MAS, MinLaw extend loan repayment support for SMEs, individuals

Individuals can choose to make reduced instalment payments for up to nine months.

The Monetary Authority of Singapore (MAS), together with the Association of Banks in Singapore (ABS) and the Finance Houses Association of Singapore (FHAS), announced an extension of support measures to help individuals and small and medium-sized enterprises (SMEs) facing payment difficulties in transitioning gradually to full loan repayments.

Since April this year, banks and finance companies have been providing payment deferrals for individuals and SMEs facing short term challenges in servicing their loan instalments. These relief measures are set to expire by December 31.

As economic activities continue to open up, borrowers who are able to resume paying their loan instalments in full should start doing so from 1 January 2021, as further postponement increases their overall debt, MAS said in a media briefing.

Meanwhile, individuals with residential, commercial and industrial property loans who are unable to resume making full loan repayments may apply to their respective bank or finance company to make reduced instalment payments pegged at 60% of their monthly instalment, for a period of up to nine months.

This option is available to individuals who can provide proof of income impact of at least 25%, with property loan payments that are not more than 90 days past due, regardless of whether they have taken up payment reliefs previously. Individuals who meet these criteria can apply for assistance from 9 November 9 until 30 June 30 2021.

SMEs may first consider the Extended Support Scheme Standardised (ESS-S), where firms in Tier 1 and 2 sectors may opt to defer 80% of principal payments on their secured loans granted by banks or finance companies. This also applies to loans granted under Enterprise Singapore’s (ESG) Enhanced Working Capital Loan Scheme and Temporary Bridging Loan Programme till 30 June 2021. SMEs in other sectors may opt to do the same up to 31 March 2021.

SMEs whose loans have been granted principal moratorium should also not have overdue interest payments for these loans. For SMEs who are not suitable for the ESS-S, banks and finance companies are also developing an Extended Support Scheme - Customised (ESS-C) to facilitate the restructuring of a borrower’s loans across multiple financial institutions.

Most SME borrowers have only one lender, but for those with more than one lender, the ESS-C programme will help to bring together the various lenders to allow for better restructuring outcomes.

The ESS-C will be available for SMEs with more than one lender for whom the CCS’ SPP scheme or MinLaw’s SIP may not be suitable. Such SMEs should approach one of their lenders to assess if they would benefit from a multi-lender restructuring under the ESS-C. Borrowers can apply for both the ESS-S and ESSC from November 2 onwards.

Businesses facing financial distress and who are unable to perform certain contracts due to COVID-19 are also granted temporary relief under the COVID-19 (Temporary Measures) Act.

The act also increases monetary thresholds for bankruptcy and insolvency for individuals and businesses.

However, this may not be suited for distressed micro and small businesses, asSingapore’s insolvency laws in the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) generally provide processes for companies with substantial assets.

The bill will further establish a Simplified Insolvency Programme to assist micro and small companies which require support to restructure their debts to rehabilitate the business, or wind up the company as the business has ceased to be viable.

The programme will be available for a period of 6 months from the commencement of the proposed legislation.

Photo courtesy of Dietmar Rabich / Wikimedia Commons / “Singapore (SG), China Town, Pagoda Street -- 2019 -- 4504” / CC BY-SA 4.0