Majority of SMEs surveyed confident of meeting repayment obligations for Government-backed loans in 2021
Working capital concerns surge among SMEs, with proportion of SMEs flagging this as their top business priority more than doubling from end-May
Despite weathering some of the most challenging times ever faced in their entrepreneurial journey, Singapore’s SME community remains undaunted, with three-quarters of SME owners saying that they continue to be ‘optimistic’ and ‘determined’ to face the road ahead.
However, in a sign of creeping fatigue, close to one in five SMEs in Singapore indicated that they were ‘exhausted’ from dealing with the economic fallout of Covid-19.
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These sentiments were reflected in the DBS SME Pulse Check Survey which the bank conducted in early October, after the Monetary Authority of Singapore announced Extended Credit Relief Support Measures for SMEs to partially defer the principal repayment of secured loans and Enterprise Singapore loans. The survey recorded the findings of close to 250 SMEs in three industry sectors most acutely affected by Covid-19 – retail; food and beverage (F&B); and building and construction (B&C).
Despite being in the most severely affected industries, seven in ten respondents indicated that they were confident of meeting their repayment obligations for Government-backed loans in 2021 without impacting their current business operations. To meet their debt obligations, close to 30% of SMEs surveyed were willing to sacrifice their expansion plans and scale down their business operations to make their repayments. Only 3% flagged that they were not confident of meeting their loan repayments in 2021 and may have to wind down their businesses.
Joyce Tee, Group Head of SME Banking at DBS, shared that this latest survey was especially timely given that Singapore’s economy was moving into a new phase of recovery with business activities ramping up and Government support slowly tapering off. “I never cease to be inspired by how resourceful and resilient our SMEs are, and how they are able to turn even the most difficult circumstances into new opportunities. Our survey shows that while SMEs are wounded, they are certainly not out for the count. In fact, many SMEs are quietly preparing for a rebound and even those in the hardest-hit sectors have been busy reinventing themselves and transforming their business models. However, the road ahead remains bumpy, and DBS will continue to be a trusted partner to our SMEs and extend the support needed to emerge from this crisis stronger together.”
When asked about the Government support measures SMEs found most helpful in tiding them through to today, responses varied across the three sectors surveyed. SMEs in the retail sector favoured the Jobs Support Scheme (44% of respondents, compared to 28% for F&B and 26% for B&C), while SMEs in the F&B and B&C sectors equally favoured working capital support at 43% each (compared to retail at 36%). The Jobs Growth Incentive was uniformly found to be least helpful, garnering only 1% of responses.
However, a significant proportion of SMEs in the B&C sector indicated foreign worker levy rebates and the waiver of foreign worker levies as their most helpful support scheme (22% of respondents, compared to 1% for retail and 3% for F&B). At the same time, a significant proportion of SMEs in the F&B sector indicated rental relief as their top support measure (19% of respondents, compared to 7% for retail and 1% for B&C).
When asked how else they would like the Government to support their businesses in emerging stronger from economic downturn, SMEs surveyed ranked more grants, more rental relief, and more flexible manpower policies as their top three desired areas of support.
Working capital needs make a comeback among SMEs – but for different reasons
SMEs across all three sectors uniformly ranked working capital as their top business priority to tide through the current economic downturn, with 65% of respondents highlighting this as key to helping them cope with overheads. This represents a 35-percentage point rise from 30% when the same question was asked at the end of May as Singapore was emerging from the extended Circuit Breaker.
Commenting on this trend reversal, Tee shared that the factors driving SMEs’ need for working capital now were very different from when Singapore was exiting the Circuit Breaker. “Back then, SMEs needed the cashflow support just to stay afloat and keep their staff employed. With business activities gradually resuming, SMEs are now anticipating that additional working capital may be needed to adhere to new safety requirements and to ramp up their operations.”
Correspondingly, 66% of SMEs surveyed said that banks could support their business recovery by rolling out more working capital financing options. Only 13% called for banks to provide more loan moratoria.
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DBS continues to support SMEs with their working capital, digital and business transformation needs to emerge from the crisis stronger
DBS has partnered the Government and industry associations to avail critical working capital support to SMEs throughout the pandemic. Since the start of March 2020, DBS has approved close to 9,700 loans totalling over SGD 5 billion to SMEs through the Temporary Bridging Loan and Enhanced Working Capital Loan. DBS made special effort to reach out to micro and small enterprises, as these are typically the most underserved and vulnerable of businesses in an economic crisis. Of the 9,700 SME loans approved during this period, over 85% of the loans, or more than 8,300 loans in excess of SGD 2.2 billion, were for micro and small businesses. To provide SMEs with further liquidity support, DBS has also granted over 3,300 loan moratoria on close to SGD 4.5 billion in secured SME loans to date.
Additionally, DBS has rolled out various solutions and support packages tailored to the needs of SMEs in different sectors:
- In March 2020, DBS introduced the DBS F&B Digital Relief Package to enable F&B establishments to build a digital presence and create new income streams online in as fast as three days. This was subsequently enhanced with the addition of digital solutions for e-invoicing, accounting, HR, and payroll, and re-branded as the DBS Resilience Package for F&B. Customers who took up the package could also receive cash payouts of up to SGD 10,000 under the Digital Resilience Bonus administered by the Infocomm Media Development Authority. The bank will be rolling out a similar package curated for SMEs in the retail sector in the coming weeks.
- In May 2020, DBS launched Singapore’s first cashless purchasing card for the logistics sector, eliminating the need for cash-based payments and collections at logistics depots, and helping to jumpstart the industry’s digital transformation.
- In October 2020, DBS announced a partnership with the Singapore Tourism Board which involves catalysing the development of Singapore’s tourism industry. Such efforts include partnering local businesses to pilot smart experiences such as a seamless and contactless digital payment experience at various precincts.
Going forward, Tee commented that the survey findings will help both financial institutions and policymakers calibrate the support extended to SMEs to help them emerge stronger from the crisis. “A one-size-fits-all approach is no longer sufficient for our SMEs. For DBS, we will use insights from the survey to develop more targeted business and digital transformation solutions to complement our two-pronged approach of supporting micro and small enterprises with cashflow needs and rolling out industry-tailored support packages.”
