In Singapore, Small and Medium-sized Enterprises (SMEs) form the backbone of the economy. Ninety-nine percent of all enterprises are within the definition of SMEs which employ 65% of the work force. SMEs play an imperative role in Singapore’s powerful economy because of their significant involvement and contributions.
Managing cash flow is the lifeblood of any SME and even more crucial during the COVID-19 period. Liquidity is important for learning how easily a company can pay off its short term liabilities and debt. Businesses, especially SMEs must ensure that they have sufficient working capital to keep their business moving forward.
The Government has introduced a series of measures to help SMEs cope during the COVID-19 pandemic. We continue our sharing of these measures in the second part of our article on this topic here.
Financing Grants and Schemes
The following grants and schemes were announced on 26 Mar, 6 Apr and 26 May:
- Special Situation Fund for Startups (SSFS) – NEW
- Digital Resilience Bonus – NEW
- Enterprise Development Grant (EDG) – ENHANCED
- Productivity Solutions Grant (PSG) – ENHANCED
- SG Together Enhancing Enterprise Resilience (STEER) Programme – NEW
- Enterprise Financing Scheme – SME Working Capital Loan (EFS WCL) – ENHANCED
- Enterprise Financing Scheme – Trade Loan (EFS TL) – ENHANCED
- Temporary Bridging Loan Programme (TBLP) – NEW
- Loan Insurance Scheme – ENHANCED
These grants and schemes cover extensively from promising startups based in Singapore to mom and pop stores on the island. For example, high-potential startups can tap on SSFS for “EDBI, the corporate investment arm of Economic Development Board, and SEEDS Capital, the investment arm of Enterprise Singapore, will administer the S$285 million Special Situation Fund for Startups (SSFS) to provide financing support for promising startups based in Singapore. Under this scheme, EDBI and SEEDS Capital will invest in selected startups with private sector co-investors on a 1:1 basis” (taken from https://www.enterprisesg.gov.sg/). In contrast a small, independent, usually family-owned stores can access the Digital Resilience Bonus of up to S$10,000 by simply adopting baseline digital solutions such as PayNow Corporate and e-invoicing as well as digitalise business processes, create online channels and implement data mining and analytic solutions.
The grants and schemes have already been presented to assist businesses in need. The pertinent action is for businesses to take the first step to realise their need and submit a factual and accurate application and ultimately receive the need support.
Managing Cash Flow and Insurance
SMEs can now apply to defer payments on their property loans. The Monetary Authority of Singapore’s (MAS) response to supporting businesses through a series of measures on 31 March 2020 that aims to help ease the financial strain and temporary cash flow difficulties on SMEs caused by the COVID-19 pandemic.
MAS states that SMEs may apply to their lender to defer principal repayment of their loan until 31 December 2020 and also be able to extend the tenure of their loans by up to the corresponding principal deferment period. However, SMEs are still required to make monthly interest-only payments and interest will only accrue on the deferred principal amount and no interest will be charged on the deferred interest payments.
While this arrangement may substantially reduce a business’ monthly repayment and improve its cash flow, deferring principal payments can only increase balance principal repayment obligation. Subsequently businesses will be required to make a higher monthly repayment amount then before if the tenure of the loan amount remains the same as there would be lesser months to repay the principal of the loan.
Separately, under Enterprise Singapore’s Enhanced Enterprise Financing Scheme (ESG), SMEs can gain from lower interest rates on their loans from SME Working Capital Loan and Temporary Bridging Loan Programme (ESG Loan Schemes). Through the MAS SGD Facility for ESG Loans, MAS will provide lower-cost funding to participating financial institutions to support their lending at lower interest rates to SMEs under the ESG Loan Schemes.
Assistance With Legal Contract
The COVID-19 (Temporary Measures) Act (“the Act”) took effect from 20 April 2020 and will last 6 months and may be extended by another 6 months later. The Act aims to provide temporary relief from stipulated legal action related to the inability to perform certain contracts as a result of COVID-19, and essentially to protect and help SMEs focus on rebuilding their businesses than defending litigation or bankruptcy proceedings against them. Contracts that were entered into before 25 March 2020 and contractual obligations that are to be performed on or after 1 Feb 2020 are covered under the Act.
The Act initially covers rental contracts for the industrial and commercial sectors, construction and supply contracts, certain secured loan facilities granted by a bank or a finance company, as well as events for specific purpose eg weddings, conference and hotel bookings. The Act was enhanced on 13 May 2020 to cover option to purchase and sales agreement for property transaction and against unilateral increase of interest rates, charges, and other types of actions.
No Increase in Government Fees & Charges
The government has announced that fees and charges for government-provided services will be maintained at current rates and not be increased for one year, from 1 April 2020 to 31 March 2021. These fees for businesses include:
- LTA and STB licence fees
- SFA food import permits
- ACRA company registration fees
- NEA inspection fee
- fees for certification of government documents
The government has also introduced others measures to support Build Environment firms to preserve capacity and capability and protect jobs. These measures include:
- manpower levies
- construction and supply contracts
- business development
- cash flow and business sustainability
Enhanced Rental Waiver
To support businesses in their cash flow and cost management, the Enhanced Rental Waiver was announced on 26 Mar 2020. Qualified commercial tenants for the 0.5-month waiver announced at Budget 2020 in Feb 2020 will now get a 2-month rental waiver in total (i.e. 1.5 months more). Other non-residential tenants will be provided a 0.5-month rental waiver. Stallholders at hawker centres and markets will receive three months of waivers, with a minimum waiver of $200 per month.
The pandemic has hit SMEs the hardest for the sheer fact that they have limited cash flow and access to resources is also confined within their ability. The introduced support measures aim to provide that needed lifeline to businesses, to sustain their operations and reduce unemployment. Looking forward, these measures will help businesses build their foundation for the eventual economic rebound, and to continue to grow and expand once the storm is over. An efficient and resourceful partner in the field of Accounting and Corporate functions will definitely help any business immensely as they forge forward in their business endeavours.