Acquisition financing in Singapore: customised loans to buy a business
Acquisition financing is borrowing to buy a business, either its shares or selected assets, and in Singapore every acquisition loan is customised to the deal: the bank sizes it on whether the combined business can repay it. We help SME owners and companies arrange business acquisition loans with banks, whether the target is a competitor, a supplier, a business in a complementary line or a company overseas. The main options are a business term loan, a loan against property you already own and the government-backed EFS-M&A loan; part of the price can also be paid to the seller later.
We are brokers, not a lender, and we are also an accounting firm. Because we read accounts for a living, we look at the deal the way a bank’s credit team will before you apply, and at the tax and stamp duty that come with it. In every case the approval, the amount and the terms rest with the bank.
Settle the financing before you sign the sale agreement, because the agreement fixes the price, what you buy and when you pay, and those are the terms a bank assesses.
How hard is it to get an acquisition loan?
It depends mainly on the business you will own after completion: the bank asks whether it can carry the repayments, so it reads the target’s accounts as well as yours. It looks at how the target has traded, how the combined cash flow covers the instalments over the tenure, and what security and guarantees support the loan. Banks do lend for acquisitions, and six offer EFS-M&A. None of the bank terms we reviewed says how much of the price it will lend, and EnterpriseSG sets no figure, so each bank sizes the loan on the deal in front of it.
EFS-M&A: the government-backed acquisition loan
EnterpriseSG’s Enterprise Financing Scheme Mergers and Acquisitions Loan (EFS-M&A) is a bank loan in which EnterpriseSG shares the default risk with the lender, and it finances the acquisition of local or overseas target enterprises and assets. The terms, from EnterpriseSG’s EFS-M&A page:
All the EFS-M&A terms, in one table
| Term | EFS-M&A |
|---|---|
| What it finances | The acquisition of local or overseas target enterprises and/or assets |
| Maximum loan | S$50 million per borrower group, across all EFS facilities, so EFS loans your group already holds count towards it |
| Maximum repayment period | 5 years |
| EnterpriseSG risk share | 50 percent of what the bank cannot recover if the loan defaults; young enterprises, or enterprises operating in a challenged market, may receive 70 percent |
| Who repays | The borrower is responsible to repay 100 percent of the loan |
| Interest rate | Set by the participating bank on its own assessment of risk; EnterpriseSG does not set it |
| Who can borrow | A business entity registered and operating in Singapore (ACRA-registered sole proprietorships, partnerships, limited liability partnerships and companies), with at least 30 percent local equity held directly or indirectly by Singapore Citizens or PRs, judged by ultimate individual ownership |
| Size limit | Group annual sales turnover not exceeding S$500 million |
| Where to apply | Six participating banks; approval is subject to the bank’s own credit assessment |
How the risk share works, and three definitions
The risk share is meant to help the bank offer better terms; it does not reduce what you owe. EnterpriseSG’s FAQ explains that risk sharing aims to give banks the confidence to offer more favourable loan conditions, such as the loan amount and tenure, but borrowers “remain fully responsible for repaying all amounts owing”. If a loan defaults, the bank must first follow its standard commercial recovery procedure, including realising any security, before it can claim EnterpriseSG’s share of the unrecovered amount. So the security and guarantees in the letter of offer carry their full weight.
Three definitions behind the table. Young enterprises are firms formed within the past 5 years with at least 1 employee and more than 50 percent of equity owned by individuals. Challenged markets are countries with an S&P rating of BB+ and below, including non-rated countries; EnterpriseSG does not say whether that means the borrower’s market or the target’s. Your borrower group is your company, the companies above it that own more than half of it, and the companies more than half owned by it or by your ultimate parent, at every level. So EFS loans to sister companies under the same parent count towards the same S$50 million.
Each bank also makes its own credit assessment, and a bank’s product can be narrower than the scheme behind it. Three banks’ published EFS-M&A pages show the range:
- One major bank matches the scheme’s cap and repayment period: up to S$50 million per borrower group, with up to 5 years to repay, to “finance the purchase of local or overseas companies”, for businesses incorporated and operating in Singapore.
- Another major bank’s SME version lends “up to S$2 million”, with up to 5 years to repay, and only to companies locally incorporated for at least 15 months with turnover of up to S$20 million.
- A third bank states that the acquisition must be in line with the company’s core line of business.
So a deal can meet the scheme’s rules and still fall outside one bank’s product. Matching it to banks whose criteria fit, before anyone applies, is a large part of our work.
Choosing a structure that fits the deal
The right structure depends on the size of the deal, what you already own and how the price will be paid, and many acquisitions combine more than one. These are the structures we compare.
