Over two thirds or 60 per cent of SMEs that sought external financing this year did so for cash flow management, said Spring Singapore in a statement disclosing the findings from its second edition of the SME Financing survey.
Bank loans were the most popular form of external financing across SMEs of different sizes, industries and stages of development.
The majority of the remaining 87 per cent that did not turn to external financing, indicated sufficient funds to operate, while a smaller proportion (9 per cent) indicated a personal preference not to borrow.
The survey also found that larger SMEs were more likely to seek external financing given their growth needs and the approval rate for debt financing was higher compared to micro companies (companies with revenue below S$1 million). On the other hand, micro companies faced lower approval rates largely due to the lack of financial documents and/or weaker business performance to support their debt application.
Spring Singapore also said that a top finance-related challenge for SMEs was managing delays in customers’ payment which affected cash flow and working capital management.
This article was contributed by The Business Times.