Rising costs is the greatest challenge faced by small businesses around the world, according to the latest Global Business Monitor study from global SME partner, Bibby Financial Services and global leader in trade credit insurance Euler Hermes. Findings of the research, based on a survey of more than 2,300 SMEs in 13 countries across Asia, Europe and North America, show that two-fifths of businesses (42%) believe rising costs and overheads is their greatest challenge. Government regulation (36%) and cashflow (32%) were also cited in the top three concerns in 2019.

Despite concerns about the knock-on effects of global uncertainty, almost half say they believe their business performance will improve in the next 12 months, and a third believe they will maintain existing growth levels.

Singapore SMEs—Survey Findings

In the Global Business Monitor study conducted by Bibby and Euler Hermes, Singapore SMEs are defined as enterprises with operating receipts of no more than S$100 million or less than 200 workers. This accounts for 72% of the 3.5 million people employed across Singapore in 2019. As of September 2019, there was an estimated 261,000 SMEs in Singapore.

The survey showed that SMEs are optimistic about their growth opportunities, with 80% believing there are opportunities for their business. SMEs identified multiple avenues of growth including finding new market segments (22%), and trading internationally (13%). Against this backdrop of optimism and expected growth, 86% of SMEs plan to invest in their business in 2019, with the majority of investment ringfenced for existing staff (training and development) (41%).

Despite economic growth in 2019 having been downgraded to “0-1%”, SME optimism showed signs of improvement, rising 8 points to 42%. However, the challenges facing businesses in Singapore remain the focus for most of the SMEs. 49% of surveyed local SMEs view rising overheads and costs as a major challenge, while 45% struggle with cashflow in their business. Furthermore, many concurred that cashflow is expected to be their biggest obstacle in the next 12 months as collecting payments from customers on time remains the most difficult.

Notably, Singapore is ranked one of the highest in having to wait 30 days or more to receive payments, with an average payment duration of 41 days. In contrast, German SMEs are paid almost three weeks quicker at an average duration of 16 days.

On the other hand, Singapore has one of the lowest cases of bad debts (26%) while the US (30%) is slightly higher and the UK (23%) slightly lower.

Utilisation and access to external financing

With majority of SMEs looking to invest, there is a clear demand for finance. According to the findings, nearly one in three (30%) local SMEs utilise external and alternative financing and 18% are likely to apply in the next 12 months. Reinvestment of company profits was also one of the main sources of funding, though it fell to 28% in 2019 as compared to 47% in the last survey findings in 2017.

However, 60% felt that the application process for financing was tedious, and numerous start-ups found it difficult to gain access to external financing as they had not been trading long enough (43%). The number of bank loans also remain low at 11% with factoring even lower at 2%.

In order to finance investing in their business, 39% said they would consider factoring as a potential source of financing and 30% would consider peer-to-peer funding or online funding. While many consider the ease of use through online funding (70%), a large proportion (44%) also cited data security as a reason not to undertake it, and this poses a great challenge to SMEs when considering types of financing besides traditional bank loans.

Having access to financing will help businesses maintain a steady and positive cashflow and allowing them to invest in themselves. 71% cited favourable financing conditions as the factor that would make the biggest difference to their business.