For over a decade now, the government has made a concerted push to foster a culture of entrepreneurship here, with the aim of grooming a core of homegrown enterprises that can go on to be regional or global champions.
As the Singapore economy undergoes a period of adjustment, renewed focus has been placed on the role of local businesses in driving the next phase of our growth.
This effort has yielded results on many fronts, whether in the form of more frenetic startup activity on the ground, or the high-profile acquisitions of local tech companies.
Despite these successes, many SME owners are struggling to grow their businesses amid a tough operating environment.
One perennial bugbear for SMEs is the transition to their next stage of development.
Perhaps recognising this dilemma, the government in this year's Budget unveiled a new set of measures to further boost its already generous support for Singapore's SME sector.
The new initiatives announced in this year's budget include the extension of more grant schemes, the topping up of the National Research Fund to help companies develop and commercialise new products and more support for SMEs looking to spread their wings abroad.
The government also unveiled a new S$500 million venture debt risk-sharing programme to provide 50 per cent risk-sharing to selected financial institutions which offer such loans.
The aim is to catalyse the growth of startups which may otherwise wither from not being able to qualify for the usual loans available.
Yet, based on discussions with our SME clients, the feeling is that more needs to be done in the area of growth financing.
Some felt that there could be a higher quantum in the government-assisted loans, some were disappointed that a Government-backed bridging loan that could help them transit into the next stage of their development was not introduced in the latest Budget.
Others had hoped for a government-assisted working capital loan that would support their cash flow needs during their expansion phase.
As a result, the SMEs we spoke to were generally neutral towards this year's Budget.
Relief measures that were unveiled, like the deferment of an increase in the foreign worker levy, felt to them like only a temporary reprieve.
The need for more targeted sources of financing has become even more pertinent in light of a still uncertain economic environment, rising operating costs and a persistently tight labour market in Singapore.
Looking beyond the obvious
With the challenging business environment in mind, we urge local SMEs to explore beyond the usual financing options.
In particular, there is a range of financing solutions in the marketplace, focused on helping SMEs grow, that many may not be aware of.
Ranging from working capital and venture debt financing to raising funds through the capital markets, these can complement government funding and equity financing and help SMEs and startups through their critical growth phases.
For instance, recent studies around working capital have indicated that there is over US$1 trillion of cash "trapped" in existing sub-optimal working capital practices in Asia.
Our working capital advisory team have helped our SME customers unlock some of this cash to lower funding cost to support further expansion.
Earlier this year, we also introduced a first-of-its-kind venture debt that seeks to help tech start-ups navigate their next stage of growth, working together very closely with our partner venture capitalists.
It is important for the private sector to not just deliver a comprehensive product and service suite, but also to add value to the entire entrepreneurial ecosystem.
This should be done through expert advisories, connections and helping SMEs discover solutions that go beyond the obvious.
Playing the long game Even with sufficient and the right types of funding in place, SMEs must keep in mind that it is the robustness of their business models that will ultimately determine whether they fail or succeed.
The ability to adapt in the face of multiple business challenges in a fast-changing environment must be the long-term goal, even as financing helps to facilitate growth.
Thankfully, it appears that local entrepreneurs are starting to realise the importance of this dynamic.
The DP Information survey showed that SMEs have embraced the need to restructure, with just over half saying their main strategy going forward is to rethink their business model.
An increasing number of businesses surveyed are also seeking to improve productivity through technology and innovation.
All these are encouraging developments for the SME sector in Singapore, and, together with the support from the government and the public sectors, can ultimately lead to a more vibrant entrepreneurial scene here.
The writer is head of SME Banking, DBS Bank
This article was first published on June 02, 2015.
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