SMALLER firms bracing themselves for a big hit from tighter credit conditions should consider alternative sources of financing to fuel growth.
While small and medium-sized enterprises (SMEs) and start-ups have always found it hard to increase their credit lines or get new loans, lenders say they are keen to help.
Many have launched new products to address specific business needs of new and smaller firms, while others are promoting non-traditional avenues of funding to help tide clients over the crisis.
Unsecured collateral-free loans
DESPITE tighter credit conditions, SMEs still have a wide array of financing options.
Ms Kavita Bedi, general manager of SME banking at Standard Chartered Bank Singapore, said the bank recently launched two products for new businesses that do not have established track records, a condition that is often required for loans.
The Business Instalment Loan (BIL) is an unsecured term loan allowing SMEs to access up to $200,000.
And SMEs that need standby cash can try the Business Overdraft (BOD) facility, which gives them access to up to $200,000 within one working day.
The BIL and BOD were introduced in response to surveys of SMEs.
'(We found) that the need for working capital was real, but their limitation in providing security and financial statements was also present. Also, they needed funds fast,' said Ms Bedi.
She says SMEs can apply for either of the two products without providing any collateral: 'With no collateral requirements, SMEs need provide only six months of bank statements, with no need for audited financials.'
Government assistance schemes
FIRMS are not limited to just unsecured working capital loans.
Government loan schemes, providing for up to $15 million, are also available to medium-sized firms.
Banks like UOB are among 14 financial institutions here which help Spring Singapore administer the schemes.
'UOB is a major participant in various government assistance schemes,' said its executive vice-president of commercial banking, Mr Yeo Eng Cheong.
'They include the Local Enterprise Finance Scheme (Lefs)...as well as the Internationalisation Finance Scheme (IFS), which assists our customers in expanding overseas,' he added.
Lefs has a loan quantum of up to $15 million with fixed or variable interest rates.
The loan can be used to buy new equipment, tide a company over an emergency or seize new business opportunities.
To qualify, firms need to be at least 30 per cent locally owned, have no more than $15 million worth of fixed assets and employ fewer than 200 workers.
As a commitment to help drive the growth of businesses, the default risk of Lefs is shared equally by Spring Singapore and the partner financial institution.
SMEs can tap the IFS when they need to finance the acquisition of fixed assets for use abroad or fund the expenses of projects overseas.
Under the IFS, the Government co-shares the default risk with participating financial institutions.
'These funds can be applied for various purposes,' said Mr Yeo. 'For example, general working capital, asset acquisition and for special purposes such as bridging loans for listing, mergers and acquisitions, as well as loans for overseas acquisitions.'
Receivables >financing
CASHFLOW is another major challenge for SMEs. They often have to wait up to 90 days to get paid on their invoices, resulting in working capital being tied up in account receivables.
HSBC can help SMEs which have sound receivables unlock the value of their invoices without the need to pledge any tangible collateral.
'Receivables Xpress is a receivables financing package designed to provide more hassle-free and quicker access to financing,' said Ms Tan Siew Meng, head of HSBC's commercial banking unit.
HSBC said its service can provide SMEs wth in-principle approval within five working days without submitting physical invoices.
'It also offers higher loan quantums at attractive pricing as compared to unsecured overdraft or short-term loans.'
Global benefits and cost-savings
ENTREPRENEURS are increasingly aware of the need to track their expenses and manage spending better.
Mr Edwin Khoo, head of enterprise banking at DBS, said business people can try its DBS World Business credit card.
One benefit is that card-holders enjoy unlimited and free access to more than 300 airport lounges.
This allows those who are cutting costs by downgrading from business class to economy to continue to enjoy airport lounge privileges at no extra cost.
They can also wine and dine customers at affordable prices. The card also comes with a facility that offers discounts at restaurants locally and overseas.
Business as usual
BANKS and analysts have told The Straits Times in recent weeks that firms can expect to pay between 0.1 and 1 percentage point more in borrowing costs.
But lenders are not about to abandon their smaller clients. DBS, for example, has not curtailed lending significantly despite a gloomier outlook.
But Mr Khoo, its enterprise banking chief, added: 'Yes, we are cautious - not that we have ever not been cautious. But the message to our clients is that as long as they have been loyal to us, we are sure to help.'
This article was first published in The Straits Times on November 12, 2008.
