Liquidity and cash flow are the arteries keeping business running.  The SCB SME Survival Club recently held a discussion with SME entrepreneurs Khun Chanisara Wongdeeprasit, Managing Director of Brunch Time Co., Ltd. under the Diamond Grains brand; Khun Silinlak Tulyanan, Executive Chairman of Food Equipment Co., Ltd., and the SCB SME team to help SMEs better deal with current business challenges. 

Business overview

Amid the new wave of the Covid-19 situation, businesses that can survive are mostly those offering products meeting the new lifestyles and trending hobbies of people working from homes, such as surf skateboards, plants, and planting equipment. Small businesses can easily adjust using their specialization to get through the crisis even though this latest COVID-19 resurgence has been more severe and lasted longer.

As for Diamond Grain, Khun Chanisara said that her immediate response was to cut unprofitable sales channels and reduce operating costs, such as discontinuing Diamond Grain Bowl, which operated shops in six department stores that are currently closed under lockdown measures.  Some former store and event staff have been rotated to the new “Puckchumm” food delivery brand.  Previously, Khun Chanisara believed that business risks must be diversified.  She realized that her company can't depend on just one business.  Therefore, a new business line has begun using the existing Diamond Grain base of two million customers to offer solutions to customers’ pain points.  Differentiation has been adopted as the pillar for the new business.  In an era where many large and small entrepreneurs are rushing into the food delivery business, Khun Chanisara wants her brand to be represented as truly healthy food.  Therefore, the company produces vegetarian food products that are not oily and tasteless, supplemented by 100% nutritious cold-pressed vegetable juice, and targeting existing Diamond Grain customers who are ready to welcome healthy food.  Customers are aware that “Puckchumm” food is different from other brands because it is both tasty and healthy.  “Due to our strong customer base, we don't have to spend much money on new marketing campaigns.  And having realized that customers may not be excited with the same products, we had to come up with what we believe they want”, said Khun Chanisara.

As a distributor of food processing machines, such as shaved ice machines for Bingsu, pork slicing machines, and more, Food Equipment Co., Ltd. executive chairman Khun Silinlak said that prior to the pandemic her company was in a safe and comfort zone. After the last round of Covid-19, it was in shock for a while. With many of its customer groups experiencing difficult situations, such as factories, restaurants, and hotels, the company developed a worst-case scenario plan, assessing the situation as if it were unable to generate any revenue at all.  Having analyzed scenarios, the company came up with immediate action plans: 1) Leaning all operations by reducing costs without affecting employees and customers; 2) Increasing revenues by selling B2B to add new channels on Shopee and Lazada using SEO tools.  This action plan has even increased sales over the previous year, and 3) Upgrading the after-sales service team.  Without heavy workloads, the company switched their work to focus more on upgrading the ERP barcode system, resulting in a more streamlined work system.  The company focused more on making improvements and learning how to earn favor from customers and then use that information to design experiences meeting customer needs.

How can SCB support SMEs?

Khun Pikun Srimahunt, SCB Chief SME Banking Officer, mentioned the Bank of Thailand’s soft loan program for entrepreneurs, which existing SCB customers can apply for by contacting the Bank.  Current SME customers with credit limits not exceeding 500 million baht are eligible for a soft loan limit of up to 30% of their original credit line and with installments of up to ten years.  New customers will receive a maximum credit line of 20 million baht.

The key for doing business amid this crisis is to adjust, upskill, and transform.  Banks can provide support, provide credit lines, extend debts, and provide convenient services such as QR payment or the Robinhood food delivery platform that doesn't charge GP fees.  

For retail customers, Khun Pimjai Tongmee, Managing Director SCB Plus said that during the Covid-19 crisis assistance has been offered by many involved sectors as this is a national problem.  Banks must make sure that their customers survive.  The most important thing is that the relationship between customers and the Bank should be long-term, open, and sincere. Even now, while everyone is trying to help, some customers refuse to bring their problems to the Bank. To be able to help, customers must tell us the problems they are facing.  The Bank is willing to support them all.   

Payment holidays are a short-term solution, while Covid-19 is a long-term problem.  Banks need to prolong their lifelines for customers by extending loan terms, such as implementing step-payment plans, which means paying less in the beginning according to their current status.   However, if customers stop paying it will affect their credit score if they want new loans when the economy rebounds.  Therefore, consistency is very important.  SCB is keen to have good relationships with our customers.  In normal times, customers seeking new payment plans may be considered vulnerable.  However, in this special situation, we consider them to be good customers because all parties involved must be willing to support one another to get through the crisis together.

