Unlocking Sustainability: A Guide to Enterprise Financing Scheme - Mergers & Acquisitions Loan

Enterprise Financing Scheme – Mergers & Acquisitions: Facilitating Growth and Expansion

The Enterprise Financing Scheme – Mergers and Acquisitions Loan (EFS-M&A) provides essential support for enterprises looking to scale and expand their operations through acquisitions. This scheme is particularly beneficial for companies venturing into complementary businesses and emerging sectors. Notably, the EFS-M&A has been enhanced to include domestic M&A activities until 31 March 2026, further broadening its scope and utility.

Understanding the EFS-M&A

The EFS-M&A finances the acquisition of both local and overseas target enterprises, enabling businesses to expand their market presence, diversify their offerings, and enhance their competitive edge. This scheme is integral to supporting companies in their strategic growth initiatives.

Loan Details

Maximum Loan Quantum: The EFS-M&A offers a maximum loan quantum of S$50 million per borrower or borrower group. Borrowers are subject to an overall borrower group limit of S$50 million, which also applies across all facilities under the EFS-M&A.

Maximum Repayment Period: The maximum repayment period for the EFS-M&A is 5 years, providing ample time for enterprises to manage their finances and repay the loan.

Enterprise Singapore Risk-share:

• The standard risk share is 50%.

• For young enterprises or those operating in challenged markets, the risk share may increase to 70%.

• Borrowers are responsible for repaying 100% of the loan amount. In cases of default, participating Financial Institutions (PFIs) must follow standard commercial recovery procedures, including the realization of security, before claiming the unrecovered amount from Enterprise Singapore in proportion to the risk-share.

Interest Rate: The interest rate is determined by the participating FIs based on their assessment of the risks involved.

Eligibility Criteria

To qualify for the EFS-M&A, enterprises must meet the following criteria:

1. Business Registration: The business must be registered and operating in Singapore. Eligible entities include ACRA-registered Sole Proprietorships, Partnerships, Limited Liability Partnerships, and Companies.

2. Local Equity: The company must have at least 30% local equity held directly or indirectly by Singaporeans or Singapore PRs, determined by ultimate individual ownership.

3. Annual Sales Turnover: The company's Group Annual Sales Turnover should not exceed S$500 million.

How to Apply

Interested enterprises can approach any participating Financial Institutions (PFIs) to apply for the loan. Applications are subject to the banks’ credit approval and can be made via the Enterprise Singapore Incentive Management System (ESIMS).

Frequently Asked Questions

1. When is the Enterprise Financing Scheme open for application? The programme was launched on 29 October 2019, and enterprises can approach PFIs to apply.

2. Can enterprises apply for the EFS multiple times with different banks? Yes, enterprises can apply multiple times with different PFIs. Contact details of the PFIs can be found in the “Apply” tab of each facility.

3. How will this affect existing loans approved under former SPRING Singapore and IE Singapore? There will be no changes to approved loans; they will remain valid for the tenure of the loan. The current schemes will be subsumed under the new Enterprise Financing Scheme.

4. How is the Enterprise Financing Scheme different from previous schemes? The EFS streamlines the application process with common eligibility criteria and a unified application platform. It also offers enhanced support for young enterprises and those operating in markets with Standard & Poor’s (S&P) ratings of below BBB- or are unrated.

5. Are there any specific industries targeted by the EFS? No, the EFS supports companies across all industries at various stages of growth.

6. Does the EFS help newly established businesses secure financing? Yes, the EFS provides government risk sharing of up to 70% for young companies (firms incorporated within the last 5 years) to help catalyze lending from participating financial institutions.

7. Since Enterprise Singapore risk shares a portion of the loan, does it mean that borrowers are only responsible for the remaining portion? No, borrowers are responsible for repaying 100% of the loan amount. In cases of default, PFIs must follow standard commercial recovery procedures before making a claim against Enterprise Singapore for the unrecovered amount in proportion to the risk-share percentage.

Conclusion

The Enterprise Financing Scheme – Mergers and Acquisitions Loan is a crucial financial tool for enterprises aiming to expand through acquisitions. By offering significant loan amounts, extended repayment periods, and risk-sharing options, the EFS-M&A supports businesses in their strategic growth and expansion efforts. Understanding the eligibility criteria and application process is essential for enterprises to effectively leverage this scheme and achieve their growth objectives.