7 in 10 SMEs confident of repaying loans in 2021: DBS

Singapore

SEVEN in 10 small and medium-sized enterprises (SMEs) in Singapore's most embattled sectors are confident of meeting their repayment obligations for government-backed loans in 2021, said a DBS survey.

But a minority - about 3 per cent - said that they will have to wind up their business, with about a fifth of SMEs indicating that they are "exhausted" from dealing with the Covid-19 economic fallout.

The DBS SME Pulse Check Survey was conducted in early October, after the Monetary Authority of Singapore (MAS) announced extended credit relief support measures for SMEs to partially defer the principal repayment of certain loans, and responses came from close to 250 SMEs in three industry sectors hit the hardest by Covid-19 - retail, food and beverage (F&B), and building and construction.

Working capital has become the top business priority to tide through the economic crisis, according to 65 per cent of SMEs.

This is a 35-percentage point jump from 30 per cent when the same question was posed at the end of May as Singapore was emerging from the extended circuit-breaker measures.

On the trend reversal, Joyce Tee, group head of SME Banking at DBS said that SMEs back then needed cashflow support just to stay afloat and keep 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," she said.

As such, about two-thirds of SMEs said that banks could support their business recovery by rolling out more working capital financing options, with 13 per cent calling for banks to provide more loan moratoriums.

Despite this, most SMEs expressed confidence that they can repay their loans, with almost 30 per cent indicating that they are willing to sacrifice their expansion plans and scale down business operations to meet debt obligations.

When asked about the government support measures SMEs found most helpful, responses varied across the three sectors surveyed.

Some 44 per cent of SMEs in the retail sector favoured the Jobs Support Scheme (JSS), compared with 28 per cent for F&B and 26 per cent for building and construction.

However, SMEs in the F&B and building and construction sectors equally favoured working capital support at 43 per cent each, compared with retail at 36 per cent.

The Jobs Growth Incentive was uniformly found to be least helpful, garnering only 1 per cent of responses.

Under the Jobs Growth Incentive, the government will co-pay up to 25 per cent of salaries of all new local hires for one year, subject to a cap. For those aged 40 and above, the co-payment to firms will be up to 50 per cent.

One in five SMEs in the building and construction sector indicated that foreign worker levy rebates and the waiver of foreign worker levies were their most helpful support scheme, compared with just 1 per cent for retail and 3 per cent for F&B.

At the same time, one-fifth of SMEs in the F&B sector said that rental relief was their top support measure, while only 7 per cent of retail SMEs and 1 per cent of building and construction SMEs indicated so.

Ms Tee said 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," she noted.

Since the start of March 2020, DBS has approved close to 9,700 loans totalling over S$5 billion to SMEs through the Temporary Bridging Loan and Enhanced Working Capital Loan. Out of this, over 85 per cent of the loans were for micro and small businesses.