Credit Application Process

What are the available financial assistance schemes offered to SMEs and how does a company qualify for them?

Government Assistance Schemes, currently available are namely, Local Enterprise Finance Scheme (LEFS), Micro Loan Program, Loan Insurance Scheme (LIS), and Internationalisation Finance Scheme (IFS).

To qualify for such schemes, you must meet the following criteria:

•  At least 30% local equity

•  Fixed assets (defined as net book value of factory building, machinery and equipment) not exceeding $15 million

•  Employment size not exceeding 200 workers*

* For Micro Loan Program, the applicant must have an employment size of not more than 10 workers (if it is in the service industry, it's group employment size must not exceed 200 workers).

How does my company apply for a credit facility with the bank?
You may call a bank or visit any of its branches and its customer service officers would be able to assist you with the credit application process, which may vary from bank to bank. In most cases, the bank will require you to submit the following documents for processing:

•  Application Form (if any)

•  Notice of Income Tax Assessment of key promoter/director(s) (latest two years)

•  Financial Statements (latest two years, with at least one year audited for Private Limited Companies)

•  Other bank statements (latest three months)

•  Personal account statements for sole proprietor/partners (latest three months)

•  Business Plan (for startups only)

•  Memorandum & Articles of Association for Pte Ltd company

•  Profile of the promoter/sponsor/director(s)

On occasion, the bank may require you to meet with their representative in person.
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What documents do I need to present to the Bank when I require credit facilities? How much do I need to tell the Bank?

Banks will generally ask for a current copy of your audited financial statements and latest management accounts, bank statements and business plans.   This will give them a better understanding of your business needs and financial strength. You should be open in sharing your plans and commitments so that the Bank can help you structure appropriate facilities.
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What basic criteria does my company need to satisfy in order to obtain banking facilities?

Depending on its credit policies and requirements, the bank typically evaluates the applicant based on the following criteria:

•  Business Plans/Cash flow projections

•  Positive networth (typically comprising paid-up capital and accumulated profit/loss) which should be commensurate with the nature of the business

•  Ability to service monthly installments or financial obligations

•  Satisfactory conduct of operating bank account/s

•  Background information on the applicant/promoters and personal guarantors.
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Lending Criteria/Collateral Requirement

Why is it that banks appear not prepared to lend if you have no collateral?

The most important consideration for Banks in extending credit is your ability to pay. If you are able to show that you have good repayment ability, the Bank will review your application favorably.
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Why do bankers ask so many questions when I apply for a business loan when they are getting tangible security like property mortgages for their loan?

The most important consideration for Banks in extending credit is your ability to pay. The questions asked are intended to help the Bank to have a better understanding of your business.   This process, will in turn, help the Bank in the assessment of your application.
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Why do banks insist on personal guarantee of directors when I have already mortgaged my property to them?

Banks generally ask for personal guarantee of the directors as a sign of commitment by the directors towards the facilities granted.
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If the value of my property that I provided as security for bank financing has dropped by 30%, would my credit line be automatically cut?

Depending on the Bank's lending policies and the terms of the credit facility and its structure, the Bank may trigger a request for security top up or partial loan repayment.
-------------------------------------------------------------------- Are banks more interested in the large corporations and not small enterprises like mine?

The Small and Medium Enterprises make up a significant portion of businesses in Singapore. In fact, many Banks have dedicated account officers to manage the accounts of small and medium enterprises, and they are a separate and distinct team from Corporate Banking, which looks after the large corporations. SMEs form an important business component of Banks.
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Is it not true that banks are only supportive in good times and in a crisis they will pull lines?

Banks have been supportive in bad times as they have helped SMEs restructure facilities to ease their repayment during crisis. It is advised that customers should try to stay with their "regular" bank as far as possible so that a meaningful relationship can be built up.
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