Understanding Budget 2024

This article was first published on Mothership on 16 March 

Good news if you happen to own a small and medium enterprise (SME) in Singapore.

You can now borrow up to S$500,000 from local banks to improve your cash flow amidst rising business costs.

This new maximum working capital loan quantum was part of the new S$1.3 billion Enterprise Support Package (ESP) introduced by Deputy Prime Minister and Minister for Finance Lawrence Wong during his Budget Statement on Feb. 16, 2024.

Included in the ESP was the enhanced Enterprise Financing Scheme (EFS), under which the maximum trade loan quantum was also increased to S$10 million to fund businesses’ internationalisation efforts.

According to Wong, the ESP aims to help Singaporean businesses manage costs amidst an uncertain economic environment and price surges in areas such as rental, utilities, and wage bills.

What else is there in the Enterprise Support Package?

Besides the enhanced EFS, another noteworthy initiative in the ESP is the extension of the SkillsFuture Enterprise Credit (SFEC), which allows SMEs until Jun. 30, 2025, to claim any used credit on supported schemes.

In case this term doesn’t ring a bell, SFEC provides eligible employers with a one-off credit of up to S$10,000 to cover up to 90 per cent of their out-of-pocket expenses when they embark on workforce and business transformation.

Last but not least, the ESP also comes with a Corporate Income Tax Rebate capped at S$40,000 for eligible companies in Assessment Year 2024 and a cash payout of at least S$2,000 for companies that hire at least one local employee in Financial Year 2023.

How to leverage ESP to your advantage

If you have been looking for help in defraying rising operations costs, improving cash flow, or restructuring and transforming your business, you should definitely consider making full use of the ESP.

Simply start by identifying areas where your business requires additional support and familiarising yourself with the various initiatives and grants offered under the ESP that will help address those needs.

Other noteworthy initiatives in Budget 2024

However, ESP is not the only measure in Budget 2024 that SMEs can leverage.

If you are looking to make your business more sustainable, you can consider tapping on the enhanced Energy Efficiency Grant (EEG) and the government’s enhanced support for green loans under the EFS, also known as EFS (Green).

For those wondering, EEG provides up to 70 per cent support (capped at S$30,000 per company per year) for SMEs to adopt pre-approved energy-efficient equipment in categories such as LED lighting, air-conditioners, and refrigerators.

Under Budget 2024, the grant will be extended to more sectors, including manufacturing, construction, maritime, and data centres, as well as their users.

This means that kickstarting your business’ sustainability efforts will become easier, especially if your company belongs to the high emissions sectors above.

As for EFS (Green), which helps local companies develop capabilities, build track records, and capture growth opportunities within the green economy, it will be expanding its support to include green solution adopters from Apr. 1 onwards as well.

Depending on the type of loan you are applying for, you can borrow up to S$50 million from partner Financial Institutions (FIs).

Progressive Wage Credit Scheme

In terms of talent-related schemes, one initiative SMEs can make use of is the Progressive Wage Credit Scheme (PWCS), in which the government will co-fund the salary increase of lower-wage workers for eligible employers.

Under Budget 2024, the government will raise its co-funding levels to a maximum of 50 per cent, up from the current level of 30 per cent.

The gross monthly wage ceiling for PWC co-funding will also be increased from S$2,500 to S$3,000 in the qualifying years of 2025 and 2026.

If you are an SME owner, these measures mean that you can now manage costs better while maintaining your ability to retain talent.

To add to the good news, you also do not need to apply for PWCS, as the payout for the respective year will be automatically disbursed by the first quarter of the following year.

Partnerships for Capability Transformation

Finally, if you are looking to exchange best practices with larger companies, plug into global supply chains, and raise your business’ profile as well as credentials in markets overseas, making use of the enhanced Partnerships for Capability Transformation (PACT) scheme is a good place to start.

The PACT scheme, which supports collaborations between larger companies and SMEs in supplier development and co-innovation, has been enhanced under Budget 2024 to support partnerships in more areas, including capability training, internationalisation, and corporate venturing.

Currently, SMEs can expect a support level of up to 70 per cent of the qualifying costs in software, materials, professional services, and manpower costs, and 50 per cent of qualifying costs in hardware and equipment costs.

A Budget that addresses SMEs’ business concerns

Given the number of support measures for SMEs contained in Budget 2024, it is clear that Budget 2024 recognised and underscored the important role SMEs play in supporting Singapore’s economic growth.

However, on a more concrete level, Budget 2024 also addressed the business concerns of SMEs on the ground.

When asked about what areas of support for businesses they are hoping to see in Budget 2024, 62 per cent of SMEs who took part in DBS’ annual SME pulse survey said they would like to receive support to alleviate the pinch of rising costs.

Two other areas that respondents hoped to seek support in were training and upskilling their employees, as well as innovation and Research and Development (R&D) activities.

Getting support from DBS

While understanding what Budget 2024 entails for SMEs is important, what is equally crucial is to choose the right bank partner to help achieve business goals.

After all, besides providing financing support for businesses to tackle their short-term challenges, the right banking partner can also play a complementary role by providing expertise and insights for SMEs to propel their business growth.

One bank that SMEs can consider partnering with is DBS, which, through its in-depth understanding of the community, offers crafted products and solutions to help them in areas of need.

For instance, a community business can check out DBS’ newly launched Heartland Merchant Banking Package.

According to the bank, the package, which is a first in the market, goes beyond typical banking solutions to include insurance coverage and solutions for sales collection.

Alternatively, for those looking to digitalise their business, they can leverage DBS’ Start Digital Programme, which offers accounting, online HR/Payroll, digital collaborations, e-commerce, and cybersecurity solutions from a curated list of partners at a preferential rate or special package price.

Last but not least, those looking to kickstart sustainability efforts but are concerned about affecting their cash flow, do check out the DBS Eco Renovate Loan.

According to the bank, this first-of-its-kind hybrid financing solution allows borrowers to borrow up to 100 per cent of the cost of using resource-efficient or energy-optimisation solutions for a green renovation at preferential rates.

You can find out more about how DBS can help your business and its offerings here.