Unlocking Sustainability: A Guide to Enterprise Financing Scheme - Venture Debt

Enterprise Financing Scheme – Venture Debt

The Enterprise Financing Scheme (EFS) offers financing solutions for high-growth startups that do not have significant assets to use as collateral under traditional bank lending. Announced at the Committee of Supply 2023, the EFS-Venture Debt Programme has been enhanced to support loans backed by Redeemable Convertible Preference Shares (RCPS), offering flexible repayment plans for early-stage and deep tech startups with irregular cash flows.

About the Scheme

The EFS - Venture Debt (EFS-VD) aims to finance the growth of innovative enterprises using Venture Debt and Warrants. It supports high-growth enterprises lacking significant assets for collateral under traditional bank lending. The venture debt facility can be backed by warrants or RCPS.

Enterprises may use the loan to:

1. Grow and expand existing capacity

2. Diversify into other product lines

3. Augment working capital needs

4. Undertake new projects

5. Undergo mergers and acquisitions

Loan Details

Maximum Loan Quantum: S$8 million per borrower

Overall Borrower Group Limit: S$20 million for EFS-VD

Overall Loan Exposure Limit: S$50 million per borrower group across all facilities

Maximum Repayment Period: 5 years

Risk Share:

• 50% by EnterpriseSG

• 70% for young enterprises

• Borrowers are responsible for 100% repayment

• In the event of default, financial institutions must follow standard recovery procedures before claiming against EnterpriseSG for the unrecovered amount in proportion to the risk share.

Interest Rate

Determined by participating financial institutions based on their risk assessment.

Eligibility Criteria

1. Must be a business entity registered and operating in Singapore (including sole proprietorships, partnerships, LLPs, and companies).

2. At least 30% of equity must be held by Singaporeans or Singapore PRs.

3. Group annual sales turnover must not exceed S$500 million.

Application Process

Interested enterprises can apply through participating financial institutions (PFIs) or the Enterprise Singapore Incentive Management System (ESIMS), subject to credit approval.

Frequently Asked Questions

• Application Opening: The scheme launched on October 29, 2019. Applications can be made to PFIs.

• Multiple Applications: Yes, enterprises can apply through different PFIs.

• Impact on Existing Loans: Approved loans under former SPRING Singapore and IE Singapore will remain valid and unchanged.

• Scheme Differences: The EFS has unified eligibility criteria and application processes, enhancing support for young enterprises and those in lower-rated markets.

• Industry Focus: The scheme is inclusive and supports businesses across all sectors.

• Support for New Businesses: Yes, it offers government risk sharing to help young companies secure financing.

• Borrower Responsibilities: Borrowers must repay the full loan amount, with PFIs following standard procedures for defaults before claiming from EnterpriseSG.