Shrewd creditors slog struggling retail SMEs with stricter lending terms

SMEs are being pressured to settle debts faster.

Wary creditors are tightening the purse strings when it comes to lending to the country’s struggling retailers.

A report from the DP SME Commercial Credit Bureau showed that retail SMEs were the most improved debt payers in Singapore in 2014, as more lenders establish stricter lending terms for retailers. 

According to the Days Turned Cash National Average, SMEs in the retail sector have increased the speed they pay bills by 21 days – from 63 days at the end of 2013 to just 42 days at the end of 2014.

The report states that the faster payment speeds may have been forced on the retail industry by creditors and suppliers.

“The Commerce-Retail sector has had an uphill battle since the changes to the foreign talent laws in 2013 as they have been forced to wean themselves off cheap labour and find ways to improve productivity. They are also under pressure from increased rental costs. That’s why companies that extend credit to retail companies have become stricter in their lending terms, requiring faster payment of debts,” said Ong Siew Kim, Senior General Manager of DP Information Group.