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SINGAPORE: The Association for Small and Medium Enterprises (ASME) has called on the government to consider giving SMEs access to financing that is based on cashflow rather than collateral.

The association said this would solve the difficulties that some companies face in trying to meet the requirements from banks to pledge their assets when applying for loans.

Cashflow-based financing allows companies to take loans from banks based on their track record, business models and future revenue prospects.

But this is not offered to SMEs here, according to the ASME.

Kurt Wee, Vice-President, ASME, said: "Local lending is always requesting for personal guarantees and so on, because they want some kind of collateralized blanket, protecting the bank itself.

"If the government can work with the financial institutions to be a little bit more risk-taking towards SMEs, give SMEs that push towards cashflow-based financing, I think that would really help SMEs a lot."

Without the need for SMEs to put up personal assets as collateral, the association believes that these firms will be able to borrow more money for their businesses.

This is in response to a comment by Minister of State for Trade and Industry Lee Yi Shyan who said that while local and foreign banks are now provide SMEs with better access to funding, the government will continue to fine-tune these options.

To help SMEs further, the association is also proposing higher tax credits for interest costs, and more aid to offset the cost of borrowing.

And it mooted the idea of a credit-rating tailored specially for SMEs.

Mr Wee said: "This can be one of the tools that businesses can use to understand where they stand as far as their financing creditability is concerned. If you have a poor rating, it can be something which you use to reflect and understand where you're weak at, and to improve in your business."

ASME said this would in turn help small- and medium-sized businesses to qualify for more financing to grow their businesses.


- CNA/so

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