OCBC Bank expects to disburse s$1 billion in government-assisted loans to small businesses by 30 June 2020
Come 30 June 2020, OCBC Bank expects the quantum of the government-assisted SME loans it lends out, to help small businesses under siege from the COVID-19 pandemic, to hit the S$1 billion mark, fully utilising the support given by the Monetary Authority of Singapore under its low-cost SGD Facility. OCBC Bank will pass all the cost savings from the Facility to these small businesses. Further cost savings will be derived from the waiver of the Bank’s loan processing fees.
With loan approval of two days and quick disbursement of the funds into the pockets of the small businesses within a week, OCBC Bank seeks to extend funding support to SMEs to quickly address their pressing cashflow needs. The cost savings from the lower interest rate extended by the Facility will be completely passed on to the customers, by bringing the interest rate of the government-assisted Temporary Bridging Loan to 2% to 3%.
OCBC Bank has been pro-actively reaching out to its small business customer base, engaging about 80% of its borrowing relationships within two months. One in two small businesses in Singapore has a relationship with OCBC Bank.
There has been a spike in the volume of applications for the relief measures in the last two months by more than 10 times as the financial strain arising from the Circuit Breaker added to an already challenging situation.
The manufacturing, construction, trading and distribution, and services businesses are increasingly looking to the bank for support.
The loan amount of S$1 billion for small businesses projected for the three months from April to June will exceed the total government-assisted loans disbursed to the same customer segment during the 2008-9 Global Financial Crisis.
Close to 1,000 small businesses have asked for deferment of principal payments on unsecured and secured SME loans.
For the larger SMEs with turnover above S$20 million, OCBC Bank has seen a similar surge in requests for funding relief, and the amount to this segment of SMEs has also exceeded the support given during the last Global Financial Crisis.
These loans are part of OCBC Bank’s range of targeted relief measures that it has rolled out to businesses to tide over this difficult period.
The Bank has digitalised the process and simplified the requirements for existing customers. Where hardcopies of documents were required before, it has adapted to accept the electronic copies with digital signatures during this circuit breaker period.
Statement from Mr Linus Goh, Head of Global Commercial Banking, OCBC Bank
“Small businesses around the world have been the hardest hit from this global pandemic as the impact has spread widely across all industries. In reaching out to our small business customers over the past three months, we have seen how they have had to adapt to cope with the new challenges and have been very responsive to the initiatives to relieve the stress on their operating cash flow from the loan moratoriums as well as the new ESG loans.
Our approach thus far has been to proactively seek out the small businesses who may be vulnerable from this deepening economic crisis and to extend our help as quickly as possible to address their pressing financial needs.
Therefore, the announcement on the new Monetary Authority of Singapore (MAS) low-cost SGD facility is a timely boost to help SMEs in the escalating financial hardship, especially the small businesses. With this facility, we are able to further lower our interest rates on the government assisted loans, from 6% plus in the beginning of the year to the range of 3% to 4% following the enhancements made to the scheme by ESG in March and now with the new funding support to about 2% to 3%. We will pass all the cost savings to the SMEs and have also waived our processing fees for the new loans.
We will ensure that no SME with a viable business model hit by COVID-19 is turned away.”
Statement from Mr Kurt Wee, President of the Association of Small & Medium Enterprises (ASME)
“The pandemic has inflicted unprecedented impact on the small businesses. The last two months have wiped out many small business owners’ years of effort in savings and building their business. Many are doing all they can to keep fighting to stay afloat - not just for themselves, but for the livelihood of their employees. Banks like OCBC which has been proactively reaching out to them since February really makes a difference, not just financially but also psychologically. Loans to these small businesses can now be swiftly extended. The lowered interest rates will give the added boost.
As recent as two weeks ago. I personally did a borrowing rate survey through my network of big and small companies. Unless you are trading in the big boys league, or your business banking is backed by a substantial private banking account, we all know, interest rates of 2% to 3% are rare and even unheard of for most SMEs in Singapore, not even mentioning the small ones. The rapid support given to small business arising from the coordination among banks like OCBC, MAS and ESG is also unprecedented. This makes me believe that we can all bounce back and then grow from strength to strength after the outbreak.”
Statements from OCBC Bank’s customers
The company supports businesses like hotels and event companies with transportation services for high net worth clients. Principal moratoriums on her business’ existing unsecured loans with the bank were granted to provide a liquidity buffer during this challenging time.
“In mid-February, when COVID-19 started becoming more widespread and travel showed signs of decline, OCBC got in touch to discuss the kind of support that they could provide. Since then, they have continued to engage us especially when new relief measures are announced, this has enabled us to better evaluate our choices at every stage of our internal planning.”
Received a temporary bridging loan from OCBC Bank.
“OCBC has been in touch with me since early February to understand the difficulties posed by COVID-19 on my business. When the relief measures were announced in March, after some discussions, I decided to apply for the Temporary Bridging Loan, and received the approval in less than a week. There is a lot of uncertainty ahead so the loan is a useful buffer for my business, and it can be used to support existing projects. We also intend to use the funds to make bulk purchases which will allow us to enjoy economies of scale.”
Jew Kit Group Pte Ltd started as a single Chicken Rice Stall in 1992 and has expanded to a chain of 5 eateries across Singapore. The Group applied for and was granted approval for an Enhanced SME Working Capital Loan.
“The loan application process was very convenient, and the loan approval was given quickly. What really helped was the constant communication that the bank had with us. The loan is useful to tide us through this difficult period where we still have to pay wages and rent, but we also want to prepare for the future. For instance, we want to automate our business by procuring software and hardware for a better point of sale (POS) system. This will facilitate the keying in of orders, and to enable payments to be made prior to the collection of food.”