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S$500m Venture Debt Programme launched for high-growth SMEs

SPRING Singapore on Thursday launched a S$500 million Venture Debt Programme (VDP) with DBS, OCBC and UOB to support high-growth enterprises.

The programme seeks to catalyse about 100 venture debt loans over two years, under which Spring will provide 50 per cent risk-sharing to the financial institutions.

Small and medium enterprises (SMEs) and startups can apply for venture debt loans of up to S$5 million each for working capital, assets, projects or M&As (mergers and acquisitions) for business expansion purposes.

The VDP was announced during Budget 2015 as a complement to current government loan financing schemes, and has since January 2016 backed companies such as shipping vessel monitoring systems Ascenz Solutions, digital media enablement services provider Conversant, and fashion manufacturer MDS Retailer.

Venture debt is a form of alternative financing for enterprises with high growth potential, but which may not have established revenue streams or assets to use as collaterals.

To make up for the higher risk involved in backing such companies, venture debt providers may combine their loans with warrants, or rights to purchase equity. Venture debt may also entail deferred payment terms, and typically less shareholder's dilution than equity investment.