What's keeping local SMEs from obtaining business financing?

What's keeping local SMEs from obtaining business financing?

By: 
Michelle Zhu
04/10/17, 03:40 pm

SINGAPORE (Oct 4): A majority of small medium enterprises (SMEs) in Singapore are unlikely to qualify for business financing, according to recent data from Linkflow Capital.

Since Linkflow Capital's SME loans comparison web portal was launched in January, out of 1,065 SMEs which have utilised its free online loan assessment and comparison tool, 81% or 863 of the users may not meet these requirements for financing.

Based on information found on the business loan consultancy firm’s website, general business loan criteria include a minimum annual revenue of $200,000; an operational business which has been incorporated for at least six months; and a minimum local or PR shareholding of 30%.

See: Linkflow Capital Business Loan Assessment  

According to Linkflow Capital, the most common basis for the potential rejection of loan applications would be the losses reported in company financials, with 55% of users indicating they are loss-making, says Linkflow Capital in a Wednesday press release.

Another reason would be the age of the company, as 21% of the website tool’s users have identified as new startups incorporated for less than a year – whereas most banks would require a minimum 2-3 years of  operational history to be eligible for financing.

Meanwhile, more than half (52%) of SME users indicated an annual revenue of below $300,000 and low operating cash flow, which Linkflow Capital have also highlighted as adverse factors which may lead to rejection when it comes to financing eligibility.

As such, it is believed that SMEs may be facing challenges in obtaining financing from mainstream banks and financial institutions, especially given Singapore’s current slowdown in the domestic economy.

“The Singapore government has introduced measures to help SMEs improve access to financing such as the SME Working Capital Loan program introduced in June 2016. Finance companies also had their cap on unsecured business loans extended to SMEs raised from 10% to 25% of its capital funds in February 2017. There are also alternative business lending platforms such as P2P crowdfunding catering to SMEs whom might not qualify for traditional banking facilities,” notes Linkflow Capital.

“With a slew of other government led initiatives such as the SME Talent Programme, the Capability Development Grant and SME Go Digital Programme, small businesses have multiple sources of assistance to restructure, survive and thrive in the new age of business disruption.” 

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