Author’s Blurb: Once the economic stimulus package was announced, the internet was immediately abuzz with all sorts of reactions from entrepreneurs. Mostly, I saw emotional rants in both written and video form, but they were all over the place. I wanted more level headed, concrete opinions from actual SMEs.
So Vulcan Post reached out to 7 different SMEs from varying industries ranging from healthcare to home furnishings to learn how their businesses have been affected, and whether the SME related initiatives in the economic stimulus package could actually help them.
The SMEs we interviewed were:
- Lee from Aliments, a one-stop F&B system that helps scale F&B businesses
- Wee Yong from Esyms, an on-demand pharmacy delivery startup
- Melanie from Flow Dive Center, a PADI dive centre
- Khairul from Pandai, an edutech company
- Kev from QueueMed, a healthtech startup for appointment and mobile queue solutions
- Nana from Rotan Lot, a rattan home furnishing startup
- Nabilah from Sentuh, a mobile spa startup
Aside from learning what the existing initiatives could do for them, we also asked them what they, as SMEs themselves, really wished the government would have included in the package.
The Bad Situations
Melanie revealed that Flow Dive Center’s been closed since March 18. “Our scheduled trips, workshops and classes have all been postponed. And as of now, we are unsure when we can resume our business as things are very fluid, and sales have been nil since.”
Rotan Lot deals with items that are big and categorised as non-essential, so their deliveries of ready stock are unable to proceed while their new stock is stuck in their workshop in Jakarta.
But Nana, its founder, is looking on the positive side of things. “We are taking this time to sort out our rebranding and new collection, and setting up our online website while taking as many pre-orders as we can during this period.”
What worries Nabilah of Sentuh is the fact that the majority of their therapists are getting zero income due to zero bookings.
However, the Sentuh team is doing their best to support their own by having promotions like voucher sales and pre-sales of Sentuh products and treatments, of which some of the sale proceeds will go to a special fund for their therapists.
The Better Situations
In quite a different situation, Lee of Aliments told us that their business has actually been positively affected by the MCO.
In fact, they’re running a non-profit initiative called #strongertogether by opening up their platform to all merchants so they can enjoy their pickup and delivery service at a cost transaction rate.
Wee Yong of Esyms also revealed the MCO’s positive impact on their business.
“Within the first week of MCO, we were dealing with thousands of customers who came to us for masks, sanitisers, vitamins, refilling medications, and all sorts of other COVID-19 enquiries.”
To extend their online business presence, many independent pharmacies have also come on board their platform, something which Esyms previously struggled with.
Their addition has provided the startup with a more extensive location coverage, strengthening Esyms’ core offerings even more.
QueueMed has also been able to get more clinics on board, but it’s because of their CSR contribution of providing a free drive-thru clinic initiative.
Dr. Kev summed it up, saying, “In short, we managed to expand our market during the MCO, but not our revenue.”
Pandai’s leveraging on the current situation too, with co-founder Khairul sharing that their educational app has been thriving.
Furthermore, after the MCO was announced, the team came up with a new initiative called ‘Pandai Videos’ which aggregates educational videos and categorises them according to the national curriculum.
With schools being closed, parents are looking for alternative ways for their children to study. This has brought Pandai’s website visits up to more than 1.5 million unique visitors, and the number of registered users has increased from 5,000 users to 50,000 users.
Finding What Will Work For Them
Aliments and Flow Dive Center have not been able to identify any initiatives that will work for them, with Lee noting that the package seems to focus on individuals more than SMEs.
The only thing Wee Yong could find himself interested in were the discount on electricity usage and the free internet.
For Khairul, he believes that the initiatives can address their working capital needs and help them overcome their temporary cash flow issues.
However, he’s choosing not to participate in the wage subsidy programme due to the strict conditions it imposes.
Dr. Kev has identified a few initiatives that will be relevant and helpful to his business, such as the deferment of income tax instalment payments due between April 1 and June 30, 2020, the wage subsidy programme, and the Special Relief Facility (SRF) loans.
With Rotan Lot falling under the category of SMEs with business records of less than 4 years, Nana believes that, if attainable, the relevant initiatives would allow them to proceed with their growth plans during the recovery period after MCO ends.
Nabilah felt that the Employment Retention Programme (ERP) will at least help cushion the impact of revenue loss to their business.
Being able to defer payments of EPF and HRDF contributions will also help them with cash flow savings.
