SINGAPORE: Some Singapore companies are shelving expansion plans amid crippling United States tariffs and a global economic slowdown, while others could go on “life support mode”, said the Association of Small and Medium Enterprises (ASME).
Businesses are bracing for uncertainty once a 90-day pause on sweeping tariffs announced by US President Donald Trump in April ends.
“If they are impacted, they will go on life saving and life support mode and minimise expenses,” ASME president Ang Yuit told CNA.
“They will have to try out a pivot, and it ranges from case to case.”
Mr Ang said that while overall interest rates have come down slightly, leading to less intense loan repayments, they are “still not low”.
“So I think for SMEs, many are still a bit reluctant to apply for loan or working capital at this point, unless they really have no choice,” he noted.
Non-bank lender Funding Societies told CNA that it has seen a 15 per cent dip in loan requests and submissions from March to April. Before the drop, loan applications were steadily rising for several months.
The financial institution said firms are hesitant to take on loans as they reconsider their cash flows to stay afloat.
It specialises in short-term financing ranging from one to 12 months.
While it does not expect a wave of bankruptcies, it is watching closely for any red flags.
“Other bank and non-bank lenders have also started tightening within this segment preemptively and similarly for us, we also have additional scrutiny of borrowers that have supply chains that could potentially be impacted by selling to the US,” said Kelvin Teo, group CEO and co-founder of Funding Societies.
He added that many SMEs are recalibrating their business strategy.
“I think in the short term, we are fine. In the medium term, once we start seeing the cash flow level to drop or liabilities to increase, then we will have to start taking measures to manage our exposure.”
With less than half of the 90-day pause in US tariffs to go, the ASME said firms need to consider what happens after, including the likely reconfiguration of the global trading system.
The association also called for more government support to help SMEs enter new markets and integrate into a bigger supply chain network.
Skincare product company Theo10, for instance, has postponed its business growth plans and moved funds into purchasing more supplies.
The firm - which makes skincare products such as eczema creams and body washes - sources its materials from around the world, including Australia, the US and China.
When the US announced sweeping tariffs in April, the prices of such material shot up by as much as 30 per cent overnight, said the company’s director Theodore Khng.
He said the firm increased its bulk purchases when suppliers warned of a possible price hike after US President Trump secured a return to the White House.
“We had lesser cash flow for us to expand regionally, even though it was in the works,” Mr Khng added.
“We felt that securing our supply chain and the logistics issue was more pressing, rather than expansion, especially considering how unpredictable the issue may be.”
As tariff fears mounted and consumers tightened their spending, the company’s sales also fell by 15 per cent. This is despite efforts to entice customers with discounts.
Mr Khng said the situation has pushed its cash flow levels down to a “super thin line”.
“We do have reserves, but even our reserves are quite badly affected by the tariff news and all the uncertain economic moves,” he added.
“If we stretch a little bit more, it’s a very dangerous game for us to play.”
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Businesses are bracing for uncertainty once a 90-day pause on sweeping tariffs announced by US President Donald Trump in April ends.
“If they are impacted, they will go on life saving and life support mode and minimise expenses,” ASME president Ang Yuit told CNA.
“They will have to try out a pivot, and it ranges from case to case.”
CASH FLOW INSTABILITY
Mr Ang said that while overall interest rates have come down slightly, leading to less intense loan repayments, they are “still not low”.
“So I think for SMEs, many are still a bit reluctant to apply for loan or working capital at this point, unless they really have no choice,” he noted.
Non-bank lender Funding Societies told CNA that it has seen a 15 per cent dip in loan requests and submissions from March to April. Before the drop, loan applications were steadily rising for several months.
The financial institution said firms are hesitant to take on loans as they reconsider their cash flows to stay afloat.
It specialises in short-term financing ranging from one to 12 months.
While it does not expect a wave of bankruptcies, it is watching closely for any red flags.
“Other bank and non-bank lenders have also started tightening within this segment preemptively and similarly for us, we also have additional scrutiny of borrowers that have supply chains that could potentially be impacted by selling to the US,” said Kelvin Teo, group CEO and co-founder of Funding Societies.
He added that many SMEs are recalibrating their business strategy.
“I think in the short term, we are fine. In the medium term, once we start seeing the cash flow level to drop or liabilities to increase, then we will have to start taking measures to manage our exposure.”
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MORE GOVERNMENT SUPPORT NEEDED
With less than half of the 90-day pause in US tariffs to go, the ASME said firms need to consider what happens after, including the likely reconfiguration of the global trading system.
The association also called for more government support to help SMEs enter new markets and integrate into a bigger supply chain network.
Skincare product company Theo10, for instance, has postponed its business growth plans and moved funds into purchasing more supplies.
The firm - which makes skincare products such as eczema creams and body washes - sources its materials from around the world, including Australia, the US and China.
When the US announced sweeping tariffs in April, the prices of such material shot up by as much as 30 per cent overnight, said the company’s director Theodore Khng.
He said the firm increased its bulk purchases when suppliers warned of a possible price hike after US President Trump secured a return to the White House.
“We had lesser cash flow for us to expand regionally, even though it was in the works,” Mr Khng added.
“We felt that securing our supply chain and the logistics issue was more pressing, rather than expansion, especially considering how unpredictable the issue may be.”
As tariff fears mounted and consumers tightened their spending, the company’s sales also fell by 15 per cent. This is despite efforts to entice customers with discounts.
Mr Khng said the situation has pushed its cash flow levels down to a “super thin line”.
“We do have reserves, but even our reserves are quite badly affected by the tariff news and all the uncertain economic moves,” he added.
“If we stretch a little bit more, it’s a very dangerous game for us to play.”
Continue reading...