Debrief: Support for distressed SMEs to ride Covid-19 crisis includes debt restructuring aid

What’s the story

Two debt restructuring schemes have been introduced to help distressed small and medium-sized enterprises (SMEs) in Singapore, providing support to those facing challenges amid the Covid-19 crisis.

The Sole Proprietors and Partnerships Scheme and Extended Support Scheme – Customised allow SMEs to restructure their credit facilities and debts owed to multiple creditors.

These are part of the extended relief measures announced by Monetary Authority of Singapore, the Association of Banks in Singapore and the Finance Houses Association of Singapore last month.

Besides debt relief, SMEs have also benefited from other support schemes rolled out over the past year, including enhanced grants to encourage enterprise transformation and incentives to boost adoption of digital solutions.

Wage support, like the Jobs Support Scheme, has also reduced the burden on SMEs and helped them retain workers.

Why it matters

SMEs, which are generally defined as companies with an annual turnover of less than $100 million or employ fewer than 200 workers, form a significant part of Singapore’s economy.

They account for about 99.5 per cent of enterprises here, according to 2019 data from the Department of Statistics (Singstat).

They also employ over 70 per cent of the country’s workforce and contribute about 44 per cent of Singapore’s gross domestic product.

Continued growth and development of Singapore’s SMEs are therefore crucial to ensuring the vibrancy of the Republic’s economy, especially against the gloomy backdrop of a recession amid the coronavirus pandemic.

What lies ahead

Firms which have multiple lenders will benefit from the collective measures to help them restructure their debt, including loans under the Temporary Bridging Loan Programme and Enhanced Working Capital Loan Scheme administered by government agency Enterprise Singapore.

Besides help with debt restructuring, SMEs also benefit from initiatives to bolster transformation and growth, and help them repare for the changes in the world’s economy post Covid-19.

These include the Enterprise Leadership for Transformation programme, which provides training for SME leaders to help them better tap growth opportunities, launched late last month (October).

More on this topic

SMEs could also receive a year of salary support for each new local hire, as part of the Jobs Growth Incentive (JGI), an initiative targeted at encouraging employers to accelerate hiring of local workforce.

Up to 50 per cent of salary support will be provided for each hire, although the payment that firms receive will be adjusted if local workers leave their companies. The first JGI payout will start in March 2021.

Such measures to boost hiring among SMEs, which employ the bulk of Singapore’s workforce, will help to ease the soft labour market situation.

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