Budget 2022: Extension of loans important as some sectors still not out of the woods
EXTENDING loan assistance programmes for small and medium-sized enterprises (SMEs) and the construction sector is important, despite the lower quantums this time round, said industry professionals.
To support SMEs with cash flow needs, the Temporary Bridging Loan Programme (TBLP) and the Enhanced Enterprise Financing Scheme - Trade Loan (EFS-TL) are extended until Sep 30, 2022. The maximum loan quantum for the TBLP will be revised to S$1 million per borrower, from S$3 million. For the EFS-TL, the maximum loan quantum will be revised to S$5 million per borrower, from S$10 million previously.
Satya Ramamurthy, partner and head of infrastructure, government and healthcare at KPMG in Singapore, said that the quantum of loans has been gradually reduced since 2020 - the height of the pandemic - as stress levels are reducing and more of the workforce are returning.
"Extra business measures were needed to protect businesses from the crisis, and that is being gradually weaned off," he noted.
Senior lecturer of the marketing programme at Singapore University of Social Sciences, Associate Professor Lau Kong Cheen, pointed out that although business may start picking up, cash flow may take time to reach a healthy state for most SMEs.
"Loans will come in very handy for many SMEs to manage their cash flow and also for some others to jump start their business again if they had kept their operations dormant for some time," he added.
Lennon Lee, partner, tax, at PwC Singapore, said that SMEs eligible for the loans are struggling with lower business income and increased operating costs.
"The extension of the TBLP and EFS-TL will be welcomed but the benefit is likely short lived, given that these programmes and schemes are extended for only 6 months when the effects of the pandemic are unlikely to be gone in 6 months," Lee added.
Access to project loans for the domestic construction sector, such as the Enterprise Financing Scheme - Project Loan, will also be extended for another year to Mar 31, 2023.
The construction sector has seen projects delayed for months due to severe manpower shortages, and extensions of loans are important for such sectors to see through their projects, said T Chandroo, chairman of Singapore Indian Chamber of Commerce and Industry.
"While the economy is improving slowly, some sectors are still not out of the woods as yet," he said.
Ramamurthy noted that the loans are reflective of the longer duration of projects in the construction industry, and that the structure of the loans also provide no loss for participating financial institutions.
"Yes, the loans are beneficial, but it's also important to know that these are transitional. Businesses will have to start getting back to more commercial logic starting 2023," he added.
Read more:
