Simplifying schemes for SMEs a key focus: industry watchers

But the cost issue that such firms are facing right now is a "huge problem", they add


MORE support for small and medium-sized enterprises (SMEs) to deepen capabilities and scale up were doled out in Budget 2019 as expected on Monday, as part of the government's ongoing efforts to transform businesses.

But instead of the introduction of eye-catching new initiatives, the emphasis this time was on consolidating, simplifying and extending current schemes - heeding earlier calls by businesses for an easier process to get the help they need.

For instance, Finance Minister Heng Swee Keat announced that the government will be streamlining existing financial schemes offered by Enterprise Singapore into a single Enterprise Financing Scheme that will cover trade, working capital, fixed assets, venture debt, mergers and acquisitions, and project financing.

To be launched in October this year, this move aims to simplify the process for SMEs to apply for funding.

This was welcomed by many observers, including Irene Tai, corporate tax director, PwC Singapore.

"This would improve access to information on financial support options and allow them to select those that are most relevant to their business needs," she noted.

"This centralised approach should also allow Enterprise Singapore to channel the funds to where they are most needed."

Chester Wee, partner, international tax services leader, Ernst & Young Solutions LLP, added that it will reduce administrative costs for SMEs, and hopefully help them to gain quicker access to funds needed for their expansion plans.

With the introduction of the Enterprise Financing Scheme, eight existing financing schemes will be discontinued. They include the SME Equipment Loan, SME Factory Loan, SME Working Capital Loan, SME Micro Loan, SME Micro Loan for Young Companies, SME Venture Loan, Internationalisation Finance Scheme and Loan Insurance Scheme Plus.

In particular, Mr Heng highlighted that the SME Working Capital Loan scheme, to be folded under the Enterprise Financing Scheme, will be extended for two more years till March 2021. The loan helps SMEs address near-term cashflow concerns and growth financing through unsecured working capital loans.

In another consolidation move, Mr Heng said that the government and relevant agencies are developing a one-stop portal to make it easier for businesses to transact with the authorities. A pilot for the food services sector will be launched by the third quarter of 2019.

"Businesses will deal with only one point of contact, instead of up to 14 different ones," he added.

Mr Heng also announced that the government will take on a bigger share of the risk for bank loans to firms that have been incorporated for less than five years, up from the current 50 per cent to 70 per cent.

In addition, the government is setting aside some S$100 million to establish the SME Co-Investment Fund III. This is part of the Co-Investment Programme (CIP) started by the government in 2010, together with the private sector, to catalyse investment in Singapore-based SMEs that are ready to scale up.

The latest injection is expected to bring in at least S$200 million of additional funding, according to the finance minister. So far, the government's investments have brought about approximately S$1.3 billion of additional funding for SMEs.

However, Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), thinks that the initiatives in Budget 2019 might not be "substantially meaningful" to help SMEs cope with costs.

"I'm not sure whether that is enough initiatives to help SMEs with capital needs. If we come face-to-face with interest rate increases this year, it will hit businesses on the cost side," he explained.

Alson Teo, CEO of food and beverage business Stamfles Group, concurred, stating that the cost issue that SMEs are facing right now is a "huge problem".

With economic growth in 2019 expected to slow down, he had been expecting some relief for SMEs to defray costs. "We currently don't have breathing space... It's going to be very tough," he added.

Aside from funding support, Mr Heng also announced a further push for SMEs to digitalise.

The Automation Support Package, targeted to support firms to deploy large-scale automation such as robotics and Industry 4.0 technologies, will be extended by two years to March 2021.

Since its launch in 2016, the programme has supported more than 300 firms to automate their operations and raise productivity, he said.

The SMEs Go Digital programme will also be expanded, with accountancy, sea transport and construction to get their own industry digital plans (IDPs), with more sectors to be added later. These plans are meant to guide SMEs on relevant digital technologies and skills training programmes.

The finance minister also spoke on the need to build stronger ties both within Singapore and across the world.

To this end, the government will be strengthening support for the trade associations and chambers (TACs) through the Local Enterprise and Association Development (LEAD) programme, by developing five-year roadmaps with TACs that have "demonstrated strong leadership and shown ambition to do more for the business community".

The government will also be streamlining and digitising Singapore's trade processes further to raise efficiency. This will enable easier access to overseas markets and help firms make better use of the free trade agreements (FTAs) signed.

Mr Wee summed up: "In many respects, Budget 2019 is a continuation of current policies, and we hope to see bold moves on internationalisation and assistance on costs at the upcoming Committee of Supply debates."

Key points

  • S$100 million will be set aside to establish the SME Co-Investment Fund III, part of the Co-Investment Programme, to invest in Singapore-based SMEs ready to scale up
  • Existing financing schemes offered by Enterprise Singapore will be streamlined into a single Enterprise Financing Scheme to make it simpler for companies
  • Government to take on up to 70% of risk for bank loans to companies incorporated for less than five years, compared to 50 per cent currently
  • The SME Working Capital Loan scheme will be extended for two more years till March 2021
  • The Automation Support Package will be extended by two years, up to March 2021

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