UOB has approved S$4 billion in loans under Enterprise Singapore's (ESG) temporary bridging loan programme (TBLP) since the government increased its risk-share of such loans to 90 per cent a month ago.
The loans were extended to the bank's mid-sized enterprise clients in sectors that have been hard hit by the Covid-19 pandemic. These include construction, consumer staples, retail and hospitality segments.
UOB said on Tuesday that it is the first bank to access the Monetary Authority of Singapore (MAS) Singdollar Facility for ESG loans.
MAS in late April set up a facility to lend Singdollars at an interest rate of 0.1 per cent per annum to eligible financial institutions, which will in turn offer loans to SMEs at low cost. The central bank offers such funding by opening a window for applications for each tranche of such funding, with no cap set on the overall facility size.
The low-cost funding from MAS is available for a two-year tenor, though loans through the ESG schemes have a maximum repayment period of five years. This facility, together with the government backing against the loans, has effectively allowed banks to halve the interest rates on these loans to 2-3 per cent for most SME borrowers, when compared with rates charged in pre-Covid times.
In a statement, Eric Tham, head of group commercial banking at UOB, said that as the Covid-19 pandemic continues to affect businesses' day-to-day operations, many mid-sized firms are finding themselves at "a critical juncture".
"These firms tend to have hundreds of employees and high overhead fixed costs, making it imperative for them to access additional liquidity quickly," he said.
"We hope that through the tripartite effort between MAS, ESG and UOB, we will be able to help these companies tide over the pandemic and plan for the eventual return to more normal operating conditions."
UOB has also digitalised the entire loan application process for clients to receive their funds in about a week.
Eng Lee Engineering Pte Ltd is one firm that secured government-assisted loans through UOB. In a media statement through the bank, managing director of Eng Lee Engineering Looi Bock Heay said the company has seen a huge strain on its cashflow, with the company having to stop operations to ensure the safety and well-being of its foreign workers residing at dormitories.
"Not only are all our projects at a standstill, we don't know when we can resume normal operations," said Mr Looi. "With the additional financing, I can now focus on managing our immediate challenges and planning for the eventual recovery with more confidence."
Another UOB client that secured a temporary bridging loan under the ESG programme is Consort Bunkers Pte Ltd, a bunkering supplier and logistics and barging services provider.
SK Yeo, managing director and founder, Consort Bunkers Pte Ltd, spoke of the "particularly trying" period, as it faces the double whammy of Covid-19 and a weak sentiment perpetuated by the fall in oil prices. Mr Yeo said he secured lower-cost financing in about a week after submitting applications online.
UOB had earlier announced S$3 billion in relief assistance for those affected by Covid-19, separately from the S$4 billion in government-assisted loans that the bank said it has offered to its customers.
Linus Goh, OCBC's head of global commercial banking, said in the last two months, the volume of applications from mid-sized firms for the relief measures has surged by more than 10 times.
"While they may not have financial difficulties now, these firms have taken up these loans to conserve liquidity in anticipation of a protracted recovery in the aftermath of the pandemic," he told BT.
But he noted that the funding support for small businesses is still more urgent. Mid-sized firms tend to have stronger balance sheets and access to more financial resources including tapping undrawn facilities or accumulated cash reserves.
Similarly, group head of SME Banking at DBS Joyce Tee said the bank is "doubling down" to lend to micro and small SMEs (small and medium-sized enterprises), given their "twin challenges of typically having fewer working capital financing options while bearing the brunt of any drop in business activity as the result of economic headwinds".
DBS has to date availed government-assisted loans to close to 3,000 corporate customers, with about 65 per cent of these being micro and small SMEs.