PAPee's Fake Bank Guarantee for SMEs!

[makapaaa]

Yet Temasick can afford to set up microloan companies in India, but got no $ to help local SMEs?!

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>April 8, 2009
MICROLOAN SCHEMES
</TR><!-- headline one : start --><TR>Don't make it so hard for SMEs
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>




<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->I AM disillusioned after finding out the reality behind the risk-bearing burden for microloan programmes, which purportedly aim to help start-ups and small and medium-sized enterprises (SMEs).
My inquiries into such loans with OCBC Bank, DBS Bank and Orix tell me that such loans are not as convenient as they are made out to be.
I was told by the banks that although microloans, when approved, are dispatched without any physical collateral, they almost always require that the directors of the company act as guarantors for the full loan amount.
What this means is that should the company have problems repaying a loan of, say, $100,000, the bank will first recover the full debt, in this case, $100,000, from the business owners or directors.
Only after the guarantors have been declared bankrupt will the banks seek the irrecoverable sum or up to 80per cent of the loan amount from the Government, under the risk guarantee that the Government has agreed for financial institutions.
My understanding was different. I had thought that for a microloan of, say, $100,000, the business owners or directors would be liable for 20 per cent of the risk, that is, $20,000, while the Government would bear 80 per cent of the risk, or $80,000, thus leaving banks with no risk.
This is obviously not the case. In reality, the risk is still borne fully by the business owners.
I hope other SMEs or start-ups have the correct understanding of what is meant by 'government-backed' microloans when they seek such loans from financial institutions.
Johnson Lai

 

[halsey02]

Johnson Lai must be the 66.6%, who is living in constant stupidity to 'swallow, hook, line &...." of the government 'goodies'..

 

[kakowi]

hmmm...it is people like Johnson Lai that makes governing Singapore so difficult.

If the directors of the company do not have sufficient confidence to stand as full guarantors in their own company, then who will have that confidence?

If as what Johnson Lai attested, that the government is responsible for 80% of the loan and the directors do not have full liability for their own performance, then such a system is subject to loopholes.

The directors do not bear the brunt of their own incompetency.

Then the burden of their failure will fall on the government. And ultimately on the tax burden of the singaporeans.


Such a system proposed by the government is good in making sure that deserving SMEs get the needed loans to jumpstart their business, at the same time, make them accountable for the money that they borrowed.

Without the government guarantee, deserving start-ups will not even get the loan in the first place. Banks normally require a three-year track record with a minimum revenue before they are willing to grant loans.

This is after all, about lending money and getting back interest. Not for the directors to go on a free lunch.

There are enough free lunches in Singapore to-date. There is no need for more.

 

[takcheksian]

Free lunch in Sinkieland? Only if you are a PAPpy ministar or a crony living off the people's money.

 

[yellow_people]

Yet Temasick can afford to set up microloan companies in India, but got no $ to help local SMEs?!

Would you put your money on a horse that's bound to lose? That's what these SMEs represent.

 

[RumLee]

Does Johnson Lai really think he can walk away from a 100k loan just by returning 20% and leaving the rest of the burden to the state! Then move onto to borrow another $100k for another business venture. LOL!