Laws passed to save SMEs; now cut the red tape, as execution is key

NOW that the government has expedited the passing of laws and a slew of measures to help businesses survive the Covid-19 pandemic, execution is key. Otherwise, the very survival of many small- and medium-sized enterprises (SMEs) could be at stake.

To date, the government has increased its risk share of loans to 90 per cent, up from 80 per cent, for borrowings initiated under the Temporary Bridging Loan Programme, the SME Working Capital Loan scheme, and the Enterprise Financing Scheme from April 8 this year to March 31, 2021. It has also granted one-month rental waivers for industrial, office and agricultural tenants of government agencies, as well as waived the foreign worker levy due in April, among others.

Now, the proof is in the pudding.

SMEs - firms with annual turnover of less than S$100 million or that employ not more than 200 workers - play a significant role in Singapore's economy. They are key generators of employment and income, as well as drivers of innovation and growth, contributing to almost half of the gross domestic product (GDP), accounting for some 70 per cent of the workforce and 99 per cent of all firms.

The Covid-19 pandemic has in a matter of weeks escalated from split operations to circuit breaker stay-at-home orders and school closures, fuelling business, job and cashflow insecurities. SMEs - which count on being nimble and adaptable to survive - are struggling, along with the entire nation, but are particularly vulnerable.

Under normal circumstances, SMEs already require quick financing to survive or stay ahead of the curve, but often find this challenging. What more now, when a global health crisis has disrupted supply chains, labour supply and shuttered most operations?

Time is of essence for SMEs that qualify for bank loans and government grants and aid. Many are unable to wait four to six weeks for loan approval and a further three months for the actual grant disbursal. Loan tenures may also pose a concern, especially in instances where the businesses require only short bridging loans.

Compared to large corporations, SMEs have a shorter operating history and are generally asset-light, so in many cases they may not have sufficient collateral for a secured business loan. Startups and newish ventures may not see breakeven or profits until later. This means the odds are stacked against them, since banks - which are typically stringent with company profile, performance, and risk assessments - may now be even more rigorous, as the crisis has detrimental consequences for banks' balance sheets and profitability. Thus, SMEs tend to be hit doubly hard during crises.

It would be most helpful to, for a start, trim the red tape. Cut the paperwork, enable faster risk assessments, pare unnecessary work rules and provide legal approvals to expedite the application process. It is a common lament among SMEs that applications - whether for aid or other services - are often tedious processes, with many referrals to other agencies for further assessments and recommendations. Now is not a time for administrative buck-passing nor to be looking for high sales while considering a grant disbursement.

Cutting back on bureaucracy is not an end in itself. The goal ultimately is saving businesses and jobs amid the economic carnage wrought by Covid-19. Yet the outbreak has also provided the perfect opportunity for everyone to think about how to streamline work processes and emerge from the battle leaner, stronger and more efficient.

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