A microloan is a financing modality that is characterized by lending small amounts of capital to promote productive projects of SMEs in the different sectors of the economy.
A microloan is a type of small-amount, short-term loan that is usually granted to people with a low level of resources, who do not have guarantees and, therefore, are excluded from traditional banking.
Microloans for SMEs are another measure in favor of the growth of Singaporean small and medium-sized enterprises. Micro-loan allows access to a loan that cannot exceed the maximum limit of 35 thousand Singaporean dollars, granted by banks, financial intermediaries, and affiliated leasing companies.
Microloans are aimed at people who cannot apply for a loan through traditional systems, such as banks, because they do not meet the requirements.
They consist of loans of a small amount and short duration, focused on promoting those entrepreneurs who, having a business project, lack the necessary capital, or to solve small unforeseen events in family economies.
What is a microloan for SMEs, and how much can it finance?
SME Micro-loan is aimed at all those who want to open a new business and at existing small and medium-sized enterprises, which have not been established for more than 5 years, and who want to obtain financing with the “Fund Guarantee”.
Businesses that cannot access loans can apply for credit to banks or other subjects adhering to the Public Guarantee Fund. The fund intervenes on the sums covered by the guarantee or on the repayment plan; in this way, for the covered part of the fund, the bank cannot ask for other guarantees from the company.
Basically, how is a microloan different?
- No real guarantees are required from the end-user
- The SME microloan fund covers 80% of the financed amounts
- The fund guarantee is issued free of charge
The loans can have a maximum duration of 7 years and cannot exceed the maximum limit of 25 thousand Singaporean dollars for each beneficiary. The limit can be “raised” by 10 thousand Singaporean dollars if the loan provides for the disbursement of funds in a “fractional” manner, provided that the beneficiaries have paid the six previous installments on time and, above all, that they have achieved the “intermediate” results established in the contract.
Therefore, companies can benefit from a maximum of 35 thousand Singaporean dollars of a microloan.
Which companies can access microloans?
Those who want to open new businesses and small and medium-sized enterprises already established for no more than 5 years in all sectors, in possession of the financial documentation of the profits of the last two years of operation, can access the measure. Startups, on the other hand, must submit forecast plans.
Businesses can be of all types: sole proprietorships, associations, partnerships, simplified limited liability companies, and cooperatives. Professionals with a VAT number for less than 5 years and with a maximum of 5 employees can also access a microloan.
The following are excluded from the SME microloan plan:
- the automotive sectors
- shipbuilding companies
- the coal and steel industries
- the synthetic fiber industries
- all financial assets
To access microloans in Singapore for SMEs, companies must have made a profit in one of the last two approved financial statements or, in the event of a loss, this must not exceed 10% of turnover.
Other requirements affect the ability to access a microloan: the seniority of the company, the number of employees, investments in assets, investments planned for the future, an increase in turnover, etc.
How to apply for and obtain the guarantee of the fund?
Companies that believe they have what it takes to participate can apply online on the website of the Guarantee Fund in the section dedicated to microloans.
After registering, you can book the guarantee: the tax code, company name, legal form of the company, PEC (certified e-mail), e-mail, and the amount of the operation must be entered. The system will issue an identification code and a booking receipt, which the beneficiary can print.
This is only the first step: once the guarantee has been booked, it will be up to the beneficiary to find a lender who can confirm the online booking within the next 5 days.
The lender must, in turn, confirm the reservation of the resources by accessing the microloan section of the fund and confirming the request for admission to the guarantee within 60 days.
It is also possible to make more booking requests, without exceeding 35 thousand Singaporean dollars, the maximum funding limit.
Why apply for access to a microloan for SMEs?
This measure is particularly suitable for those who are unable or unwilling to apply for a “traditional” loan. The measure provides that the Guarantee Fund intervenes without any economic-financial evaluation of the final beneficiary.
The guarantee covers small and medium-sized enterprises that would have difficulty obtaining credit: in a period of crisis, such a measure is the lifeblood for companies that need liquidity and for those who want to start their micro-entrepreneurial activity.
Be careful, however, not to get confused: the Guarantee Fund does not directly disburse the funds, but acts as a “guarantor”, precisely, between the companies and the lenders.