With the current COVID-19 situation resulting in Singapore’s “circuit breaker” measures amidst a global economic slowdown, the government has introduced a raft of measures aimed at supporting SMEs through this difficult time, as well as preparing them for the eventual recovery and upturn.
These measures were rolled out in two supplementary budget statements, the Resilience Budget and the Solidarity Budget, which build on the support measures in the original Budget 2020.
Jobs Support Scheme
The Jobs Support Scheme was enhanced to provide more impactful and sustained wage support. Under the resilience budget, the Government’s co-funding of wages was raised from 8% to 25%. Firms in the food services sector will receive higher support, at 50% of wages, and firms in the aviation and tourism sectors, which are the most badly affected sectors, will be supported at 75% of wages. The monthly qualifying wage ceiling was raised from $3,600 to $4,600.
The Jobs Support Scheme will be extended for another two quarters, till the end of 2020, so employers will receive a total of three tranches of payouts, in May, July, and October this year. With these enhancements, a total of $15.1 billion will be allocated to support more than 1.9 million local employees under the Jobs Support Scheme.
Currently, with the circuit breaker measures in place, the Solidarity budget announced that the Jobs Support Scheme has been further enhanced for the month of April, with the wage subsidy for all firms increased to 75% of gross monthly wages, for the first $4,600 of wages paid in April 2020, for each local employee
Maintaining cash flow for businesses
The Resilience Budget aims to help business overcome immediate challenges: cash flow, cost, and credit. To ease cash flow problems for businesses in this immediate period, the government aims to flow payouts under the wage support schemes quickly, with more than $600 million disbursed to employers under the former Wage Credit Scheme parameters.
The government aimed to pay out a total of $5.6 billion under the Jobs Support Scheme and the Wage Credit Scheme. With the enhanced circuit breaker measures in place, the Solidarity budget aims to realise this first payout in April.
Agencies continue to work towards bringing forward an additional $500 million of wage credits under the enhanced parameters, from September to end-June. Altogether, the Jobs Support Scheme and Wage Credit Scheme will flow $16.2 billion into the hands of businesses by October this year.
To further ease cash flow for businesses in the immediate period, an automatic deferment of income tax payments for companies and self-employed persons has been granted for three months.
For companies, income tax payments due in April, May, and June 2020 will be deferred. Instead, income tax payments will only be payable from July 2020, freeing up cash to meet more urgent needs.
To help defray costs for businesses, the Property Tax Rebate was enhanced by raising the amount and covering more types of properties.
For 2020, qualifying commercial properties that have been more badly affected by the COVID-19 outbreak, including hotels, serviced apartments, tourist attractions, shops, and restaurants, will pay no Property Tax. This is a an enhancement from the 15% to 30% Property Tax Rebate announced in the Unity Budget.
Businesses in other non-residential properties such as offices and industrial properties will now be granted a Property Tax Rebate of 30% for the year 2020. Measures have been put in place, including a new bill, to ensure that this support reaches the businesses affected. The Government will lead by example in supporting tenants by enhancing rental waivers, and freezing all government fees and charges by one year, from 1 April 2020 to 31 March 2021.
Enhancing credit schemes
Under the Resilience Budget, financing schemes were enhanced so that even the hardest-hit businesses can continue to have access to credit.
The Enterprise Financing Scheme (EFS) – SME Working Capital Loan was introduced in Budget 2020 to alleviate SMEs’ cash flow concerns. The Temporary Bridging Loan Programme (TBLP) was introduced for enterprises in the tourism sector.
To support businesses’ trade financing needs, the EFS – Trade Loan was enhanced by to Resilience budget to increase the maximum loan quantum from $5 million to $10 million, and increasing the Government’s risk-share from up to 70%, to 80%. Under the Solidarity Budget, this was further increased to 90% for loans initiated from 8 April 2020 until 31 March 2021.
Subsidies to businesses for loan insurance premiums under the Loan Insurance Scheme will also be increased from 50% to 80%. The Temporary Bridging Loan Programme will be expanded to all sectors, and increase the maximum supported loan from $1 million to $5 million.
SMEs that require support beyond the TBLP can continue to tap on the EFS –SME Working Capital Loan. The maximum loan quantum for this will be further enhanced, from $600,000 to $1 million. In addition, the government will work with Participating Financial Institutions to defer capital payments for one year on the EFS-Working Capital Loan and the TBLP loans if requested by businesses, subject to assessment by Participating Financial Institutions.
In addition to these enhancements to our financing schemes, $20 billion of loan capital in this Budget has been set aside. This will help to support good companies with strong capabilities, and catalyse private sector loan capital. As the situation is fluid, we will seek to provide help where the credit needs are more acute.
Concurrently, MAS is working with banks and insurers to see how best to help businesses and individuals facing cash flow challenges with their loan obligations and insurance premium payments. The Solidarity budget referenced a package of measures MAS had introduced. For example, SMEs can now opt to defer principal payments on their secured term loans till the end of the year. More than $40 billion of SMEs’ existing loans are likely to qualify for this relief.
Additionally, Banks and finance companies may also apply for low-cost funding through a new MAS Singapore Dollar facility, for new loans granted under the Enterprise Financing Scheme SME Working Capital Loan and Temporary Bridging Loan Programme. If they do so, they must commit to pass on the savings to their borrowers.
Building resilience to emerge stronger
The resilience budget also includes measures to build economic resilience as Singapore prepares for recovery.
To this end, the government introduced the SG Together Enhancing Enterprise Resilience (STEER) programme, which supports industry-led initiatives to help companies tide over today’s economic uncertainties, and build longer-term capabilities.
The Government will now match $1 for every $2 raised by Trade Associations and Chambers (TACs) or business groups for qualifying initiatives, doubling the earlier matching rate of $1 for every $4.
In his budget statement, Finance Minister Heng Swee Keat encouraged businesses to make use of this downtime to digitalise, restructure, and transform. Programmes such as the SMEs Go Digital Programme, the Productivity Solutions Grant (PSG) and the Enterprise Development Grant (EDG) can be leveraged to do so.
These programmes have been enhanced, with the SMEs Go Digital Programme to provide support for more digital solutions, from basic remote working tools, to more advanced systems. The maximum support levels for PSG and EDG to 80% and 90% respectively to spur transformation, and enhancements to these three schemes will last until December 2020.