SMEs remain optimistic amidst hardships, but fatigue settling in: DBS

Close to 30% are willing to sacrifice expansion plans to meet loan repayments.

Small and medium enterprises (SMEs) continue to remain optimistic amidst tough times, although signs of fatigue are creeping amongst business owners dealing with the continued onslaught of the pandemic on the economy, DBS reports.

In a survey of 250 SMEs across three industries most affected by the pandemic—retail, food and beverage (F&B), and building and construction (B&C)—the banking giant found that three-fourths of SME owners continues to express optimism and determination in facing the economy’s most challenging times in recent history.

But close to one in five owners also indicated ‘exhaustion’ from dealing with economic fallout of the pandemic, the survey found.

Despite being in the most severely affected industries, seven in 10 respondents indicated that they were confident of meeting their repayment obligations for government-backed loans in 2021 without impacting their current business operations.

But to meet their debt obligations, close to 30% said that they are willing to sacrifice their expansion plans and scale down their business operations to make their repayments.

Only 3% flagged that they were not confident of meeting their loan repayments in 2021 and may have to wind down their businesses.

When asked about which government support measures they found most helpful, responses varied. SMEs in the retail sector favoured the Jobs Support Scheme, with 44% of respondents saying this, compared to 28% for F&B and 26% for B&C.

Meanwhile, SMEs in the F&B and B&C sectors equally favoured working capital support at 43% each (compared to 36% from retail).

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

A significant proportion of SMEs in the B&C sector also indicated foreign worker levy rebates and the waiver of foreign worker levies as their most helpful support scheme at 22% of respondents, compared to 1% for retail and 3% for F&B.

At the same time, a notable proportion of SMEs in the F&B sector named rental relief as their top support measure, with 19% of respondents saying this, compared to 7% for retail and 1% for B&C.

When asked how else they would like the government to support their businesses in emerging stronger from economic downturn, SMEs surveyed ranked more grants, more rental relief, and more flexible manpower policies as their top three desired areas of support, DBS noted.

In terms of business priority, SMEs across all three sectors uniformly ranked working capital as their top priority to tide through the current economic downturn, with 65% of respondents highlighting this as key to helping them cope with overheads.

This represents a 35-percentage point (ppt) rise from 30% when the same question was asked at the end of May as Singapore was emerging from the extended circuit breaker, noted DBS.

“Back then, SMEs needed the cashflow support just to stay afloat and keep their 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,” said Joyce Tee, group head of SME banking at DBS.

Majority or 66% of SMEs surveyed also said that banks could support their business recovery by rolling out more working capital financing options.

Meanwhile, more than one in 10 or 13% called for banks to provide more loan moratoria.