What should I do if I want a loan? 

Khun Sakkawat Itthasawad, EVP of SCB Business Banking Relationships Management Division, touched upon the pain points of applying for SME loans.  He said that a common problem is that some entrepreneurs can run their businesses but cannot sell their stories.  Khun Sakkawat said that getting a loan can be likened to borrowing money from a friend. How can you assure your friend that they will get repaid? Do we have a clear business plan? What are the key success factors?  You need to provide proof of how your business is doing, such as revenues, sales, costs, financial performance, account movements, and payment records of your home loan or credit card if any.  These numbers are critical for credit approval.    

Bank lending is approved based on the 5C principle, comprising creditworthiness, capital, capacity (to repay), collateral, and conditions (referring to prevailing business conditions).  Entrepreneurs must prepare the latest year's financial statements, historical bank statements, related tax filing forms, and other records of income versus expenses. 

The problem with SSMEs is that their business is carried out on a cash basis, and not backed by bank accounts.  However, tools such as mobile banking applications which are are very common nowadays, such as Mae Manee QR payments, can easily capture your cash transactions to reflect cash flow.  Such information will be useful for credit approval.  

What if SMEs are unable to survive, despite a loan?   

SME owners are advised to contact the bank(s) involved.  However, they should make efforts to adjust their business process by learning costs or adding new selling channels as banks will consider their potential.  Business plans proving revenue sources will be an important factor in ensuring that companies can generate sales.  If profits are used for investing in assets, they should also provide evidence.  

What many people misunderstand is that customers seeking debt restructuring will be viewed as having financial problems and therefore vulnerable.  Thus, they suffer from installments that do not reflect their actual situations.  In such cases, revealing your problems to the Bank to adjust your installments is a better option.  If you insist on continuing to suffer while your business is not viable, you will not have any backup funds if the situation gets worse.  We would recommend customers come to us to reduce their burdens, so they have more money to use for their businesses.  When the economy recovers, it can pay off debt according to loan conditions.  If their business resumes strongly their payment plans can be readjusted. Paying back quickly means debts will be reduced rapidly.

Use the right financial products to reduce financial costs

Khun Silinlak also shared her experience about using the right products to help reduce financial costs.  For example, she previously used OD to settle all types of payments.  Later, when she learned about TR and used that facility for foreign transfers, she saved money as the interest rate was cheaper by half.  Entrepreneurs should talk to RMs about using the right financial products as some may not be familiar with bank products such as FX Online that offer better exchange rates, save time, and are very convenient.  Customers can also buy currency options to close their currency risk exposure. 

Talking with your bank is very important because it lets both parties realize the problems they are facing.  The Bank is ready to listen to the problems of our customers as a friend.  Sincere communication will allow the Bank to support them in the long term. 

Can retail individuals apply for a business loan? 

Normally, banks approve loans based on income projection and see if you have other loans with the bank, such as auto loans.  Then, banks must verify your income.  Banks want information from customers.  The important factor is your discipline and intention to pay.  This will allow customers to receive more loans. On the other hand, if a contract is breached once or twice, it may take years to restore your credibility. In other words, your financial records and relationship are very important in earning trust.  If you do business mainly with cash, you should put some money into the bank to let the bank know how much you earn.  Previously, you may not have had time to go to the bank.  However, we now have QR payment and mobile banking for more convenience.

Bank of Thailand soft loans for aiding SMEs have a total credit line of 200 billion baht at a 2% fixed interest rate for the first 2 years, and the average interest rate for 5 years is not more than 5% p.a.  SMEs can request a loan of up to 30% of their original credit line as of 31 December 2019 or 28 February 2021, whichever amount is higher, less the soft loan limit previously received according to the Financial Aid Ministerial Regulation issued in 2020.  However,  the maximum limit shall not exceed 150 million baht with installments of up to 10 years.  Credit guarantees can be provided by the Thai Credit Guarantee Corporation (TCG).  Entrepreneurs who have never had a loan with any bank will be offered a maximum credit line of 20 million baht (including all credit lines with all financial institutions). See more details at  https://www.scb.co.th/th/sme-banking/business-loan/long-term-loan/sme-soft-loan.html

Source: Clubhouse: SCB SME Survival Club, Wednesday, May 19, 2021 at 19.00 hrs.