(Small and Medium Enterprises) SMEs massive debt problem is now getting a hand from Credit Counselling Singapore (CCS). The pilot programme aims to help owners of small enterprises who took loans to try and keep their failing businesses afloat.
The pilot programme, Enterprise Credit Counselling Programme (ECCP), is a new initiative to advise owners of small enterprises on their obligations and financial liabilities in the event of business termination. Where feasible, the programme will propose a repayment arrangement to their creditors for unsecured business debt that remains as well as for unsecured personal debts. This is provided that the total unsecured business debt owing to all banks and financial institutions is not more than S$500,000.
CCS hopes that this pilot programme will ease some of the stress of SMEs massive debt problem.
This service provides enterprise credit counselling to owners of small enterprises who meet all of the following criteria:
- Have ceased business operations or in the process of closing down the business operations;
- Have business assets not exceeding S$1 million; and
- Have unsecured business debts owing to banks and financial institutions not exceeding S$500,000.
“When small enterprises fail, they often lack the relevant financial knowledge and/or the resources to engage professional business consultancy services to manage and address their obligations and financial liabilities as business owners,” said Mr Kuo How Nam, Chairman of Credit Counselling Singapore.
SMEs massive debt problem has been highlighted in recent times. Many examples of individuals who ave dipped into their personal credit facilities to finance their business operations have surfaced. Some have also given personal guarantees for SME loans of others.
The New Paper for example, recently reported the story of a jewellery business owner in his 50s who took personal loans from nine banks to keep his company afloat and ended up with a $130,000 debt. The SME owner said, “I was so alone, and I felt so sorry and ashamed because a father is supposed to provide for his kids, but I couldn’t do that. I couldn’t even buy them simple gifts like a wristwatch.”
Others highlighted by the newspaper included a businessman who racked up a $600,000 debt after taking personal loans from several banks to pay his workers, and a teacher who owed $200,000 after she stood as guarantor for her father’s failed business.
SMEs massive debt burden become unbearable when creditors are not just banks but finance companies and other licensed lending entities whose security arrangements may be different or more complicated.
Mr Kuo said: “Our experience has shown that a coordinated and comprehensive solution involving all creditors will usually produce better outcomes for both creditors and borrowers. CCS will act as a facilitator for small enterprise owners who have terminated their operations. The goal is to help them avoid bankruptcy while optimising repayments to creditors.”
To make matters worse, SMEs massive debt issue makes it difficult for owners in deep fix to get credit from the banks.
Even without debts, small enterprises already face a lot of difficulties in securing SME loans. One research report released last year said that up to 81 per cent of SMEs in Singapore do not qualify for business financing.
Mr Kuo said that the mission of CCS to not to help individuals deal with leftover debts from a business as well as consumer loans taken to support the failed enterprise.
“We are not going to try to save enterprises that are in trouble as we do not have the resources or expertise to broker a deal with various stakeholders involved in a rescue mission. However, we can try to minimise the impact of a business failure on entrepreneurs, by hopefully, helping them to avoid bankruptcy if all their creditors can agree on a structured repayment proposal put up by CCS,” said Mr Kuo.
To qualify for assistance under CCS’ Enterprise Credit Counselling Programme, owners must have terminated their businesses or are on the verge of doing so, and have business assets not exceeding $1 million and total business debts of not more than $500,000.
There were 43,000 start-ups here in 2016, almost double the 22,000 in 2003, and according to the Department of Statistics, half of new businesses fail within the first three years. CCS said that 351 owners of failed or failing small and medium-sized enterprises (SMEs) who had sought help from them since June last year.
CCS has been helping individuals to deal with their unsecured consumer debts since 2004 by providing information to individuals on how to manage their unsecured consumer debts, and where feasible, arranging a restructuring of their unsecured consumer debts with bank creditors enabling the individuals to pay off their unsecured consumer debts over a specified period.
by: Hitesh Shah / Contributor iCompareLoan
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