Business Loans

How It Works: Government-Risk Sharing for SME Working Capital Loan & Temporary Bridging Loan Programme

Eric Koh
May 22, 2020

To combat the economic challenges caused by COVID-19, the Singapore government introduced a number of government-backed business loans to support the enterprises in Singapore.

These loans, administered by Enterprise Singapore (ESG) and participating financial institutions (PFIs), are attractive to SMEs as they include a government risk-share of up to 90%.

However, based on our interaction with business owners on the ground, this “government risk-share of up to 90%” clause is often misunderstood.

Recap on Government-supported Business Loan Schemes in 2020

ESG currently offers 3 main credit facilities:

Enterprise Financing Scheme - SME Working Capital Loan (EFS - WCL):

  • Max loan quantum S$1 million
  • Government risk-share of 90%
  • Only available for SMEs
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Refer to this article for a detailed table for all the Cost, Cash & Credit Support offered by the government for all 3 budgets in 2020!

Enterprise Financing Scheme -  Trade Loan (EFS - TL):

  • Max loan quantum of S$10 million
  • Government risk-share of 90%

Temporary Bridging Loan Programme (TBLP):

  • Max loan quantum of S$5 million
  • Government risk-share of 90%

Common Misconceptions about Government Risk-sharing Loans

These are some of the comments we’ve heard from business owners that we’d like to clarify.

  1. “Since the government shares 90% risk, does that means that if I default on the loan, I would only be required to pay 10%?”
  2. “I will apply for the S$1 million SME working capital loan with 5 different banks and hope that I can get a S$5 million loan in total.”
  3. “Since the government is giving money for free, I should quickly set up a business and apply for this loan.”

So How Exactly Does Government Risk-sharing Work?

Misconception 1: “Since the government shares 90% risk, does that means that if I default on the loan, I would only be required to pay 10%?”

This is not true.

Although the government provides 90% risk-share, this risk-sharing is between the bank and the government, not between the government and the borrower.

This means that the borrower is still responsible for repaying 100% of the loan amount obtained from the bank.

In the event that the borrower is unable to make repayments, the bank will be required to exhaust all methods of debt collection, before claiming the defaulted amount from the government according to their risk-sharing percentage.

Debt collection methods could include the realization of any security, such as repossessing property collateral (if any) or lawsuits and bankruptcy suits against the personal guarantors.  


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Learn about the submission documents required when applying for any business loan

Misconception 2: “I will apply for the S$1 million SME working capital loan with 5 different banks and hope that I can get a S$5 million loan in total.”

This is not possible.

Each SME may only obtain a maximum of S$1 million for the EFS-WCL, and S$5 million for the TBLP.

This is because ESG is the gatekeeper of the total amount of government-backed loans approved for each SME.

The behind-the-scenes process:

  1. An SME applies for the EFS-WCL & TBLP through a PFI, which then evaluates the SME’s credit records and comes up with an in-principle loan quantum.
  2. The PFI will then submit the SME’s request, along with the approved loan amount, for approval by ESG.
  3. ESG will approve or reject the request after verifying the total amount of government-backed loans (if any) previously secured by the SME.

Thus, even if an SME applies to multiple PFIs, the maximum loan amount available to an SME is capped based on the facility limit set by ESG.

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Find out the most common reasons for rejection and improve your business to stand a better chance of obtaining your desired loan

Misconception 3: “Since the government is giving money for free, I should quickly set up a business and apply for this loan.”

This is not recommended and it is unlikely that you can obtain the loan.

The government has provided the high risk-sharing percentage to encourage lenders to continue providing capital to enterprises, and a cheap source of funds to lower the interest rates of these loans.

Although they are doing what they can to provide access to financing for SMEs, that doesn’t mean that the banks are obliged to open the flood gates and provide financing to anyone that applies.

In reality, lenders are still responsible for 10% of the business loans and are thus still cautious about providing financing to businesses that may not be able to make repayments.

This means that SMEs will still be required to fulfill certain criteria, such as profitability, positive cash flow, decent revenue, and at least 2 years in operations, before they can be approved for these government-backed loans.

Pros and Cons of Taking Up a Government-backed Business Loan


  • High maximum loan amount, at a cheap interest rate
  • Can be used to pay off outstanding business loans (with higher interest rates), provide cash flow for your business or used to expand your business using cheap credit facilities


  • If the company is unable to continue business operations even with additional cash flow injection and thus unable to repay its debts, business owners may be subjecting themselves to possible lawsuits as guarantors.
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Find out about the record low interest rates for Enterprise Singapore’s SME Working Capital Loan and Temporary Bridging Loan!



We hope that our explanation is able to provide clarity on the government risk-sharing mechanism and the risks involved in taking up these facilities.

Please don’t hesitate to contact us if you have more questions!

Request for a Business Loan Now! operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.

Leading digital loan marketplace Lendingpot connects SMEs to its network of 45 lenders comprising relationship managers from banks, financial institutions, and private and peer-to-peer lenders in Singapore. It aims to help SMEs overcome the information asymmetry problem and lack of transparency prevalent in the SME financing sector by offering SMEs financing options such as business term loans, property loans, revenue-based financing, credit lines, working capital loans, bridging loans, invoice financing, and more.

About the author

Eric Koh is passionate about helping SMEs grow and has spent years interacting with business owners at OCBC and IFS Capital. He is interested in 70s rock ‘n roll, the odd novel and copious amounts of historical trivia.

How it works
Government-Risk Sharing
SME Working Capital Loan
working capital
temporary bridging loan
Budget 2020
Government Support

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