By CHEN HUIFEN

AS government-backed loans provided to SMEs jumped 38 per cent to $990 million last year, Spring Singapore will continue to step up efforts to support viable SMEs through the downturn.

But Spring chairman Philip Yeo says businesses must realise that government support is not an entitlement - and that they too must help themselves.

'Banks don't get money from heaven', so the usual due diligence to evaluate applications and non-performing loan risks will still apply, he says.

And SMEs should consider consolidation because 'good companies should grow and bad companies should exit'. Bigger entities also have better chances of obtaining equity finance, an alternative funding option to bank loans

'The trouble is that many of the companies are very small,' Mr Yeo said. 'They don't want to come together - they all want to be towkays. But they are not of critical size.'

Among the 162,000-plus enterprises here, about 128,000 are in the micro-enterprise category, with less than $1 million in annual revenue. About 33,000 enterprises generate revenue between $1 million and $50 million a year, and the remaining 1,000 are classified as large companies.

'It's a reality there's too much fragmentation,' said Mr Yeo. 'They should come together. If you don't have a big enough company, how do you attract talent? How do you get customers? It's all economics.'

For SMEs that continue to have a competitive advantage, Spring will help to widen their lead through the $200 million business upgrading initiatives for long term development scheme, or Build.

The programme provides 70-90 per cent of grant support in areas such as technology innovation, branding, IP management, HR and design.

Later this year, Build will launch attachment programmes at SMEs for fresh graduates, and innovation vouchers that companies can use to buy technology from approved research institutes. There will also be a pilot mentoring scheme to match experienced consultants with SMEs.

In an update on the SME financing schemes offered by the government, Spring said 3,073 loans were approved last year, down from 3,572 in 2007. This was because the number of asset-based loans fell 51 per cent to 719, as companies cut back on capital expenditure. The bulk of the $990 million loan support went to the loan insurance scheme (LIS), with 1,452 applications supporting $800 million of loans approved. Micro loans numbered 902, amounting to $34 million.

In the first five weeks of this year, 551 government-backed loans amounting to $185 million were approved. Spring expects the take-up rate for LIS, micro loans and bridging loans to go up, and that for asset-based loans to fall.

In a review of Spring's achievements last year, the agency said it supported 2,585 enterprises in 1,540 projects, up from 1,482 enterprises in 1,260 projects in 2007. The 2008 projects are expected to create 9,700 new jobs, up from 5,300 in 2007.

Upon completion of the projects, the 2,585 companies are expected to create value-add of $2.9 billion, fixed assets investments (FAI) of $465 million and total business spending of $499 million.

On targets this year, Mr Yeo said that while the number of companies receiving support is expected to increase, value add, FAI and jobs created are likely to be affected. But Spring is aiming for results 'as good as 2008'.

'The (Trade and Industry) Minister has already set a target of 2,000 companies for the Build programme over the next two years,' said Spring chief executive Png Cheong Boon. 'So I think at least we must hit 1,000 of them.'

This article was first published in The Business Times on February 12, 2009.