Singapore SMEs, individuals given more time to resume full loan repayments

CERTAIN small and medium-sized enterprises (SMEs) and individuals facing cash flow pressures will be given more time to resume full loan repayments, as part of a slate of measures aimed to soften their landing from the Covid-19 fallout.

This extension of Singapore's debt moratorium programme beyond Dec 31, 2020 to 2021 will offer more relief to industries hit the hardest, according to a joint announcement by the Monetary Authority of Singapore (MAS), together with the Association of Banks in Singapore and the Finance Houses Association of Singapore on Monday.

Under the Extended Support Scheme - Standardised (ESS-S), SMEs in Tier 1 and 2 sectors from Nov 2, 2020 may opt to defer 80 per cent of principal payments on their secured loans granted by banks or finance companies, as well as loans granted under Enterprise Singapore's (ESG) Enhanced Working Capital Loan Scheme and Temporary Bridging Loan Programme till June 30, 2021.

Tier 1 and 2 sectors comprise of aviation and aerospace, tourism, hospitality, conventions and exhibitions, built environment, licensed food shops and food stalls (including hawker stalls), qualifying retail outlets, arts and entertainment, land transport, and marine and offshore.

SMEs in other sectors may opt to do the same up to March 31, 2021.

The ESS-S relief will be available to all SMEs that are not more than 30 days past due on all their loan payments. SMEs whose loans have been granted principal moratorium should also not have overdue interest payments for these loans.

Since April this year, SMEs could defer principal payments on their secured term loans up to Dec 31, 2020. In addition, eligible enterprises under the ESG loan schemes could also apply for a deferral of principal payments, subject to assessment by the financial institutions.

As at August 2020, there were 5,400 applications by SMEs to defer secured loans, of which 99 per cent valued at more than S$11.5 billion were successful.

For SME borrowers with more than one lender, a new Extended Support Scheme - Customised (ESS-C) is being developed to facilitate the restructuring of a borrower's loans across multiple financial institutions.

From Nov 2, 2020, the scheme will be available for any multi-banked SME for whom Credit Counselling Singapore's scheme for sole proprietors and partnerships (SPP Scheme) or Ministry of Law's Simplified Insolvency Programme for qualified micro and small companies is not suitable, with more details to come.

Aside from SMEs, individuals will also get some leeway with their loan commitments.

From Nov 9, 2020 till June 30, 2021, those 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 per cent of their monthly instalment, for a period of up to nine months.

For most individuals, the 60 per cent reduced monthly instalment will cover interest and partial principal payments.

This option is available to individuals who can provide proof of income impact of at least 25 per cent, with property loan payments that are not more than 90 days past due, regardless of whether they have taken up payment reliefs previously.

An MAS spokesperson said that the number of mortgage deferments has tapered off since the peak in April to June 2020 when more individuals were affected by the "circuit-breaker" measures.

As at end-June 2020, there were nearly 34,000 approved mortgage relief applications. By the end of August 2020, there have been 36,000 applications to defer home loans, amounting to S$29 billion. This makes up about 15 per cent of outstanding mortgages.

In addition, individuals with renovation and student loans may apply to their respective bank to extend their loan tenures by up to three years. This option is available to individuals who can provide proof of income impact, and whose renovation or student loan payments are not more than 90 days past due, regardless of whether they have taken up payment reliefs previously.

Earlier in April, it was announced that those with renovation loans and student loans can apply to defer both principal and interest payments through to the end of this year. Applicants do not need to demonstrate any impact from Covid-19 to secure the deferment.

For those who face difficulty repaying their unsecured revolving credit facilities, they may apply to their lender till June 30, 2021 to convert their outstanding balances to term loans at a reduced interest rate. The interest on the term loan is capped at 8 per cent, compared to the 26 per cent per annum rate typically charged on credit cards.

This is an existing relief measure whereby the application period has been extended from Dec 31, 2020.

They must provide proof of income impact of at least 25 per cent and with repayments that are between 30 and 90 days past due.

Those on Debt Consolidation Plans (DCP) - offered since May 2020 - may apply to their lender till June 30, 2021 to extend the loan tenure of their DCPs for up to five years. They must provide proof of income impact and with repayments that are between 30 and 90 days past due.

Ravi Menon, MAS managing director, said that the central bank and the financial industry "have put much care" in the design of the extended credit support measures.

"We want to continue providing relief to borrowers facing cash flow challenges while encouraging them to resume loan repayments to the extent they are able to so that they do not accumulate too much debt," he said. "A good outcome is one where individuals and SMEs are able to use the support measures to help them tide through the current economic difficulties and emerge with a sustainable debt burden as the economy recovers."

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