Article 24 – Meeting your banking needs
by Tan Thiam Hock
It was five in the morning and I was woken by a call from a Doris or a Doreen from Hong Leong. I was too sleepy to ask whether she was from the bank, insurance or building materials.
Two days earlier, another call had come in and since my phone was on silent mode, I texted that number with a “Who r u?” The immediate reply pinged, “I am Yvonne from Hong Leong, Mr.Chai’s colleague.” I was about to call back when I realised that it was Chai and not Chia. It must be fashionable for the ladies in Hong Leong to call themselves Yvonne nowadays but there could possibly be a few hundred Yvonne’s.
Banks, like every other consumer business, have to work very hard to acquire and cultivate customers. In their B to C business model, they compete among themselves in a very tough arena. From having to make cold calls to hard selling to card pushing, they are almost like an insurance.
So, they call themselves financial consultants offering financial solutions. They encourage you to spend to your last dollar and then lend you more money to continue spending. If our young generation is not careful, we might end up like the Americans with high consumption of over 70% of GDP with no savings. Basically, America is broke and living on credit. China keeps lending them more money so that they can continue buying more goods from China. Sounds familiar?
When I first started trading back in 1985, I learned how to issue and negotiate letter of credits from Gan of Bangkok Bank and Toh of OUB Bank. Both elderly clerks were extremely knowledgeable and very efficient with their old fashioned typewriter. They would make me sit down, lecture me and help me type all the necessary documents, mistake free. Then, they lectured me some more, helped me stamp the documents and got me to sign off.
The lessons learnt turned out to be very useful later when I had to deal with unscrupulous buyers in cohorts with their banks especially from the Middle East and South America.
I still remember these words from my partner’s father, Ang Toon Chew spoken in Teochew/Hokkien, “Young man, if you invest 10 dollars to make 1, then you are a poor trader. You should only invest 1 dollar, borrow 10 dollars to trade so that you can make a dollar on your dollar investment.”
So, if you are in a trading environment and you have managed to arrange a trade facility combination of Letter of Credit, Trust Receipts (TR) or Bankers Acceptance (BA) of say RM1mil with repayment terms of 120 days for TR or BA, then technically speaking, you can turn/use the facility to a maximum of three times or RM3mil. If you can sell the goods for double the costs, then you will have a turnover of RM6mil.
Say you have a paid up of RM200,000 and you had put up your revalued property of RM1mil as collateral, then with an investment of just RM200,000, you have the potential to trade up to 30 times your paid up. Normally, you would have done very well if you can trade 10 to 15 times your paid up.
Banks love to offer you trade facilities for a variety of reasons. Higher margins, double profit if there is forex involved and technically speaking, lower risks. You are not expected to lose all their money if it is invested in stocks/inventory as there is a salvage value. Only an idiot of a trader will have his whole inventory written off and as such deserves to lose his property to the bank. And if you are able to turn three times, the bank too will turn the same facility three times. Everybody is happy.
Entrepreneurs must treat all granted bank facilities with respect. Your banker will support you if you are sincere and honest in your business dealings. Your personal integrity will determine the level of support given by your bankers.
I was sitting next to Khun Chai from Bangkok Bank Thailand in the lecture hall. As he oversees the international business, he is familiar with its Malaysian operation. He mentioned to me that the Bangkok office still has very high respect for Datuk Tan Chin Nam, who was their Malaysian Business Advisor in the 60s/70s. Reputation earned based on honesty and integrity lasts a lifetime.
Over lunch, I met micro-financing (small loans to cottage industries, farmers etc) experts from Ecuador and India. I was surprised to hear that their non-performing loans was about 8% and the main reason was that politicians in the small towns told the borrowers that they do not have to pay back. In exchange for their votes, the politicians promised to get their loans waived!
While some special people continue to get grants and special loans easily, many small entrepreneurs find it difficult to get financing for their start ups or when they need to scale up.
For some time, it has been on my mind to set up a non-profit foundation to help the small entrepreneurs in terms of financing and advisory services. Write to me if you have any good ideas. I would love to hear from you.
In the meantime, if you need any financing, may I suggest you contact Yvonne of Hong Leong Bank. Just do not call her on her mobile phone lest you wake her from her beauty sleep. Just text her that you got her number from Quek. This could just be the beginning of a mutually-beneficial relationship between you and your banker.