exceptional cases, MAS said without elaborating

A CUSTOMISED SUPPORT SCHEME

• For companies with more than one lender, banks and financial institutions are developing another scheme, the Extended Support Scheme - Customised, for which applications will open on Nov 2, 2020

• MAS said that SMEs should approach their lenders and assess if they would benefit from the restructuring of their loans across multiple lenders under this scheme

• The programme will bring together the various lenders in hopes of securing better restructuring outcomes

• More information on the scheme will be announced in the coming weeks

HELP FOR MICRO AND SMALL COMPANIES 

Aside from SMEs, micro and small companies may also be in financial distress due to the pandemic. 

The Ministry of Law (MinLaw) will introduce new processes to help such firms that are facing bankruptcy or looking to wind up by amending the Insolvency, Restructuring and Dissolution Act in Parliament. 

In a statement on Monday, MinLaw said that in 2018, there were more than 251,000 micro and small businesses — 207,000 micro enterprises and 44,000 small firms — operating in Singapore.

The proposed simplified insolvency programme aims to provide simpler, faster and lower-cost proceedings for eligible businesses to restructure their debt or wind up.

Under the simplified process, companies hoping to restructure their debt:

• Need make only one application to the High Court instead of two under the existing scheme 

• Will be granted an automatic moratorium restricting creditors from taking action, to give them breathing space to propose its restructuring plan

• May propose a restructuring plan that will require a lower threshold of approval by creditors (67 per cent in value, compared with the usual 75 per cent) 

Companies looking to wind up:

• May choose to put up the shutters voluntarily, instead of having the court order them to shut

• May be dissolved quickly without having to take further steps if the liquidator is of the view that the assets are inadequate to meet the expenses of winding up

• Can expect the liquidator's functions to be reduced, including obviating the need to convene a creditors’ meeting

Companies that could be eligible for the simplified process are those with:

• A yearly revenue of less S$10 million

• Less than S$2 million in total liabilities

• Fewer than 30 employees and 50 creditors 

• Assets totalling up to S$50,000 

Companies on this simplified programme, if found to be unsuitable later, may be moved to the conventional track.

If Parliament passes the amendments to pave the way for this simplified insolvency programme, it will be available for six months from the date the law takes effect. 

Applications may be extended for a period determined by the law minister.