Techblog
Leveraging the Capability Development Grant for SME growth
How can Small and Medium Enterprises (SMEs) faced with cash flow concerns fund innovation efforts? SPRING Singapore offered some much-needed guidance on the capability development grant at a recent event.
The Capability Development Grant (CDG) offered by SPRING Singapore for SMEs defrays up to 70 percent of costs for approved capability upgrading projects across 10 development areas. Two key areas under which SMEs can apply for CDG support are Business Strategy Innovation and Productivity Improvement.
Business Strategy Innovation
Under the Business Strategy Innovation area, the Capability Development Grant will support projects that help the SME convert knowledge and ideas into new or improved products, processes, services or business models to gain competitive advantage. Deliverables include a final review report and a blueprint or prototype of the new/improved product, service concept or business process.
Her Velvet Vase is a recent success story of an SME that utilised the Capability Development Grant support for business model innovation (BMI). One of Singapore earliest fashion e-tailers who entered the market in 2007, the online boutique found it was fast losing its first-mover advantage a few years ago. After reviewing its business model and looking at customer insights with a consultant recommended by SPRING Singapore, the company tapped into CDG support for Business Strategy Innovation.
Her Velvet Vase came up with a Mood Box, which contains clothing, accessories and sponsored freebies tailored to a customer’s moods and needs. This and other innovations proved to be successful and Her Velvet Vase found profits increasing by 500 percent over two years. During that period, there was also a 20 percent improvement in inventory turnover year-on-year and a 33 percent increase in social media awareness.
Productivity improvement
Industry bodies like the Singapore Innovation & Productivity Institute have always stressed the importance of continuous productivity improvement for SMEs. Projects supported by the CDG in this area include activities that lead to productivity gains such as optimising manpower allocation, streamlining processes and intensifying land use. Deliverables SPRING Singapore will look for are implementation of initiatives or a detailed roadmap as well as a final report.
SMEs have benefitted well from this assistance. Ngee Soon Jewellery, a gold and jewellery retailer established in 1990 saw a need for improvement in its inventory management processes. After putting in place standard operating procedures to account for all inventory, redesigning its workflow and implementing an RFID solution to track its inventory, the retailer managed to reduce time and manpower required for stock-taking by 40 percent and 50 percent respectively. It now also has real-time visibility of stock levels.
How to apply
To qualify, an SME would need to be registered and operating in Singapore and with at least 30 percent local shareholding. It should also have a group annual sales turnover not exceeding S$100 million or a group employment size of not more than 200 employees. As of 1 April 2015, the application process for grant support has been simplified for project costs of S$45,000 or less.
An SME needs to identify the grant area where business capability upgrading is needed, identify a consultant or solution provider and approach SPRING Singapore with its application containing relevant documents and company’s financial figures. There is no upper limit on project costs and each application is evaluated on its merits. SPRING Singapore’s decision will reach the SME within 35 working days and grant disbursal is six to eight weeks after completion of the project.
Seeking loans
While the government supports SMEs through a multitude of grants and policies, the grant is usually not disbursed for a few months from the time of approval until the project is completed.
Quite naturally, cash-strapped SMEs seek other sources of funding to bridge this gap. One such option is the DBS Business Capabilities Loan. The loan is available to any SME that has successfully applied for a government grant. There is no early pre-payment penalty and the loan can be repaid well after receiving the grant disbursal. The loan amount can also exceed the grant amount and collateral is not required.
SMEs are preparing well for times to come. According to the SME Development Survey of 2014, more than half (51 percent) of SMEs say their main business strategy is to rethink their business model, while an increasing number of SMEs are seeking productivity improvements, reinforcing the need for technology investments and innovation. To meet these objectives, SMEs should:
- Seek Capability Development Grant support.
- Start the process by going to their nearest SME Centre.
- Explore loans in the market that bridge the gap between grant approval and disbursal.