Half of Singapore’s small businesses feeling inflation pain

New research from global SME funder, Bibby Financial Services, reveals that small and medium sized enterprises (SMEs) in Singapore are feeling the pressures of inflation and cashflow strains, but remain optimistic about future growth as they increasingly turn to external sources of financing to address immediate challenges and support their growth plans.

Although business sentiments are positive, findings from the 2023 Global Business Monitor, which surveyed SME owners and decision makers from nine countries including Singapore, pointed to inflation and rising costs emerging as top concerns (51%) for SMEs in Singapore. This is followed by an uncertain economic environment (38%), energy costs and supply (34%), and supply chain pressure (31%).

Notwithstanding these challenges, Singapore’s SMEs are determined to accelerate the growth trajectories of their business and aim to invest around SGD $294,337 on average to priority areas identified as digital technology and IT (38%), marketing and sales (32%), and staff training and development (32%).

But with cashflow being a critical component in unlocking investment streams, the ambitions of SMEs in Singapore have been clouded with cashflow strains, with four in 10 (40%) having suffered a bad debt in the last 12 months. 28% of small businesses were also revealed to have had insufficient cashflow to grow.

This is exacerbated by delayed payments, with close to 60% of SMEs indicating that it is taking longer for customers to pay them, compared to a year ago. Meanwhile, 48% of SMEs surveyed noted that their customers have entered administration in the past 12 months, putting further pressure on operating costs.

Kenneth Tham, Managing Director, Singapore and Southeast Asia at Bibby Financial Services, said: “Working capital strain is especially acute for SMEs that require higher amounts of cash payments for their workers’ wages. This includes businesses from the sectors of Manpower Services, Security Services, Cleaning Services, Construction, Logistics, Wholesale and Distribution. We are also seeing SMEs in Singapore encountering administrative delays and this is common among payments being made by larger organisations.”

Continued rising interest rates are also prompting more businesses to consider alternative methods of financing to traditional sources. SMEs are now increasingly turning to third-party financing with more than half (57%) indicating that they are more likely to use external financing than before the Covid-19 pandemic.

“Singapore’s SMEs are the backbone of the economy and ensuring they can cope with increasing costs and inflationary pressures is a key priority. With traditional financing sources revaluating credit appetites, SMEs need to consider a range of financing options so they can maintain sustainable working capital and cashflow. This will enable them to navigate headwinds, capture opportunities, and fuel their local and international aspirations.”

Against the backdrop of challenges and pressures that SMEs in Singapore face, 82% SMEs indicated that they remain highly optimistic about their business outlook in 2023. Unlike other markets surveyed, Singapore’s SMEs are also upbeat about the global economy, with only 24% believing that global economic conditions are worse now than during the Covid-19 pandemic.

Kenneth Tham, commented: “Government schemes have helped to maintain a level of optimism in Singapore that is higher than in many other markets. However, some sectors, especially those reliant on exports, are more vulnerable to global downturn and supply chain disruption. Across the board, access to affordable external financing is critical in tackling the challenges Singapore’s SMEs face today.”

The Singapore segment of the Global Business Monitor report is available online, and the full global report can be accessed here.

This is a press release from Bibby Financial Services. Asia Markets sometimes makes small edits for editorial reasons.