In a recent interview with Singapore’s business daily, The Business Times, Hong Leong Finance (HLF) said it has seen its loan books hit an all-time high as they extend more credit to small and medium enterprises (SMEs), its biggest client segment.

In its Q3 2018 results, HLF, Singapore's biggest finance company, saw a robust loan growth of almost 5% year to date to S$10.3 billion – the highest in its 57 years of history. This was followed by Sing Investments & Finance which gained 8.7% to hit S$2.07 billion, and Singapura Finance, the third and smallest finance company in Singapore, which saw loans fall 7.1% to S$694 million. 

HLF President, Mr Ang Tang Chor said HLF’s loan growth was due to strong demand from programmes such as HLF’s SME programme, working capital loan, equipment loan, property loan and hire purchase. "The relaxation of restrictions by the MAS such as raising the limit of uncollateralised business loans has provided us with the capability to assist more SMEs with cash flow financing," he said.

More flexibility

“There is more flexibility in our customisation of funding solutions to meet the specific needs of our SME clients. More accessible funding options are made available to SMEs that generally have few assets to pledge,” said Mr Ang.

The Monetary Authority of Singapore (MAS) relaxed rules for finance companies to offer unsecured loans to SMEs last year. Effectively, it meant finance companies could extend collateral-free loans to small businesses.

“SMEs are faced with a longer asset conversion cycle for debtors are taking longer to pay them back. Demand for cash flow financing is very strong as cash flow is the lifeline for businesses. They are also borrowing to meet their working capital needs,” said Mr Ang.

HLF offers a wide variety of cash flow financing solutions to fit different business needs - from revolving credit lines to accounts receivable financing, factoring and supplier invoice financing and customised innovative financing solutions to meet project delivery and trade-specific requirements.

Mr Ang said many SMEs are restructuring and investing in capabilities to strengthen their business and become more effective and efficient. He also noted that there is a growing emphasis on digitisation especially in the areas of business operations and finance.

“The SME market will remain a key focus for our business growth. The economic climate remains challenging as SMEs become more competitive and productive. However, we continue to see opportunities in serving them well and will help them stay ahead of the competition with new innovative and relevant financing solutions,” he said.

According to Statistics Singapore, there are over 210,000 SMEs in the country.

New financing programmes

“We are also very encouraged with the success of our award-winning mortgage equity loan programme ME @50 rolled out in March 2017 in support of the regulatory relaxation of borrowing against the value of private properties to enable borrowers to monetise their assets in their later years,” said Mr Ang.

HLF is the first financial institution to introduce this unique loan programme, Mortgage Equity @50 (ME @50), where the total debt servicing ratio framework for mortgage equity withdrawal loans with loan-to-value ratios of 50% and below is relaxed. The programme was lauded at the Asian Banking & Finance 2018 awards, and won for ‘Housing Loan and Mortgage Loan of the Year’.

ME @50 allows individuals in their retirement years to cash-out with a term loan up to 50% of private residential property value without having to sell the property and also enjoy the unique flexibility to make early loan repayment without penalty to save interest cost.

“ME @50 has empowered 50- and 60-something baby boomers to make different life choices that they did not have before. ME @50 serves the diverse needs of our customers well in their retirement years, be it for their new business ventures, settlement of family issues, business transformation, home renovation or helping their children to achieve their dreams by supporting their education,” said Mr Ang.