A business term loan
For a smaller purchase, an ordinary business term loan to your company may be the simplest route: one facility, repaid in instalments, sized on your company’s accounts and the target’s. Our business loan page sets out business term loans for SMEs.
A loan against property you already own
If you or your company already owns property, an equity term loan secured on it can fund some or all of the price, depending on the property’s value and the bank’s assessment. The property is then the bank’s security, rather than the shares you are buying. Our property financing page explains equity term loans against commercial, industrial or residential property you already own, whether the business or you borrow.
EFS-M&A
EFS-M&A is not only for large deals: one bank’s SME version lends up to S$2 million. It may suit when the bank wants more comfort than your company’s track record and security give on their own, since the risk share is meant to support better loan conditions. With repayment over 5 years at most, the instalments are sized to clear the loan within that time, and whether the combined business can carry them is the first thing we test.
Part of the price paid to the seller later
The sale agreement can provide for part of the price to be paid to the seller after completion, in instalments or on agreed milestones, often called seller financing or deferred consideration. That reduces what you borrow on day one, but the combined business then carries both the bank’s repayments and the amount still owed to the seller, so we model both together.
The timing matters for tax too. IRAS bases the M&A allowance on the cash paid for the shares, which must be paid in full within 6 months of the date the sale agreement is signed, not the completion date. A payment due only once pre-agreed conditions are met has 6 months from when it becomes payable. If you intend to claim the allowance, we check the payment schedule against these rules before you sign.
Working capital for the enlarged business
After completion the enlarged business may need more working capital than either company did alone. A business overdraft covers short, repeating cash flow gaps. EnterpriseSG’s EFS SME Working Capital Loan finances daily operational cash flow. It can support the enlarged business but is not a way to pay the price, and it counts towards the same S$50 million borrower group cap as EFS-M&A. Our working capital loan guide explains it.
Whichever mix you choose, compare offers on the all-in cost, not the headline rate. Our effective interest rate calculator converts a flat-rate quote, with its upfront fees, into an effective rate you can compare.
Buying shares or buying assets: what changes
In a share purchase you buy the company itself and its assets stay inside it; in an asset purchase you buy selected assets out of the business. The choice changes the stamp duty, the GST and the tax relief available.
Read the detail: stamp duty, GST and checking the seller
Share purchase
Stamp duty is charged on the document signed when you buy the shares, at 0.2 percent of the purchase price or the value of the shares, whichever is higher. For shares in a private company incorporated for more than 18 months, the value is the net asset value, broadly what the company owns less what it owes, from its latest accounts dated within 24 months before the transfer. Any property the company owns is taken at market value where its book value does not reflect it. A company incorporated for 18 months or less uses the allotment price if it owns no property, or a net asset value from management accounts if it does. A target holding property bought long ago can therefore have a net asset value above the price you agreed, and the duty follows the higher figure. IRAS’s page on buying shares sets out the method.
Only a share purchase can earn the M&A allowance, because IRAS grants it on acquisitions of ordinary shares. The M&A scheme’s old stamp duty relief has lapsed, so budget for the full duty. For GST, a share purchase moves no business assets: in IRAS’s words, they “still belong to the limited company”, so the going-concern rules for asset sales do not arise.
Because you buy the company as it stands, know who you are dealing with. Our background checks on the seller and the target verify shareholders and directors against ACRA records and screen court, insolvency and sanctions records, and our guide shows how to check that a company is registered.
Asset purchase
Buying assets lets you choose what you take, such as premises, fixtures and fittings, contracts or intellectual property. A GST-registered seller must account for GST on the assets unless every condition for a transfer of a business as a going concern is met. Two of them: the business must still be running at the transfer, and you must use the assets to carry on the same kind of business. IRAS’s GST guide on going concerns lists the rest. An asset purchase earns no M&A allowance, but EFS-M&A can still finance it: a government pilot running until 31 March 2030 extends the scheme to targeted asset acquisitions, such as intellectual property and contracts, without a corresponding equity purchase. A bank’s own product may be narrower.
The tax side: the M&A allowance and deal costs
A Singapore company that buys ordinary shares in another company may claim an M&A allowance of 25 percent of the value of the acquisition, written down evenly over 5 years, for qualifying acquisitions completed by 31 December 2030.
Read the detail: the conditions, deal costs and a worked example
Across all qualifying acquisitions in the basis period for a year of assessment, broadly your company’s financial year, the value of acquisition is capped at S$40 million and the allowance at S$10 million, and the allowance cannot be deferred. IRAS’s M&A allowance page sets out the rules. The main conditions:
- The stake: the purchase must take your company from below 20 percent to at least 20 percent of the target’s ordinary shares, or from 50 percent or less to more than 50 percent. Where the claim rests on the 20 percent level, your company also needs at least 1 director on the target’s board, and the target must count as its associate under the accounting standards.
