Only a few of the country's smaller firms that sought financing over the past year were knocked back by financial institutions, a new survey showed.

It found that 13 per cent of small and medium-sized enterprises (SMEs) sought external funding over the past 12 months, with 90 per cent of them successful.

In addition, 60 per cent of the firms that sought financing did so for cash flow management, said Spring Singapore, which carried out the survey.

Bank loans were the most popular form of external financing across SMEs of different sizes, industries and stages of development.

Most of the 87 per cent that did not turn to external financing indicated that they had enough funds to operate, while 9 per cent of this group indicated a personal preference not to borrow.

The survey also found that larger SMEs were more likely to seek external financing given their growth needs and that their approval rates for borrowing are higher than firms with annual revenue below $1 million.

These smaller firms faced lower approval rates largely due to the lack of financial documents and/or weaker business performances to support their debt application.

Spring Singapore said a key challenge for SMEs was managing delays in customers' payments, which affect cash flow and working capital management.

About 60 per cent of SMEs faced some form of delay in receiving client payments, which they expect to continue to be a key challenge next year.

"While external financing can help bridge gaps in payment cycles in the short term, SMEs should strengthen their cash flow management capabilities to improve long-term resilience and competitiveness," said Spring Singapore.

Ms Chew Mok Lee, assistant chief executive, capabilities and partnership group of Spring, said: "No business can operate successfully without effective cash flow management.

"To better manage cash flow, SMEs can put in place regular reviews and controls on financial reporting so that any potential issues with billing, cash collection and credit terms with customers can be promptly addressed."