information - Colin Ng and Partners

Special Risk Sharing Initiative (“SRI”)
The Singapore Government has recently introduced measures to keep credit and financing flowing in the
face of present global economic conditions. Measures comprise: (a) the Special Risk-Sharing Initiative
(“SRI”); (b) enhancements to existing credit schemes; and (c) tax benefits.
The SRI has two components:
1. The new Bridging Loan Programme (“BLP”); and
2. Trade Finance Schemes, comprising:
(a) Loan Insurance Scheme (“LIS”) enhancements (ie LIS3 and LIS Plus (“LIS+”); and
(b) Trade Credit Insurance Programme (“TCIP”).
This update focuses on the SRI, particularly on the BLP and LIS3 and LIS+. It does not deal with the TCIP.
Through the SRI, the Government will make available funds for the participating banks and finance
companies, ie the Participating Financial Institutions (“PFIs”), to lend and it will take on a significant share
of the risks of that lending.
New Bridging Loan Programme (“BLP”)
CNPUpdate
9 March 2009
a bi-monthly publication by CNP Issue 09/03
Under the BLP, the Government makes funds available to the PFIs to lend to Small and Medium Enterprises
(“SMEs”) (ie with more than 10 employees) which need funding for working capital. The BLP applies to
loans with an interest rate of 5% or more. The provision of funds by the Government overcomes problems
the PFIs are having in obtaining funds in the interbank market. PFIs process and approve loans and release
the loan funds in the usual way.
As part of the SRI, enhancements were made to the BLP in January and February 2009. There has been a
decrease in the interest rate floor for eligible loans, a substantial increase in the maximum facility amount
for each borrower group and a broader range of companies are eligible to borrow under the BLP. In
addition, the Government takes a greater share of the risk of defaults under loans made by PFIs under the
BLP, whether or not the loans were made by the PFIs with funds provided by the Government. Details of
the BLP are set out in the table below:
Previously Enhancements as at 01 February 2009
(applicable for one year)
Interest Rate Minimum: 6.25%
Minimum: 5%
Maximum
Loan
Amount
Eligible
Companies
50% of interest rate spreads above 5%
accrue to the Government
S$500,000
SMEs with at least 30% local shareholding
Interest spreads above 5% accrue fully to PFIs
S$5 million per borrower group
All locally owned companies and
foreign-owned SMEs
Default Risk
Sharing
Government: 50%
PFI: 50%
Government: 80%
PFI: 20%
Colin Ng & Partners LLP (UEN T08LL0403K) registered in Singapore with limited liability was converted from the firm “Colin Ng & Partners” to a limited
liability partnership on 1st April 2008

MICA (P) 2136/07/2008
CNPUpdate
a bi-monthly publication by CNP
9 March 2009
Issue 09/03
LIS (trade finance scheme) enhancements: LIS3 and LIS+
As part of the SRI, LIS3 and LIS+ have been introduced as enhancements to the existing LIS trade finance
scheme.
LIS3 and LIS+ apply to domestic and export-oriented trade finance and cover facilities for inventory/stock financing,
working capital and factoring financing. Under LIS, the Government makes funds available to the PFIs
to enable them to undertake this financing. Also under LIS, the Government subsidises the cost of the insurance
premiums payable by the borrowers to the PFIs for the cost of the PFI’s insurance cover against borrower insolvency
and default risk. This subsidy has increased under LIS3.
In addition, under LIS+, where the amount of a loan exceeds the limit a LIS insurer is able to cover against borrower
insolvency and default risk, the LIS insurer will insure the loan up to its limit and the Government will cover
the amount above the LIS insurer’s limit, ie the Government shares the risk with the LIS insurer and the PFI. Under
LIS+, the level of premium payable by the borrower with reference to the amount covered by the Government’s
insurance is 0.5% pa. PFIs process and approve loans and release the loan funds in the usual way.
Details of LIS3 and LIS+ are set out in the table below.
LIS3
LIS+
Maximum Loan Amount No limit but LIS insurer may refuse to insure S$15 million per borrower group
loan amounts over S$1 million
Effective Date and Period With effect from 1 December 2008 for one
year
With effect from 1 February 2009 for
one year
Turnover Cap Removed No change
Qualifying Criteria for
Companies
For domestic facilities
• Company must have at least 30% local
shareholding
No change
For export-oriented facilities
• Company must be Singapore-based
• Company must have at least three
strategic business functions located in
Singapore
Risk Share Insurer: 75%
PFI: 25%
No change
Government: 75%
PFI: 25%
Insurance Premium
1.5% pa of the total loan amount approved
Government subsidy of the cost of the
insurance premium increased to 90% of 1.5%,
ie 1.35% pa of the total loan amount
approved
Remaining 0.15% is payable by the borrower
company and will be collected upfront by
the PFI upon loan acceptance
Government will bear the cost of
insuring loan amounts beyond the LIS
insurers’ capacities
0.5% pa of the amount insured by
Government
For more information, please contact:
Bill Jamieson
Partner
Tel: (65) 6349 8680
Email: billjamieson@cnplaw.com
Colin Ng & Partners LLP (UEN T08LL0403K) registered in Singapore with limited liability was converted from the firm “Colin Ng & Partners” to a limited
liability partnership on 1st April 2008