What do recent SG Budgets mean for SMEs?

With the impact of COVID-19 deepening, the Singapore Government has pulled out the stops to support people and businesses.

On 6^th April 2020, the most recent of three successive Budgets – the Solidarity Budget - was announced by Minister Heng Swee Keat, Deputy Prime Minister of Singapore and Minister of Finance.

The Solidarity Budget is aimed at complementing and reinforcing the Resilience¹ and Unity² Budgets announced on 26^th March and 18^th February, respectively.

The primary aim of the latest Budget is to take further steps to save jobs and protect the livelihoods of people. It is also aimed at helping businesses preserve capabilities and capacity to resume activity when the ‘circuit breaker’ is lifted.

The combined Budgets total $59.9 billion, representing 12% of Singapore’s GDP.

This is a significant support package, and the Government has extended a particular focus on supporting the country’s enterprises – the task now is for business owners to navigate and activate the measures appropriately.

Enhanced Support Measures for SMEs

The Government has formulated a bold and practical package to enhance support to SMEs under pressure, looking not only at today, but at the long term impact on businesses.

HSBC is a participating bank for the enhanced measures extended via the following Enterprise Singapore financing schemes.³ Below is a short summary of measures which may be of importance to SMEs:*

1. The maximum loan quantum under the Enterprise Financing Scheme - known as the EFS - SME Working Capital Loan (WCL) – has been raised from SGD 600,000 to SGD 1 million.
2. The Temporary Bridging Loan Programme (TBLP) has been expanded to provide additional cash flow support for all business sectors. Under this programme, eligible enterprises can now borrow up to SGD 5 million, with the interest rate capped at 5% p.a. from HSBC.
3. The enhanced Enterprise Financing Scheme (EFS) – Trade Loan which will increase the maximum loan from SGD 5 million to SGD 10 million.
4. Businesses eligible under the EFS – SME Working Capital Loan and TBLP may also apply for up to 1-year deferral of principal repayment to help manage their debt*.

We’re in an environment where the decline in supply and demand is impacting cash flow. Loans today are being used for survival, but businesses still need to plan for the future. Introducing the EFS will give SMEs breathing space to plan cash flow moving forward.

Most recently, the Government announced that it will increase the risk share of loans from 80% to 90%, applying to the Temporary Bridging Loan Programme, the Enterprise Financing Scheme – SME Working Capital Loan, and the Enterprise Financing Scheme – Trade Loan.⁴ This is a material uplift and enables us as a bank to widen the breadth of our book beyond normal risk thresholds to extend liquidity and repayment flexibility to our clients.

The Monetary Authority of Singapore (MAS) has since also introduced a package of financial measures, complimentary to the Budgets, to help further ease the financial strain on SMEs.⁵ We are supportive of this move by the MAS, and will enable our Business Banking clients to make use of these measures which include the option for SMEs to defer principal payments on their secured term loans up to 31 December 2020.**

In addition, HSBC Singapore has introduced a number of additional measures designed to continue to support SMEs in the areas of commercial trade and corporate treasury, including collection, handling and deployment of cash.⁶

Activating support measures

The Singapore Government has responded decisively to the needs of SMEs; there are more options to tackle challenges in this time of need. Liquidity is vital to companies during this time, so businesses must be proactive in managing their cash and credit.  We urge SMEs to evaluate both the Government measures and their own business requirements for additional short-term financing.

*All loans extended under Enterprise Singapore’s financing schemes are subject to Enterprise Singapore’s qualifying criteria and approvals, and HSBC’s credit and internal approvals.
**The deferral of principal payments is subject to HSBC’s credit and internal approvals.

¹ https://www.singaporebudget.gov.sg/budget_2020/resilience-budget

² https://www.singaporebudget.gov.sg/budget_2020

³ https://www.enterprisesg.gov.sg/financial-assistance/loans-and-insurance/loans-and-insurance/enterprise-financing-scheme/overview

⁴ https://www.businesstimes.com.sg/government-economy/singapore-budget-2020/solidarity-budget-government-risk-share-of-loans-raised

⁵ https://www.mas.gov.sg/news/media-releases/2020/mas-and-financial-industry-to-support-individuals-and-smes-affected-by-the-covid-19-pandemic

⁶ https://www.business.hsbc.com.sg/en-sg/business-continuity-plan?pid=HBSG:VL:MS:GEN:XX:HOM:0228:001:COVID