Helping SMEs tackle issues of liquidity, business development and efficiency

SINGAPORE’S small and medium enterprises (SMEs) are the heartbeat of the economy, making up 99 per cent of enterprises and accounting for about 70 per cent of the labour force. Yet how can they continue to grow and succeed in an increasingly challenging and complex global environment?

As Maybank Singapore head of SME banking, I have worked with many business owners and gained insights into their priorities, concerns and challenges. The journey towards thriving and succeeding is not something that SMEs should have to undertake alone. Rather, it is a collaborative effort where governments and corporates support SMEs from start-up to growth and expansion.

SMEs face three main business challenges: liquidity, business development and operational efficiency.

Liquidity matters because it is an indicator of an SME’s ability to fulfill its liabilities or debt obligations, and is a key consideration when banks decide whether to offer them credit and financing facilities. SMEs need healthy liquidity ratios to sustain and expand their business operations.

From the first day of their operations, SMEs should find a banking partner whose values are aligned with theirs, and whom they can trust, to open a business account which suits their needs. With this business account, they can deposit their revenue and gradually build up an operating track record.

SMEs will benefit from having such a track record, as within months of their business inception, they will be able to apply for finance facilities such as credit lines, as well as other financing solutions such as term loans, trade finance, and asset-backed loans.

At the same time, SME owners should monitor their companies’ liquidity ratios, with forward-looking scenarios to guide decisions on their financing needs.

Business development, meanwhile, can be a challenge due to a lack of talent. In my years of working with SMEs, I’ve observed that many lack the know-how to effectively market their innovative products or services.

This could be due to insufficient or untrained employees who are unable to execute marketing strategies, or under-investment in digital capabilities and technology due to a lack of funds or know-how.

Finally, many SMEs do not set their operational foundations right at the onset of their business. This includes areas such as accounting, human resources and payroll, where operations may be paper-based and not institutionalised or systemised.

Digitalisation and technology, such as data analytics and the Internet of Things, can help SMEs overcome the latter two challenges of business development and operational efficiency.

A 2021 study indicated that small businesses that readily adopt new technology have an average of 120 per cent higher revenue and 106 per cent higher productivity than those that do not.

With the time and cost savings from improved operational efficiency, SME business owners will have more time and resources to strategise for long-term business growth.

However, SMEs today face challenges such as rising geopolitical tensions, increasing protectionism, supply chain disruptions and a high interest rate environment. The outlook does not appear rosy.

SMEs need the right support to keep growing in challenging times. Here, the Singapore government continues to play a vital role. This year, it made top-ups of S$150 million to the SME Co-Investment Fund for promising, growth-oriented SMEs, and S$1 billion to the Singapore Global Enterprises initiative, which helps large local enterprises in areas such as innovation, internationalisation and fostering partnerships.

Financial institutions such as banks are also committed to supporting SMEs, in both good and bad times. For example, during the Covid period, SMEs could lower their short-term repayment obligations for their loans and stay insured despite facing financial difficulties. Several banks offer SME schemes and provide mentorship, such as Maybank’s Young Entrepreneur Scheme, to help businesses stay nimble, connected and relevant.

With public and private support, SMEs can tap a wide array of schemes that best align with their goals, to help ensure their business sustainability and success.

The writer is Maybank Singapore head of SME banking.