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Cash flow relief to help SMEs cope with Covid-19 impact
Over the past decade, linkages between China and other regional economies have strengthened substantially, and China is Singapore's largest trading partner today. As the world comes to grip with the coronavirus outbreak, Asian economies, including Singapore, has taken immediate action to support the needs of local businesses and individuals.
A slowdown in Chinese economic activity will impact the region's supply chains and have implications on Singapore as well. Unsurprisingly, Prime Minister Lee Hsien Loong said recently that the impact of the coronavirus outbreak has already exceeded that of the SARS pandemic of 2003.
Closer home, immediate effects can be felt within the tourism and transport sectors, while broader consequences will impact the economy throughout the remainder of 2020.
The government promised support for Singapore's companies and workers1, and the recently announced Budget 2020 is set to deliver. It outlines initiatives to support small and medium-sized enterprises (SMEs), which generate almost half of Singapore's GDP and employ 72 per cent of the workforce2. The SME support measures outlined in the budget will go a long way to meeting their near-term liquidity needs and helping cash flow management in an uncertain economic environment.
Cash Flow Support for SMEs to Meet Liquidity Requirements
Budget 2020 announced a bridging loan programme3 to help SMEs in the tourism industry cope with their short-term liquidity challenges as a result of COVID-19. UOB is one of the participating financial institutions.
As part of this support measure, impacted businesses can use the loan for labour wage costs (to retain workers), to meet rental expenses and to cushion the impact from the virus outbreak. The key thrust of the support measures is to provide cash flow management and support to SMEs, so they can continue with their business operations despite the disruptions in the global supply chains. Companies in the tourism industry can loan up to S$1million, at a lower preferential interest rate, across a repayment period of up to five years.
The bridging loan programme is part of a S$4 billion Stabilisation and Support Package, which has several components that aim to help companies retain their employees and help them with cash flow.
The package also comprises the Enterprise Financing Scheme's Working Capital Loan3, which has been enhanced, with the maximum amount of the loan increased from S$300,000 to S$600,000; and with the risk-share on these loans being increased from 50 and 70 per cent to 80 per cent.
To help enterprises' with their cash flow, the government is also granting a corporate income tax rebate3 of 25 per cent of tax payable per company, capped at S$15,000.
There will be additional support measures for the hardest hit sectors, namely tourism, aviation, retail, food services and point-to-point transport services.
The support provided by the government to enterprises is similar to the S$230 million package the government implemented during the 2003 SARS crisis, which comprised property-tax rebates and a bridging loan programme for SMEs.4
UOB is Committed to Steering SMEs Through these Uncertain Times
UOB has allocated S$3 billion5 to provide companies financial relief at a challenging time for their business stability. Companies with good track record can benefit from measures such as:
- Deferring principal payments and servicing only interest for up to one year;
- Extending their current payment tenor; and
- Increasing their loan amount or getting an overdraft facility against mortgage security for financing liquidity.
As the biggest partner for SMEs in the unsecured space, the bank also offers working capital loans of up to S$550,000 to SMEs without any collaterals and with up to S$2,500 rebate6.
UOB is committed to helping its customers navigate this challenging time. With the support of the various stakeholders in the business ecosystem, such as the government, financial institutions and industry associations, SMEs will be able to overcome the challenges brought about by COVID-19 on their businesses.
Speak to us to find out how you can leverage on these relief measures to strengthen your cash flow.
