Most of us are taught from a young age to “never a borrower nor lender be”. But as with many adages, this is an oversimplification. In fact, it can sometimes be imprudent wipe out your existing funds, rather than use a loan. Here’s when you should use a loan in place of your savings:

Small and medium-sized enterprises, or SMEs, are critical to Singapore’s economy. In 2019, SMEs accounted for 99% of all enterprises, employed 72% of the workforce and contributed more than $200 billion to the economy. While the numbers prove Singapore is a land of opportunity for businesses, they also highlight the intense competition. Entrepreneurs need to look for new ways to add value and cut costs on a continual basis, and it can feel like walking a tightrope to keep a business in the green.

Cost-cutting strategies for modern SMEs

1. Outsource time-consuming tasks and functions

There is a long list of tasks and functions that go into running a successful business, but not all of them need to be performed in-house. Marketing, accounting, payroll, website development and IT support are just some of the processes that can be performed by a third party as part of a streamlined outsourcing package. This can be a particularly valuable cost-saving for smaller businesses that previously employed full-time staff to deal with ancillary functions. Alternatively, if these tasks are spread across overworked staff, outsourcing gives them more time to spend on sales and other profitable outcomes.

2. Renegotiate with contractors, vendors and suppliers

It’s easy to get comfortable with your current supply chain, especially if you’ve built a relationship with certain contractors, vendors and suppliers. But it’s important to regularly review your spending in these areas to see if you can get a better offer, either with an offer from a different third party or a discounted deal for long-term business with an existing company.

3. Reconsider your working space

The global pandemic has been a rude awakening for businesses who have realised what can be achieved with more flexible working arrangements. Consider whether you could downsize the office and have staff work some days from home to save on expensive property rental. Even if your employees can’t or don’t want to work from home, you may find a more practical working space for which the immediate cost of moving is outweighed by the long-term benefits. Coworking spaces are another cost-effective option, particularly for smaller teams, salespeople and managers who travel frequently.

4. Take advantage of technology

Technology evolves at lightning speed and there are countless new tools, platforms and programs emerging to serve the needs of businesses. Cloud computing, productivity apps, project management software, teleconferencing and collaboration tools are just some of the options available to modern businesses, and each can cut costs through various methods of increasing your productivity and decreasing time spent on menial tasks. Numerous tools are available free of charge, while those that set you back in the short term can pay for themselves in no time.

Don’t let a tight budget cripple your business

Balancing the highs and lows of running a business is a delicate task at the best of times. While keeping costs low is good practice – and sometimes a necessity to stay afloat – it’s important not to be so frugal that you make it impossible for your business to be productive. You will inevitably encounter circumstances where major cost savings are not feasible, at which point you’ll need to identify what you need to get back on track.

If you face temporary cash flow issues but forecast a promising period in the longer term, a business loan may be the financial tool you need to keep you going through a downward turn. Business loans can:

• Provide short term financial security, potentially even if you have declared bankruptcy.
• Spread the financial impact of big spending over a longer period.
• Improve your credit score if repaid on time, making it easier to qualify for future loans.

There are a range of business loans, grants and schemes available to entrepreneurs. Browse our guide to loans for SMEs for more information, use our independent tool to compare business loans in Singapore and equip yourself to find the best offer for your needs.