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Opportunities For SMEs In The Economic Slowdown

The coronavirus has caused great damage all over the world, and Singapore, being a small and highly trade-dependent economy, is certainly not spared the carnage from the devastation.

Even more mature or larger, well-capitalized SMEs have been feeling the effect of the downturn, affecting almost every business sector, disrupting financial markets, global supply chains, and dampening both global and domestic demands.

In the developmental life-cycle of small enterprises, structural and cyclical declines are inevitable. The current downturn, however, is similar to a black swan event and will stress the test of SMEs business backup plans (or lack thereof), like an SME loan.

Furthermore, for small and medium-sized owners who are resourceful and agile, the downturn may not all be very bad and without hope.

Good business leaders are versatile and capable of pivoting according to situations.

In order to find the silver line within the current dark recessionary clouds, the SME owner must be ready to accept that change is a constant in both life and business, and be prepared to look for new directions.

During a slow down, the SME owner must always be very mindful of the cash flow situation of the company.

Be prepared ahead of time if you really need to apply for an SME loan to enhance your working capital position or to take advantage of the opportunities. Always prepare your loan application ahead of time as bank credit tightens in a struggling economy. Applications for SME loans have already increased to multiple folds and will be prepared for much shorter processing times with the partial lockdown in place.

Take advantage of government-aided financing schemes like the Temporary Bridging Loan or the SME Working Capital Loan to lower financing costs.

Economic depression, lower consumption, and tightening credit access is, as a matter of fact, not a recipe for disaster. In fact, within the pessimistic outlook, there may be opportunities for those who are struggling hard enough and willing to look at the broader picture that is emerging.

The opportunity lies inside every crisis, in particular, the four opportunities below.


  1. Competition is Reduced

In a recessionary environment, most businesses are likely to fall back on defensive positions by suspending investment, reducing costs, and scaling back on staff.

There will be fewer new competitors on the market, as well as most of them will be scared by the environment and want to delay their business entry until they find “times are better.”

As a consequence of the financial downturn, the level of market competition is greatly reduced.

When the market improves, the companies that endured to survive the storm will find themselves in a commanding position in their specific niche on the market.

  1. Marketing Campaigns to Capture the Consumer’s Interest

As customers, we are barraged with advertisements and marketing messages every single day. From Twitter, search engine advertising, posters,  to the conventional mass media.

In good times with low unemployment rates and high domestic wage growth, companies can outperform each other on their advertising budget.

During a recessionary period, most companies may eventually reduce costs, including promotional and marketing activities.

With fewer marketing ads and brand comparisons, the business environment should become fairly quiet. Traditional media such as TV and paper may offer discount deals that are not normally provided in good times.

So, every economic depression is the most suitable time for you to press on with your marketing campaigns to seize a bigger piece of your target customers’ mind-share.

  1. Overall Business Costs are Down

During a recessionary slump, business costs will also continue to decline as manufacturers cut prices in a bid to fuel demand.

You can see that direct material costs can start to decline as suppliers start providing volume discounts or early payment discounts.

This is also the perfect time to renegotiate company premises lease renewals with your landlord because you would have stronger bargaining power.

Banks that could normally tighten credit lending during a downturn may also give better lending rates for their existing loans to high-quality lenders. Make sure you make your credit rating clean so that you have more bargaining power to negotiate business lending interest rates with your banker.

Most importantly, labor costs tend to fall, as well. With rising unemployment rates and slow hiring across the board, talents that were previously reluctant to work in smaller firms could become available with the right pay package.

Some of your competitors with weaker holding power may call it a day. They may start selling their stock at bargain prices, or you could come across experienced industry candidates who have been let off by their defunct companies.

Take every chance to sniff out potential deals during a downturn, and you may be better positioned than anyone else to develop during the transition phase that follows.


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