Lenders may keep the dollars and cents moving, but banker Joyce Tee firmly believes that clear moral rules undergird those transactions.

“I don’t want lending to be very complicated,” said Ms Tee, group head of small and medium-size enterprise (SME) banking at DBS. “Some people look at it and say: ‘If one transaction is only less than S$25,000, why do you even bother with it?’

“But I think if you don’t make it relevant to them and what is important to them, then I think you can’t last. The business cannot last. You’re just moving along, being a banker.”

For instance, shorter-term working capital loans may not be as sexy to a bank as generous overdraft facilities – but they are a big part of what she calls “responsible financing”. The average size of SME loans that garner one-day approval is S$100,000.

Noting that working capital is always at the forefront of SME bosses’ minds, she added: “That is actually the lifeline of every SME. You help them to see how they are able to monetise their accounts receivable, how to stretch their accounts payable.”

Ms Tee is intimately familiar with the pressures small businesses face. As a child, she helped out at her father’s Sungei Road stall, selling sundry items. Later, she and her husband ran a Popeyes fast-food franchise in Texas.

“SMEs kind of ride along with the market cycle. . . Because, remember, they are the last leg of the food chain,” she explained. “So when the big guys squeeze on them – for example, when the oil price drops and all the large corps start cancelling contracts ... here come the poor SMEs.”

She added: “I don’t think you can ever ring fence this. Working capital, to me, is something that we can make sure of ... so even though we can’t really ring fence a downturn in a market cycle – and SMEs are still very susceptible to that – at least I think I am able to help them take their hit to a minimum by making sure that they get the right kind of financing for the kind of needs that they have.”

As for what the “right kind of financing” looks like, Ms Tee said bluntly: “If they are looking at bank loans as the only way to do financing, it’s going to be not smart at all.”

Instead, she suggested that bankers and business owners look at industries as ecosystems: “There are buyers, there are sellers, there are suppliers, service providers. There are intermediaries. So when you put it in an ecosystem, you have a view of the ecosystem. Then you know how to finance them. Because what kills businesses today is cash flow. It’s really not property loans or term loans.

“And people like to use the fact that I need you to be collateralised. In an up-market, of course, where the value keeps going up, it’s not difficult to collateralise a loan.

“But when a business is starting up, they need the first person to recognize that they have a business model, that it works. And if you use a traditional way of financing them, you can’t do it.”

The new model – “what I call the entire ecosystem financing” – involves knowing who her customers’ vendors and service providers are. “I can help that guy out as well,” Ms Tee noted. “It’s like the Chinese saying: When the water is high, the ship sails higher. You must be able to provide the water.”

Income for DBS’ SME banking unit rose to S$1.71 billion last year, higher by 11 per cent on the previous year, with that segment making up 14.4 per cent of the bank’s full-year income. It also had about S$1.05 billion in outstanding loans to government-assisted schemes for SMEs, as at Dec 31, 2017. Such schemes include short-term loan insurance and financing for overseas expansion or investing in equipment upgrades.

“It’s really evenly spread. There is no such thing as a particular sector that is driving loans,” said Ms Tee.

DBS has said in its latest annual report that the Singapore SME portfolio last year “experienced modest growth but continued to face ongoing challenges in several sectors such as building and construction, and offshore marine engineering”.

This article was first published in The Business Times on May 30, 2018.

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