- Your company, the buyer: incorporated and tax resident in Singapore, and if it belongs to a group, its ultimate holding company must be too. On the acquisition date it must be carrying on a trade or business in Singapore and have had at least 3 local employees, meaning Singapore citizens or PRs, other than directors, throughout the previous 12 months. It must also not have been connected to the target in the 2 years before.
- The target: carrying on a trade or business in Singapore or elsewhere on the acquisition date, with at least 3 employees throughout the 12 months before.
- Buying through a subsidiary: allowed if it is wholly owned, does not trade and claims nothing under the scheme itself; the allowance goes to your company. Our holding company guide explains how a company that only holds shares works.
- Every year of the write-down: your company’s buyer conditions, such as the 3 local employees, must hold throughout the basis period for each year of the 5-year write-down. The conditions for any ultimate holding company and any acquiring subsidiary must hold too, and, for a 20 percent claim, so must the board seat and associate status. If one fails, the allowance stops from that year. Check any later restructuring against them first, including a company amalgamation of the two companies.
Deal costs get a double tax deduction. Transaction costs on a qualifying share acquisition completed by 31 December 2030 are deducted twice, up to S$100,000 of costs. They include legal, accounting or tax advisory and valuation fees and similar professional fees necessarily incurred, but not professional and incidental fees for arranging the loan. That S$100,000 cap is shared by all qualifying acquisitions whose allowance is first claimed in the same year of assessment. Neither the allowance nor the double deduction can be transferred under group relief or carried back; unused amounts can be carried forward if the shareholding test is met.
An illustration, with our own round numbers. Suppose your company, meeting every condition, buys all the ordinary shares of a target for S$2 million, paid in full in cash at completion, within 6 months of signing.
| Item | Working | Result |
|---|---|---|
| M&A allowance | 25% x S$2,000,000 = S$500,000, written down over 5 years | S$100,000 a year for 5 years of assessment |
| Transaction costs | Legal S$45,000 + accounting and tax advisory S$30,000 + valuation S$15,000 = S$90,000, within the S$100,000 cap | Deduction of S$180,000 |
| Fees on the bank loan | S$10,000 of bank and legal fees on the loan facility | Outside the double deduction |
| Stamp duty, net asset value S$1.6 million | The price is higher: 0.2% x S$2,000,000 | S$4,000 |
| Stamp duty, net asset value S$2.5 million | The net asset value, with property at market value, is higher: 0.2% x S$2,500,000 | S$5,000 |
The allowance and the double deduction reduce your company’s taxable income, so what they are worth depends on its tax position, which is why we model them before the deal.
Security, guarantees and the target company
The bank sets the security package and your lawyer confirms it can be given; for an acquisition it may involve the shares you buy, property, guarantees and the target’s own assets. A guarantee is a promise to repay if the borrower does not, so check who gives it and for how much before you accept an offer.
Read the detail: share mortgages and the Companies Act
Shares as security. If the bank takes a mortgage over the shares, mortgage duty is 0.4 percent of the loan amount, capped at S$500. A share mortgage signed under hand, meaning signed but not under seal, is an equitable mortgage and is exempt from stamp duty. IRAS’s page on mortgaging shares sets out both rules.
The target supporting the loan. A bank may look to the target itself for a guarantee or security over its assets. Section 76 of the Companies Act restricts financial assistance, such as a loan, a guarantee or security, given for or in connection with the purchase of a company’s own shares or its parent’s. Except where the Act expressly allows it, a public company, or a company whose parent or ultimate parent is a public company, must not give it. Each officer in default faces a fine of up to S$20,000, imprisonment of up to 3 years, or both. As section 76 is written, this financial assistance ban does not reach a private company outside a public group. Other parts of the section apply to every company, though, so your lawyer should still confirm how the target can support the loan before anything is signed.
How we help
- We review the deal first: the target’s accounts and yours, the price and how it will be paid, and whether you are buying shares or assets. If the numbers do not support borrowing, we say so.
- We model the repayments: the combined business’s cash flow against the instalments, including any amount still owed to the seller, with the stamp duty and tax effects of the deal.
- We help you choose the structure that fits: EFS-M&A, a business term loan, a loan against property you already own, part of the price paid later, or a mix, with working capital alongside if needed.
- We prepare the lender pack: the accounts, the forecast and a clear summary of the deal.
- We match the deal with banks whose criteria fit, including each participating bank’s own conditions for EFS-M&A, and compare offers on the all-in cost: rate, fees, tenure, security and guarantees.
- We stay with it to the letter of offer, and go through the terms with you before you accept.
