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Another key concern of businessmen
during this period of slower growth is the availability
and cost of capital to support their business
activities. Some businesses have reported that
they are facing higher interest rates and that
their credit lines are being pulled back.
Some tightening of bank credit
and increase in interest rates is inevitable at
a time of regional uncertainty. The Government
has explained that it cannot intervene to ask
banks to extend loans or to lower interest rates.
These are commercial lending decisions, which
the banks themselves have to take.
However, the Government will
enhance its Local Enterprise Financing Scheme
(LEFS) to help local businesses to obtain working
capital.
First, we will expand the scope
of LEFS to cover more local enterprises. For factoring
and working loan facilities, we will raise the
eligibility threshold for manufacturing companies
from a maximum of $15 million in fixed productive
assets, to $30 million. For services companies,
the cap on maximum employment size will be raised
from 200 to 300 employees.
Second, the Government will share
a greater part of the risk in LEFS. Currently,
for factoring loans, the risk is borne fully by
the financial institution administering the LEFS
loan, while for working capital loans, the Government
and the financial institution share the risk 40
: 60. The Government will now co-share the risk
for both factoring and working capital loans on
a 50:50 basis with the financial institution.
However, the financial institution must still
undertake the necessary credit analysis, and satisfy
itself that the company is a good risk.
Third, the maximum loan quantum
per company for factoring and working capital
loan facilities will be increased from $5 million
to $8 million.
To cater for the expected increase
in the volume of LEFS loans, the Government will
increase its provision in LEFS loan lines from
$760 million to $1.1 billion. We will review these
enhancements to LEFS in 2 years' time.
The Productivity & Standards
Board and the Economic Development Board will
be releasing more details of the enhanced LEFS
shortly. |
