2020 has been off to a rough start. The recent Russia-Saudi Arabia oil war and COVID-19 outbreak have proved to be a double whammy for global economies. Likewise, the Singaporean economy has not been spared.
Singapore is now looking at a full-year recession as preliminary figures on March 19 2020 show that the economy has shrunk 2.2% year-on-year in the first quarter. However, the Singapore government has already begun rolling out a series of short-term and long-term measures to help businesses and individuals tide over this precarious period.
To provide aid for all workers and businesses, Deputy Prime Minister and Finance Minister Heng Swee Keat have announced approval for the government to draw a historic S$17 billion from past reserves to fund a supplementary 2020 budget of S$48 billion.
Including the S$6.4 billion announced in Budget 2020 last month, Singapore will be setting aside close to S$55 billion (11% of the nation’s GDP) in total for the battle against COVID-19. Here are some highlights of the Budget 2020 speech and how the Resilience Budget will benefit the Singaporean economy and businesses.
Jobs Support Scheme to offset wage costs
To help businesses pay their employees’ wages, the Singapore government has significantly enhanced the Jobs Support Scheme. S$15.1 billion (almost one-third of the Resilience Budget) will be dedicated to assisting businesses in retaining and supporting their workers.
The co-funding of wages for local employees will be raised from the initial 8% to 25%, with the most severely affected sectors such as the food and tourism industry receiving higher wages, having borne the direct impact of COVID-19.
In addition to raising the monthly qualifying wage ceiling from S$3,600 to S$4,600, the Job Support Scheme will also be extended until the end of 2020, with employers receiving three payouts in May, July, and October. Only Singaporeans and permanent residents on a business’ payroll will be eligible. It’s important to note that employees of government organisations and representative offices are not included in this scheme.
No GST hike in 2021
A S$6 billion Assurance Package will be allocated to buffer the potential economic strain in the next 5 years with a delay in the planned increase of GST rates from 7% to 9% first announced in 2018. Additionally, a further $8.3 billion will be spent to develop and stimulate the Singaporean economy.
These measures will allow the cost of purchasing goods and equipment to remain affordable. Alternatively, instead of splurging on expensive machinery, try equipment leasing. This could increase your liquidity and allow you to use the latest technologies required in your field of work at a lower cost.
Providing loans to help business with cash flow
To provide businesses with an access to credit amid the coronavirus, the government will also be enhancing the SME Working Capital Loan. Announced at Budget 2020, the loan quantum has been raised to S$1 million, up from the initial S$600,000 cap with a maximum repayment period of 5 years. Moreover, the Government’s risk-share has also increased to 80%, compared with the previous 70%.
Entering into a risk-sharing agreement with the Government significantly diminishes a business’ vulnerability to probabilistic events that may negatively impact a company’s financial standing. Driven by a preference for equality, more risk–in this case, 80%–is borne by the Government in order to reduce income inequalities and support small businesses.
For SMEs who are looking to secure a loan, do so via participating financial institutions. For instance, with ETHOZ, there are several types of SME business loans available:
– SME Working Capital Loan: for SMEs with group revenue of up to S$100 million or maximum employment of 200 employees; the maximum loan amount of S$1 million for business operations.
– SME Fixed Assets Loan: for SMEs with group revenue of up to S$100 million or maximum employment of 200 employees, maximum loan of S$30 million for equipment purchase or upgrading and the purchase of business properties
– Temporary Bridging Loan: for all eligible sector enterprises; maximum loan of up to $5 million
Property tax rebate for businesses and most affected industries
Business in the retail, tourism, food services, point-to-point transport and aviation industries which are most affected by COVID-19 will receive the most support with the payment of property tax for the rest of 2020 being waived. Moreover, property tax rebates of 30% will be granted for other businesses in non-residential properties such as offices or industrial properties.
With the savings from the property tax rebates, business owners looking to maintain a competitive edge can consider a rebranding and renovation of their retail premises. For those who still require more capital for renovation, consider taking renovation loans.
Alternatively, businesses who are cash-strapped can opt to take property mortgage loans at competitive interest rates.
Finance Your Business in 2020
While the Singapore government works on rolling out economic measures, business owners can and should take individual steps to find capital for labour costs, shop or office rentals and fund new business opportunities.
At ETHOZ, we offer a slew of term loans to provide uncomplicated, fuss-free methods to secure funding. These loans include working capital loans, business term loans, shipping loans and renovation loans.
To aid you in making informed financial decisions, we have a host of Relationship Managers to guide you through the process. This way, you can more easily and smoothly make careful choices and investments to aid your business.