- After completion, our corporate tax team can claim the M&A allowance and the double deduction in your company’s tax computations, and our accounting team can bring the target’s books into your reporting.
Approval, the amount and the terms always rest with the bank.
What to prepare
- The target’s financial statements for recent years and its latest management accounts.
- Your own company’s financial statements and management accounts.
- The term sheet or draft sale agreement: the price, what you are buying, and when and how the price is paid.
- A cash flow forecast for the combined business.
- Your company’s shareholding chart up to the individual owners, which shows the local equity for EFS-M&A, and your group’s annual sales turnover.
- Both companies’ existing loans, marking any EFS loans held anywhere in your borrower group, since those count towards the S$50 million cap.
- Details of any property you or your company own that could serve as security.
- Headcounts for both companies over the past 12 months, for the M&A allowance’s employee conditions.
The question to ask before you sign
Ask: after every repayment, to the bank and to the seller, how much cash will the combined business have left each month? A bank prices the loan you apply for; comparing structures and banks before you apply is the work we do.
If you are planning to buy a business, or already have a deal on the table, send us the details. We will tell you which structures fit the deal, which banks’ criteria it meets, and what the stamp duty and tax will look like.
Acquisition Financing: Frequently Asked Questions
Acquisition financing is borrowing to buy a business, either its shares or selected assets. Each loan is customised to the deal: the bank looks at whether the combined business can repay it, then sets the amount, tenure and rate itself. In Singapore the main options are a business term loan, a loan against property you already own and EnterpriseSG's EFS-M&A loan, offered through six participating banks, and part of the price can also be paid to the seller later.
EnterpriseSG caps EFS-M&A at S$50 million per borrower group, counted across all EFS facilities, so EFS loans your group already holds use up part of the cap. The maximum repayment period is 5 years. Within that cap the participating bank decides the amount on its own credit assessment, and a bank's own product can be narrower: one major bank's SME version offers up to S$2 million. EnterpriseSG does not set the interest rate.
The borrower must be a business entity registered and operating in Singapore: ACRA-registered sole proprietorships, partnerships, limited liability partnerships and companies can apply. At least 30 percent of its equity must be held, directly or indirectly, by Singapore Citizens or PRs, judged by ultimate individual ownership, and group annual sales turnover must not exceed S$500 million. Some banks add criteria of their own, such as a minimum time since incorporation, and approval rests with the participating bank.
Yes. EnterpriseSG says EFS-M&A finances the acquisition of local or overseas target enterprises and assets. EnterpriseSG shares 50 percent of the default risk with the bank, and young enterprises or enterprises operating in a challenged market may receive 70 percent, though EnterpriseSG does not say whether that means the borrower's market or the target's. The risk share aims to help the bank offer better terms; the borrower still repays 100 percent of the loan, and the bank sets the rate.
Yes. Banks lend for acquisitions, and six participating banks offer EnterpriseSG's EFS-M&A loan for local or overseas targets. Each bank sizes the loan on whether the combined business can carry the repayments, so it reads the target's accounts as well as yours. Some banks add criteria of their own: one major bank's SME version requires at least 15 months since incorporation and turnover of up to S$20 million. Approval, the amount and the terms rest with the bank.
It is a tax allowance of 25 percent of the acquisition's value, spread evenly over 5 years, for a Singapore company buying another company's ordinary shares in qualifying acquisitions completed by 31 December 2030. Across all acquisitions in a basis period, value is capped at S$40 million and the allowance at S$10 million. The buyer's stake must go from below 20 percent to at least 20 percent, or from 50 percent or less to above 50 percent; other conditions apply.
Under the M&A scheme, yes: transaction costs on qualifying share acquisitions completed by 31 December 2030 get a double tax deduction, capped at S$100,000 of costs across all acquisitions whose allowance is first claimed in the same year of assessment. Legal, accounting or tax advisory, valuation and similar professional fees necessarily incurred count; loan arrangement fees do not. Unused amounts cannot be transferred under group relief or carried back, but can be carried forward if the shareholding test is met.
It depends on the deal. A share purchase keeps the assets inside the company, carries stamp duty of 0.2 percent of the price or the value of the shares, whichever is higher, and is the only route to the M&A allowance. An asset purchase lets you choose what you take, but a GST-registered seller charges GST unless every going-concern condition is met. EFS-M&A can finance either, within each bank's product terms. Weigh both with your lawyer and accountant first.
We are a broker, not a lender, and also an accounting firm. We review the target's accounts, model whether the combined business can carry the repayments, and help you choose the structure that fits, whether EFS-M&A, a business term loan, a loan against property or part of the price paid later. We prepare the lender pack, match the deal with banks whose criteria fit and compare offers on the all-in cost. Approval and terms always rest with the bank.
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