Singapore Government Press Release
Media Relations Division, Ministry of Information, Communications and the Arts,
MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369
Tel: 6837-9666

 Mr Inderjit Singh, Member of Parliament for Ang Mo Kio GRC and Chairman of the Action Crucible for Financing

Distinguished Guests

Ladies and Gentlemen

Good Morning

Mr Inderjit Singh has just given us a quick update on some of the developments by the ACE Action Crucible for Financing. As you can see, the Action Crucible has made much progress in pursuing its aim of making more financing options available.

The government is working closely with the Action Crucible for Financing on the implementation of the Crucible’s recommendations. The main objective is to increase the financing options and sources available to the SMEs, leveraging on the resources of both the private sector and the government. Inderjit and his team have done a wonderful job in uncovering a wide variety of financing instruments found in other economies. His observations of the U.S. financing environment have opened our eyes to the diversity and dynamism of the American financial markets.

I believe that Singapore’s financial market has reached a level of maturity that it is ready to embrace some of these innovative financing options. As it is, our financial and capital markets have already come a long way. There are now different channels where SMEs can tap on external sources of funds.

The Deal Flow Connection, which I launched last year, is one of the channels where SMEs can gain access to financing. It brings together and facilitates the interactions of promising enterprises, investors, financiers and financial intermediaries to create a vibrant deal flow community. I am pleased to hear that over the last eight months, more than 300 deals have been facilitated. They comprise both equity and debt financing. Let me cite two recent transactions that have benefited from the scheme.

The first example involves a company in the logistics business. This local franchisee of an international company approached some banks for working capital financing. It received lukewarm responses, as its business modus operandi was unique. Through the Deal Flow Connection, a financial intermediary helped to profile the company and enabled the financial institutions to better understand the business model. The company succeeded in getting in-principle approval for a working capital loan of about $500,000.

The second case involves a company in the printing and bookbinding business. It was on the lookout for strategic investors. A financial intermediary linked the company up with potential synergistic partners and at the same time provided financial restructuring assistance. The company has since, through its own efforts, found a Singapore-owned printing company in Vietnam that will be merging with them. The intermediary who had initially assisted the company with its financial restructuring as well as deal matching will now be assisting them with the preparation for an IPO.

The Deal Flow Connection is just one of the many avenues which companies can leverage on to look for potential investors. At the end of the day, companies themselves must be proactive in seeking out their own opportunities, like what the printing company did.

To many of us, the more obvious sources of financing will invariably be either debt or equity financing or a mixture of both. There is another source of fund; though less obvious, but is nevertheless just as, if not more relevant to a business’ financing needs.

What is this elusive source of financing? Well, it’s none other than the company’s retained earnings and idle or non-productive resources. Often times, a company can satisfy its financing needs simply by releasing latent funds locked up in its business. This requires savvy cashflow management on the part of SME owners. This entails cutting down on inventory, stretching payables and accelerating the collection of receivables. Unfortunately, such measures tend to be overlooked by the busy businessman preoccupied with securing a deal or fulfilling his clients’orders.

The various regulatory agencies have introduced more flexible guidelines to help ensure that a company’s cashflow is not unnecessarily tied up. For example, JTC has reduced rental deposits from three months to one month for tenants paying by Giro.

The Ministry of Finance has taken the lead by issuing a circular to public agencies, covering prompt payment to their vendors and the need to be specific on the payment terms right from the onset.

Besides freeing up money tied up in deposits and prepayments, a company can also turn to its suppliers and customers for financing. This is achieved through the factoring of receivables from buyers as well as negotiation of credit terms from suppliers. The government has always been receptive towards the assignment of receivables due from public sector agencies, to the financial institutions, in return for credit facilities. The recent circular from the Ministry of Finance on prompt payment lends further credence to the quality of government receivables.

The credit terms granted by a company’s suppliers present yet another valuable source of financing. The usual payment period ranges from 30 to 60 days, or even as long as 120 days, depending on the level of trust and bargaining power between the transacting parties.

The most ideal form of suppliers’ credit is, of course, the provision of goods on consignment basis. SPRING, the Workforce Development Agency (WDA), the Retail Promotion Centre (RPC), the Association of Shopping Centres (TASC) and the Community Development Councils (CDCs) are working jointly with some suppliers on an Incubator Programme, whereby retail start-ups will be allowed to return any unsold goods during a prescribed trial period.

In today’s fast paced economy, an enterprise cannot rely entirely on organic growth and internal sources of fund for its upgrading and expansion. Very often, timely cash injections are needed so that opportunities can be seized or impending threats countered. It is times like these that a company has to turn to external sources of funds, be it for the acquisition of companies, intellectual property or tangible fixed assets. It is also times like these that the entrepreneur realises the importance of having a good credit standing.

Towards this end, the Action Crucible for Financing has done much to ease the difficulties that SMEs face in accessing finance and improving their credit standing. This Finance Fair is just one of the many initiatives developed by the Action Crucible for Financing to help hone the financial skills of our businessmen and provide a valuable forum for SME to expand their networking with the financial community.

Today, I would like to take this opportunity to thank the members of the Action Crucible for Financing and its predecessor, the SME Finance Panel for their efforts in fostering a supportive financing environment for small businesses in Singapore. The latter is responsible for formulating the various recommendations which you see in the "Report on Financing for SMEs", whilst the Action Crucible for Financing is entrusted with the implementation of these initiatives. The SME Finance Panel can be called the architect and the Action Crucible for Financing, the builder.

I would like to take this opportunity to express my appreciation to these architects and builders, who have worked so arduously behind the scenes.

Thanks to the fine work done by Inderjit and his team, 2004 promises to be an exciting year in the area of SME financing. Several initiatives that seek to broaden the scope and variety of the local financing scene have been lined up, as highlighted by Inderjit.

I wish all present here today a rewarding and fruitful experience at the Finance Fair.

Thank you.

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