Singapore’s small and medium-sized enterprises (SMEs) are grappling with unprecedented borrowing costs and shrinking access to larger loans, according to a recent survey by Linkflow Capital. The survey, which analysed data from over 2,216 users on its SME loan comparison platform, found that average borrowing costs soared to 8.47% per annum in 2024, the highest in recent years. Additionally, loan approvals for amounts exceeding $500,000 have plummeted to zero.
The survey highlights a significant contraction in loan sizes, with approvals for loans above $300,000 constituting only 3% of approved loans in 2024, down from 10% in 2023. This tightening of credit conditions has led to a surge in business closures, reaching a 15-year high, as SMEs struggle to manage rising operational costs and limited financing options.
Benjamin Teo, spokesperson for Linkflow Capital, noted, “SMEs were caught in a difficult bind in 2024—needing capital to navigate rising operational costs but facing the highest borrowing rates we’ve seen in years and finding it much harder to secure larger loan amounts required for expansion.”
Whilst early signs of interest rate easing have emerged, with the 3-month SORA benchmark falling from 3.03% in January to 2.55% by April 2025, SME lending rates are expected to remain high until at least Q3 2025. The permanent increase of the SME Working Capital Loan cap to $500,000, announced in Budget 2024, offers some relief, but cash flow pressures continue to mount.
Teo emphasised the importance of preemptive financing planning and maintaining liquidity buffers, given Singapore’s heavy trade exposure and vulnerability to external shocks. The full survey findings are available on Linkflow Capital’s website.
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