25 February 2020

Singapore’s SMEs: Reading between the lines of the Budget

Li Lian Ng

Head of Business Banking, HSBC Singapore

There were high expectations going into the Budget, and the Singapore government didn’t disappoint.

This was a Budget that provided short term assistance for businesses to address economic headwinds, including global trade, a weakening domestic economy and the ongoing impact of COVID-19. Simultaneously, it also sought to reaffirm Singapore’s long term position as a trusted hub in Asia and gateway to ASEAN.

Amongst the measures announced were initiatives designed specifically to bolster the SME community. Support for this segment was loud and clear.

Yet Minister Heng Swee Keat did not just hand Singapore’s SMEs a Budget to defend against the challenges we face today. He gave them an opportunity to bolster their businesses for the long term.

The challenge now is for business owners to decipher the code and convert policy to their own benefit.

So what’s on the table and what do they mean?

1. Immediate financial relief

First up is tackling the matter in hand: supporting businesses to endure current economic headwinds. This came in the form of two measures: firstly the maximum loan quantum under the Enterprise Financing Scheme - known as the SME Working Capital Loan – has been raised from $300,000 to $600,0001. The Government will increase its risk-share on these loans to 80 per cent from the current 50 per cent to 70 per cent. Secondly, a new Temporary Bridging Loan Programme has been introduced to provide additional cash flow support for tourism sector enterprises. Under the TBLP, eligible enterprises can borrow up to $1 million, with the interest rate capped at 5% p.a., from Participating Financial Institutions.2 This will bring immediate relief for businesses, giving them the added confidence to continue with current business plans, manage their operating costs and meet short term obligations.

Action: Consider reviewing your liquidity measures– Liquidity is key to the survival of SMEs. Speak to your advisors to assess whether your business requires additional short-term liquidity, or whether you foresee issues in repaying existing obligations. These measures can help, and with the Government increasing the risk-share on loans for SMEs to 80%, we as a Bank are able to widen the breadth of our book beyond the normal risk thresholds to extend liquidity and repayment flexibility. Dependent on how prolonged the current economic situation lasts, these measures may need to be extended. As a Bank, we have a role in playing back the needs of SMEs, but we can only do that by hearing from you.

2. Grow faster, Go Digital

The next item to explore is the digital benefits. This is a forward looking segment of the Budget; with digitisation powering consumer and stakeholder expectations, digital transformation is on the wish list of many SMEs.

The “SMEs Go Digital” scheme, which helps build digital capabilities, has been expanded to cover new sectors3. Putting this into practice, a non-profit organisation that supports literacy of children in ASEAN could now tap on the Programme to help collect funds from donors more efficiently, by digital means.

Action: Consider the efficiency of your operations – going digital can be daunting. Yet the measures in the Budget could make a real difference and without causing significant upheaval. For SMEs, payments and payroll are often a highly manual process – measures like Go Digital could help the transition to a more efficient and cost-effective process. Review your operations to assess how digital could support your business.  

3. Tap into skills development 

Skills shortages are a particular pain point for Singapore businesses. A HSBC business sentiment survey4 revealed that Singapore businesses identify skills shortage as a key barrier to innovation, reflecting the second highest percentage amongst markets surveyed.

The Budget has sought to directly answer this conundrum. The Enterprise Leadership for Transformation initiative will empower SMEs to tap into resources to enhance management and enterprise capabilities. SMEs are encouraged to send their employees for courses that will help them master new skills. In addition, businesses will also receive support to train and redesign jobs for their workers, by tapping on schemes such as “SkillsFuture Enterprise Credit” and the “Productivity Solutions Grant.”

Action: consider your skillset at a time of change: In times of normality SMEs, lean on their teams, tend to focus on the matter in hand – getting business done. Contradictory as it may seem, now is a good time to look inwardly at your greatest asset; your employees. Up-skilling employees takes time and planning. With the economy triggering a lull in some sectors, consider reviewing the gaps in the knowledge of your employees. The Budget is funding education for the future; don’t miss out on the opportunities of now.  

4. Draw on funds to help expand overseas

Whilst the Budget catered for domestically-focused businesses, the Government also introduced measures to support SMEs in their overseas growth plans. The enhancement of “Market Readiness Assistance”5, a broad-based enterprise grant scheme that gives funds to companies taking their first steps to internationalise.  

This will support businesses to defray expenses incurred in promoting their products and services overseas, to pay for cost of consultancy on guidance how best to leverage Free Trade Agreements that Singapore has signed with other countries and costs of identifying business partners.

Action: Consideration how to take the next stepGiven current uncertainties, venturing into unchartered territories might not seem like the most logical next step. But this is where the Budget is securing businesses’ futures; use the measures to map your next steps of growth. Getting ahead of expansion is the quickest route to growth.

Delivering positive outcomes 
The purpose of the Budget is clear – to support SMEs in riding out short term challenges while equipping them with measures that enable them to propel forward in the future. It now falls to the business owners themselves to unlock the potential and take advantage of the Budget measures at their disposal to meet short and mid-term needs.

A contribution piece by Li Lian Ng, Head of Business Banking, HSBC Singapore. A version of this piece was first published in The Singapore Business Review on 24 February 2020.

 

1 https://www.straitstimes.com/singapore/singapore-budget-2020-companies-get-25-corporate-tax-rebate-other-measures-to-improve-cash
2 https://www.singaporebudget.gov.sg/budget_2020/budget-measures/stabilisation-and-support-package
3 https://www.businesstimes.com.sg/government-economy/singapore-budget-2020/budget-2020-enterprise-grow-package-to-help-companies
4 HSBC Singapore Navigator Survey, 8 July 2019
5 https://www.straitstimes.com/singapore/singapore-budget-2020-new-multi-platform-package-to-help-firms-grow-and-go-global

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