How Budget 2019 Affects SMEs in Singapore

In one of the most anticipated announcement in parliament this month, Finance minister Heng Swee Keat delivered the Budget 2019 on 18 February. Most Singaporeans have digested the various policy announcements by now. In this article, we’ll touch on the Budget’s impact to local SMEs.

Of note is the launch of Scale-up SG by Enterprise Singapore. This program will include partnerships by private and public sectors to work with local high-growth firms to further innovate, grow and internationalize.

Although the details of the Scale-up SG programme will only be shared later this year, local companies and startups can look forward to more support to build growth capabilities. With this initiative, the government is looking to uplift promising startups with a kick-start and continue growing the vibrant local startup and venture capital ecosystem.

The Finance minister cited in his Budget announcement that there are more than 220 venture capital deals per year conducted locally worth close to US 4.2 billion. With Singapore’s ambition to be the fin-tech capital hub of Asia, we can expect more startup and venture capital friendly policies to drive this vision to fruition.

Government will also set aside an additional S$100 million for the establishment of the SME Co–Investment Fund III to catalyze investments in local SMEs. This fund will target mainly more mature SMEs that are ready to scale up and internationalize.

The SME working capital Loan introduced in 2016 will also be extended until March 2021. This financing scheme allows SMEs to access up to S$300K with a risk sharing mechanism by Enterprise Singapore. This financing scheme will be brought under a new Enterprise Financing Scheme from October.

The Enterprise Financing Scheme will encompass all current financing schemes under one consolidated scheme to improve financing access and reduce barriers for SMEs. The SME Micro Loan will likely fall under this as well. Further details will be released in October.

With the introduction of the Enterprise Financing Scheme, the government risk sharing portion for unsecured SME financing facilities will be increased to 70%. This increase in risk sharing percentage will cover SMEs that are incorporated for less than five years. The current risk sharing is 50% for most existing government financing schemes. Companies looking for an unsecured business loan to grow their business should definitely tap into the Enterprise Financing Scheme.

With the increase in risk sharing percentage, the government is encouraging participating banks and financial institutions to improve credit and funding access to eligible younger SMEs. New startups and young SMEs typically find it an arduous task to qualify for SME loan facilities from mainstream banks. Hopefully the revised risk sharing percentage will help credit worthy SMEs improve their financing eligibility.

The SMEs Go Digital program announced in Budget 2017 will also be expanded. The main purpose of this programme is to encourage SMEs to digitize and embark on building digital capabilities for the new economy. In the Budget 2019 announcement, the SMEs Go Digital programme will include digital solutions that will also be progressively rolled out.

The accountancy, sea transport and construction sectors will have their industry specific digital roadmaps. More industries will also be included later stage.

With the expansion of the SME Go Digital programme, the Government is continuing its push to be an enabler for SMEs to adopt technological solutions in a wider variety of cost-effective pre-approved digital solutions.

Another scheme that will receive an extension would be the Automation Support Package (ASP). The ASP will be extended by two years for more companies to automate their operations via robotics, IOT solutions and other Industry 4.0 technologies.

The Budget 2019 has built upon the theme of previous Budgets and that is to bolster support for our local SMEs to re-engineer their capabilities, to adapt digitally and to thrive in the new age of rapid disruption brought upon by new business models. Hopefully, SMEs can size these initiatives to successfully innovate, improve productivity and scale up.

budget 2019 SME

Image credit to Seedly