Loans Are Only Temporary Relief
Not only is a significant portion of the SME related initiatives in the form of loans, but one of the resounding agreements across the board was that all the different types of loans offered would be of little help.
With Sentuh being an early stage company, Nabilah shared that they do not even quality for SRF.
Lee said that he would get a loan if he could, but most SMEs already have one, if not multiple. How could they afford getting another then, or even just get the approval for more?
Wee Yong definitely wouldn’t be taking out a loan for Esyms, since their business is growing during this period, with more people benefitting from their services.
“In this context, I would probably opt to accelerate strategic expansion with my current pool of funding to prepare for the post-MCO and COVID-19 situation,” he added.
If Flow Dive Center can do without taking out a loan, Melanie will avoid them. “Especially during volatile times such as this, I would want to reduce risk and losses and not take up even more debt.”
Dr. Kev took some time to deliberate with his team the way forward, but they’re still able to sustain their business for quite some time, so they’ve decided to not take out a loan at this stage.
Nana will be monitoring the situation before making a decision, since she’s unsure of how the home furnishing market will be affected.
“If the MCO ends within April or early May, things can go back to normal with no health implications, and the repayment rates are good, we would definitely consider the opportunity to apply for the scheme,” she shared.
“We would use it as a replacement fund to grow the business as we are currently utilising growth budget to sustain.”
On the other hand, Khairul will be applying for the loans because they’re offered with relatively low interest rates of 2% and 3.5%.
“However, securing a bridging loan to overcome our temporary cash flow issues is just one part of the solution. We still have to also reduce our costs and delay our expenses as much as possible, while maintaining operations and retaining key personnel.”
How Can the Government Do Better?
Lee suggested looking to Singapore and Canada for some good examples. “Focus more on helping SMEs then the grassroot problem will also be solved. It’s a relativity question. You take care of SMEs, they take care of their staffs, and their staffs take care of their customers,” he advised.
Likewise, Wee Yong shared that the government should have an open meeting with various representatives from various industries to get a better idea of what they really need.
“I think any initiatives of all sorts that would help to free up some cash flow to the businesses would be of great help, such as reduction in corporate and personal tax from 2019/ 2020 years of assessment, waiver of sales and service tax, and longer period of assistance in fixed cost such as EPF contributions and utility bills,” he said.
Interestingly, both Wee Yong and Dr. Kev, who are founders of SMEs in the healthcare sector, stated that the government should offer more public-private collaborations where local SMEs will be given more opportunities to contribute in the combat of COVID-19.
This could help more SMEs survive, and reduce the burden of government facilities while better benefitting public consumers.
Dr. Kev also said that he found this package to be a more passive approach, while he personally would opt for a more proactive approach.
Some examples he gave were the waiving of company income tax if the company can grow during the MCO, or providing rewards to companies who can stir up the market.
“This in turn will push companies to find ways to stimulate the market, rather than wait and see attitude,” he added.
Melanie would like to see some tax deductions and subsidies, and in the same vein of thought, Khairul also brought up the wage subsidy programme.
He said that the subsidy should be revised and gave the example of Singapore’s government subsidising up to 75% of employee salaries for much longer periods (9 months), without imposing strict conditions.
Similarly, Nabilah believes that the programme can be further enhanced by subsidising at least 50% of employee salaries, and not be limited to those with monthly salaries of under RM4,000.
Another suggestion she had was for relief funds to be given in the form of one-off cash grants for SMEs to help with their operation costs for 3 months.
Khairul also looked to Switzerland’s government that’s giving out interest-free loans of up to 10% of a company’s 2019 revenue as an example, saying that if the Malaysian government were to do something similar, it could encourage more SMEs to take up the loans.
Furthermore, he felt that the collection of both employee and employer EPF contributions should be paused for the next 6 months, and that EPF should also waive the late payment penalty during this period.
For Rotan Lot, SST makes up a lot of its costs. Therefore, Nana said, “During the recovery period, to be able to have it at a lower rate or waivered for a month or two would be helpful.”
Bottom Line: As expected, each business has its own different needs that require relevant solutions. I had actually reached out to more, but many replied that they’re still waiting for more details on the economic stimulus package, and that they don’t know enough about the initiatives yet to comment. Therefore, I feel like the government should be making all the details more accessible and as specific as possible so less doubts and misunderstandings remain.
- You can read about the SME related initiatives in the economic stimulus package here.
Featured Image Credit: Sentuh / Pandai / Rotan Lot
