TMB Bank expects small and medium-sized enterprises in manufacturing and trading will have more demand for working-capital loans after the Business Security Act comes into force on July 2.
Eighteen years in the making, the act covers, among other things, businesses; the right of claim; movable property used in a business, such as machinery and inventory; immovable property used in a business; and intellectual property.
It also covers additional forms of collateral for accessing a bank loan other than traditional fixed assets such as deposits, land and buildings.
TMB is the first Thai bank to launch a new product to take advantage of the act by offering a top-up loan of 20 per cent to the existing credit lines of SME clients, which can use receivables, inventories and right of claims as collateral.
Somkid Preechasammakul, head of TMB commercial credit and supply-chain products, said SMEs with annual sales revenue of Bt200 million to Bt1 billion were the targets of this product.
She said SMEs in manufacturing and trading should benefit the most from the act because they had inventories and receivables, while contractors in government projects were another target because they had the right of claim from their contracts with the government.
Thai Top Sport Co, an SME customer of TMB, told the bank that it saw the act as an opportunity because it had a lot of receivables and it wanted additional working capital.
Somkid said that in the first phase, TMB would allow SME customers to use their inventories, receivables and rights of claim because the bank could assess those valuables easier than intellectual property.
Intellectual property needs time to implement because it must have a third party to help evaluate the value, she said.
The Bank of Thailand will announce a regulation on how to assess new collateral using the Business Security Act and loan-loss reserves from moveable collateral, she said.
Trirong Butragaht, chief SME banking officer at TMB, said the bank hoped that the 20-per-cent credit top-up would attract Bt1 billion to Bt2 billion in new loans by the year’s end.
Trirong said the legal execution of movable collateral in cases of debt default would now be quicker than for fixed-asset collateral because the process of determining the value of assets ended at the Court of Appeal. The legal execution of immovable property ends at the Supreme Court.
In the first five months, the value of SME banking at TMB grew slightly to Bt220 billion, while income from this business rose by 8 per cent in that period after 15 per cent was targeted.