According to a research conducted by Linkflow Capital, a business loan consultancy firm, up to 81% of SMEs in Singapore do not qualify for business financing. Linkflow Capital operates an online SME loans comparison web portal and since its beta launch in January 2017, there have been over a thousand SMEs that utilized the free online loan assessment and comparison tool.
“With our web portal’s data we collated from a sample set of 1065 SMEs users from January to September 2017, we discovered that up to 81% of these SMEs might not qualify for business financing.” said Ben Teo, a spokesperson for Linkflow Capital. “Our web portal offers small businesses a free online SME loan assessment tool powered by our proprietary credit algorithm. With over 8 years of experience in the local SME financing space, our assessment algorithm closely aligns with generally applied credit criteria of most SME banking lenders.”
Aggregated data released by Linkflow Capital indicates that 81%, or 863 out of the 1065 users that utilized the online business loan assessment platform are not eligible for financing. The most common reason for potential rejection of loan applications is due to losses reported in their financials with 55% of users indicating that they are loss making. Another common reason leading to potential rejection of financing applications is the age of the company. 21% of users are new startups incorporated for less than a year. Most banks require minimum two to three years of operational history to be eligible for financing. 52% of SME users indicated annual revenue of below S$300,000 and low operating cash flow which are also adverse factors leading to rejection when it comes to financing eligibility.
Due to Singapore’s current slowdown in the domestic economy, SMEs might face challenges obtaining financing from mainstream banks and financial institutions. The Singapore government has introduced measures to help SMEs improve access to financing such as the SME Working Capital Loan program introduced in June 2016. Finance companies also had their cap on unsecured business loans extended to SMEs raised from 10% to 25% of its capital funds in February 2017. There are also alternative business lending platforms such as P2P crowdfunding catering to SMEs whom might not qualify for traditional banking facilities.
With a slew of other government led initiatives such as the SME Talent Programme, the Capability Development Grant and SME Go Digital Programme, small businesses have multiple sources of assistance to restructure, survive and thrive in the new age of business disruption.
Source: Media Release