Value of loans to SG SMEs fell by 42% in 2023

There were less SMEs earning $300,000 a month who took out loans.

The average amount loaned out to Singapore’s small and medium enterprises (SMEs) was nearly halved in 2023 compared to a couple of years ago amidst a rise in interest rates.

Loan values to SMEs in the Lion City fell 42% to just $130,000 in 2023, compared to $184,345 in 2022 and $224,000 in 2021, according to data from Linkflow Capital, based on a study of data from 2,466 users of its SME loan comparison total.

Over the same period, business loan interest rates spiked to 8.16% in 2023, the highest in the decade. This is also more than triple the lowest rate of 2.5% recorded in 2020 during the pandemic.

The sharp rise in borrowing cost and decrease in loan quantum reflects the challenging financing landscape that SMEs faced in 2023, noted Benjamin Teo, Linkflow Capital spokesperson.

"This trend is driven by the unwinding of pandemic-era support measures and the broader high interest rate environment,” Teo noted.

As for the SMEs revenue profiles, LInkflow Capital observed an increased proportion of users in higher revenue brackets. One in two (50%) of users reported annual revenues below S$300,000– lower than the 57% in 2022.

Digital banks are gaining traction as the loan provider, rising 17%. This is a threefold increase from its share in 2022.