Close to 90% of Small & Medium Enterprises (SMEs) that pursued external financing last year were successful in their requests for debt funding, as per an SME Financing study conducted by Spring Singapore. Around 13% of SMEs looked for external financing in the last year.
The remaining 87% of SMEs chose not to go for external financing. This indicates adequate funds to function. On the other hand, around 9% of SMEs preferred not to borrow.
Most Small & Medium Enterprises of diverse sizes, at different phases of development, and belonging to various industries opted for bank loans. Over 60% of the SMEs requested external financing specifically to help with cash flow management.
The survey also indicated that bigger SMEs will possibly require external funding, taking into consideration a higher rate of growth and a higher approval rate for debt funding, in comparison to smaller SMEs and their growth needs. In contrast, start-ups and smaller companies were confronted with lower approval rates mainly because of lack of financial papers and/or fragile business performance to back their loan application.
The study also found that a major difficulty for SMEs was handling delays in customers’ payments, which impacted working capital management and cash flow. For instance, most SMEs do not know the ideal working capital they require to operate in relation to industry peers.
Spring’s 2016 SME survey found that 25% of SMEs anticipate delays in customers’ payments between 2016 and 2017. This feeling resonated in Spring’s 2017 study. This led Spring to partner with PwC and extend its working capital study to consider home-grown SMEs, and deliver benchmarks on the performance of working capital of enterprises in other industries.