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23 Jun 2020 Updated 26 Jun 2020

Over 7,600 businesses loaned about S$7.1 billion

The Business Times Lynette Tan

MORE than 7,600 businesses in Singapore borrowed about S$7.1 billion from government-assisted schemes over the past few months, with most of the loan applications coming from the wholesale trade, manufacturing and construction sectors.

And the loan value, amassed from March till mid-June, is more than five times the credit that was extended in 2019, said Enterprise Singapore (ESG), which oversees financing schemes including the SME Working Capital Loan and Temporary Bridging Loan Programme.

More than 80 per cent of the loans were extended to micro and small enterprises, which have less than S$10 million in annual revenue.

About 22 per cent of companies that have taken out loans operate in wholesale trade, 15 per cent are in manufacturing and 14 per cent in construction. The remaining firms are in other sectors such as services and retail.

Those three sectors have been the top three sectors that took up these loan schemes even pre-Covid-19, said Joanne Tan, assistant chief executive officer for capability programmes and planning at ESG.

Construction and manufacturing businesses typically require ready and regular cash flow to start production and projects as payments for work done would come at a later stage. Similarly, traders have to pay for the goods first but only receive payment from their buyers later.

To ensure that businesses continue to get access to credit amid the novel coronavirus crisis, the government has taken a 90 per cent risk share on loans under schemes overseen by ESG until March 31 next year.

But even as SMEs tapped the loans to meet immediate needs such as sustaining their operations, some have also used their loans for longer term plans such as "building new business capabilities and diversifying their business model to capture new opportunities", said Ms Tan.

Avero Tech, a five-year-old company specialising in developing software and programming, told The Business Times that it was not affected by the pandemic or the "circuit-breaker" period but instead, received enquiries from schools and government agencies looking to move their operations online.

Founder Lewis Cao saw it as an opportunity to grow and took out a S$100,000 loan to hire more staff to cope with the demand. He said: "The loan is very crucial because we were able to hire two programmers to immediately work on proposals (for prospective clients), and with them, we can win up to S$1 million in new projects."

The extra pairs of hands also enabled the company to work faster than usual and meet clients' urgent demands during the pandemic, Mr Cao added.

Hygge, a retailer at Haji Lane catering primarily to tourists, saw takings start to slide around March when travel restrictions were increasingly implemented to curb the spread of the virus. PHOTO: HYGGE
Hygge, a retailer at Haji Lane catering primarily to tourists, saw takings start to slide around March when travel restrictions were increasingly implemented to curb the spread of the virus. PHOTO: HYGGE

On the other hand, Hygge, a retailer at Haji Lane catering primarily to tourists, saw takings start to slide around March when travel restrictions were increasingly implemented to curb the spread of the virus. When the "circuit-breaker" period kicked in in April, Hygge's earnings were reduced to zero, said founder Tony Liu.

Mr Liu and his wife, who run the store together, decided to set up an online store and embark on digital marketing to support the business, borrowing a sum to cover the costs of doing so, and overheads for a year.

The online store was launched a month ago and orders are coming in, he said. The goal is for online sales to supplement physical store sales even after Covid-19. Even though the physical store has reopened, sales are still only about 30 per cent of pre-virus levels.

"We're quite thankful for the loan. Without it, we would have seriously considered closing down," Mr Liu said.

Meanwhile, Prime Force Engineering & Construction secured a S$200,000 loan to cover some operational expenses and refurbish equipment so as to divest them as part of plans to scale down its business during this period.

"Although we have some reserves, it can only last us about two to three months," said director Jacky Goh. The company has been "deeply impacted" by the Covid-19, having recorded zero revenue since April, when the "circuit-breaker" period started.

Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.