Covid-19 Debt Relief | 8 Key Takeaways for SMEs

Covid-19 Debt Relief for Singapore SMEs is here today with the announcement by the Monetary Authority of Singapore on 31 March 2020.

“Human kindness has never weakened the stamina or softened the fibre of free people. A nation does not have to be cruel to be tough.” – Franklin D. Roosevelt 

Did you know that the Singapore government (through the Monetary Authority of Singapore) has rolled out a Debt /Insurance Plan for Small and Medium Enterprises in Singapore which are affected by Covid-19 to help Singapore SMEs with loan repayment obligations under loans and insurance premium payments under insurance contracts.

In this article, after reading the many press releases and commentaries about this new budget measure for Singapore SMEs, we have unpacked 8 key highlights every Singapore SME boss should know about these relief measures

We have unpacked 8 key highlights of how this new measure can help your SME Business today:

Key Tip #1 – What does this Package Cover for SME?

• This package aims to help individuals meet their loan and insurance commitments;
• This package aims to support SMEs with continued access to bank credit and insurance cover; and
• This package aims to ensure interbank funding markets remain liquid and well-functioning.

Key Tip #2 – How do I benefit from this package?

You need to opt in as companies need to sign up on an opt-in basis.  Each SME and Singapore company should do its independent analysis to see whether they should signup or opt in for this package.

Do check with us if you need more information on how to opt in for this scheme.

Key Tip #3 – Is it an automatic scheme or do I as borrower need to opt in?

You need to opt in as companies need to sign up on an opt-in basis.  Each SME and Singapore company should do its independent analysis to see whether they should signup or opt in for this package.

Key Tip #4 – What is the definition of SME under the scheme

For the purpose of this scheme, a Small and Medium Enterprise is defined as an entity with i) annual sales turnover of up to S$100m; or ii) employment size up to 200 workers.

Key Tip #5 – What types of loans are covered by this  

This package only relates to term loans which are fully secured, but financial institutions may extend such relief to partially secured term loans based on their own internal financial criteria. 

Do speak to us if you need help negotiating with the financial institutions in respect of your company financial matters.

Key Tip #6 – For loans that mature prior to 31 December 2020, how would this extension of the term of the loan apply?

For example, if the borrower opts into the relief plan from 1 July 2020 and the loan ends on 1 September 2020, the borrower can elect to extend the term of the loan by 6 months to end February 2021. Do spend some time looking through your existing loan agreements with your banks to ascertain when and how to negotiate Covid-19 Debt Relief.

Key Tip #7 – How should movable and floating collateral be treated for the purposes of such debt relief?

“Fully Secured” refers to all existing fully secured collateral that banks and financial institutions may currently hold as security.  For such movable and floating collateral, the relevant financial institution would have to do its internal credit haircut on such assets to make a determination whether such assets qualify or fall under the concept of “Secured” in respect of such Covid-19 Debt Relief for the Financial Institution.

Key Tip #8 – Financial Analysis

Before any SME or Singapore company starts to rush to their existing bankers to negotiate their existing term loans, one should do an internal financial analysis to check whether from a balance sheet and cash flow perspective whether you should opt in for such debt relief programme.  Some key numbers you would need to calculate would be balance sheet solvency and cash flow solvency. 

Do contact us if you need more information on how to opt in for this scheme or need help doing your own internal analysis before speaking to your existing bankers or need help with the negotiations with your existing bankers for your Covid-19 Debt Relief.

“Things done well and with care exempt themselves from fear” – William Shakespeare

About Raffles CPA

Raffles CPA is a niche professional firm headquartered in Singapore with a relentless dedication to help global and local clients in solving their complex business problems in areas of corporate services, accounting, capital market, legal and compliance.