Post-COVID: Revisiting Capital Structure & Debt Strategy for SMEs in Singapore

The post-COVID business landscape has permanently altered how SMEs should think about financing. Higher interest rates, uncertain demand, labour shortages, and digital competition from Lazada, Shopee, Grab and TikTok Shop mean that traditional debt habits are no longer sustainable. Today, SMEs must revisit their capital structure with a more strategic and data-driven mindset.

1. Short-Term Debt Dependency Is the Largest SME Risk

a. Before COVID, many SMEs relied on short-term loans, overdrafts and revolving facilities. 

b. Post-COVID, this model exposes businesses to interest rate spikes and cash-flow shocks.

c. A healthier approach includes:

1. Term loans with longer tenors

2. Working capital lines matched to revenue cycles

3. Structured financing instead of ad-hoc borrowing

d. Banks like DBS, OCBC, and UOB increasingly reward SMEs with better rates if they demonstrate consistent management accounts and financial discipline.

2. Quarterly Refinancing Review Is Now a Must

a. Refinancing is no longer an annual conversation as it should be reviewed every quarter. Key checkpoints include:

1. Current interest rates

2. Total debt servicing cost

3. Cash flow coverage

4. Covenants & collateral requirements

b. If interest consumes more than 10% to 12% of monthly gross profit, restructuring or refinancing should be considered.

3. Government Grants Would Reduce Debt Burden

a. A balanced capital strategy blends:

1. Debt (growth)

2. Equity (stability)

3. Grants (cost reduction)

b. Schemes like EDG, PSG, and other Enterprise Singapore programmes reduce financial pressure and enable SMEs to expand without over-leveraging.

4. Better Reporting = Better Loan Terms

a. Banks would like to fund the businesses that can be understood in the easiest way. 

b. SMEs that maintain monthly management accounts often secure:

1. Lower interest

2. Higher credit limits

3. Longer repayment periods

c. Strong reporting reduces perceived risk.

5. Apply Stress Testing Before Banks Do

a. A good stress test asks:

1. What if revenue drops 20%?

2. What if interest rises by 2%?

3. What if key customers delay payments 60 days?

b. If your cash flow collapses, your capital structure is too fragile.

Conclusion

Post-COVID, managing debt is no longer only about borrowing. Instead, it is about strategy, timing, and transparency. SMEs with strong capital structures survive downturns, negotiate better terms, and compete more effectively in a tougher digital economy.

Why Choose Morrison Consultants?

In today’s post-COVID environment, SMEs need more than routine accounting as they need strategic financial leadership. At Morrison Management, your engagement is overseen by a qualified accountant plus Certified PMC (Practising Management Consultant in Financial Management), for ensuring that every recommendation meets professional, regulatory, and grant-approval standards. Our team specialises in financial restructuring, cash-flow optimisation, loan refinancing, bank negotiations, and monthly management reporting that banks trust. With deep experience supporting SMEs across multiple industries, we can help business owners to stabilise cash flow, reduce interest burden, and build a resilient capital structure by using data-driven insights rather than guesswork.

If rising interest costs, tighter cash flow, or refinancing pressures are affecting your business, Morrison can help you. 

• Book a free initial discussion

• Request a capital structure or refinancing review

• Get guidance on EDG/PSG grant support (PMC-qualified for grant submissions)

Contact us today and take control of your capital structure before the next cycle hits.