DBS approves S$800m in collateral-free loans for micro enterprises

DBS has approved close to 10,000 loans to small and medium enterprises (SMEs) in Singapore since the start of March this year.

Of these, more than 5,000 loans, totalling some S$800 million, were for micro enterprises, which are defined as companies with less than S$1 million in annual revenues. The "vast majority" of these loans were collateral-free, the bank said in a press statement on Wednesday.

Many micro enterprises need such "crucial" working capital support to cope with the Covid-19 pandemic, as they are among the most vulnerable of businesses during an economic downturn, DBS noted.

The average loan quantum was just over S$160,000, among micro enterprises that received financing from the bank over the last eight months. DBS said that this quantum is about 60 per cent more than what some digital-lending platforms are offering.

Also, as micro enterprises may need speedier working-capital financing options, the bank provided them with an option to avail funding in just one day, with its Digital Business Loan for up to S$200,000 in collateral-free funding.

DBS said it also simplified the credit documentation process to relieve micro enterprises of the onerous task of producing audited financial statements, which are typically required for such loans. Instead, customers need only provide their most recent bank statement or Notice of Assessment.

Since March, one in two loans approved for micro enterprises were for customers who had no prior borrowing relationship with DBS.

It has banked close to 2,000 new micro enterprises during this period, given the onset of the coronavirus outbreak. That brings the total number of micro enterprises banking with DBS to over 40,000.

Such companies typically fly under the radar of lenders and may not be familiar with the support available to them, even though many have viable business models and the potential to grow much bigger, said Joyce Tee, DBS group head of SME banking.

"We are heartened that many businesses we supported through the early days of Covid-19 are beginning to see the green shoots of recovery," she added. "With economic activity in Singapore and the region continuing to rev up, SMEs are beginning to look beyond the economic crisis and are actively finding new opportunities for growth."

DBS has also offered end-to-end financing and digital transformation help to the hardest-hit industries since March this year.

For instance, to support the food and beverage (F&B) sector, the bank put together a DBS Resilience Package for F&Bs to enable establishments to build a digital presence and create new income streams online in as few as three days.

A similar package for SMEs in the retail and tourism sectors is in the pipeline, the lender said on Wednesday.

As for its payment app DBS PayLah!, in October alone, the value of "scan to pay" transactions for businesses doubled from a year ago. This comes as more consumers are shifting their everyday payment and banking needs to mobile and online platforms.

In the same month, DBS also announced a partnership with the Singapore Tourism Board, which will include working with local tourism businesses to pilot seamless and contactless digital-payment experiences at various precincts.

Seven in 10 SMEs in the retail, F&B and building and construction sectors said they were confident of meeting their loan repayment obligations without affecting their current business operations, according to DBS's survey of close to 250 firms in October.

Meanwhile, close to 30 per cent of the respondents were willing to sacrifice their expansion plans and scale down their operations to make their repayments.

About 3 per cent said they were not confident of repaying their loans in 2021.