Rate cuts fine but easier access to bank loans is bigger issue for small businesses, says SME
Small and medium-sized enterprises would generally welcome the decision by a number of commercial banks to cut their lending rates this week, but actually getting a loan in the first place is the main problem for many small operators
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Tanit Sorat, president of V-Serve Group, which operates a small logistics business, said that while a lending-rate reduction was good, what SMEs really wanted was improved access to loans, which were still hard to get.
Major banks cut their lending rates on Monday, after Finance Minister Apisak Tantivorawong last week appealed to the banks, asking them to lower interest rates in order to assist small businesses.
For example, Kasikornbank announced a cut of 50 basis points in its minimum retail rate, starting tomorrow.
Tanit said many SMEs continued to complain about the difficulty of getting a bank loan.
Banks usually demand collateral and tend to value such assets as very low, or below 70 per cent of market prices, leading to little chance that many SMEs will be able to access financing, he explained.
Such a stance by the banks is, however, understandable because they are worried about rising non-performing loans in the current economic climate, he stressed.
Many banks opt to buy government bonds since it is a much safer way of earning interest, even though they get a low rate of investment return in doing so, Tanit said.
Meanwhile, large firms are currently staying away from the banks as they can raise funds at a cheaper cost by issuing corporate bonds, he added.