By Hoem Seiha
As bank loans enable small and medium enterprises (SMEs) to scale up their operations, many commercial banks are not ready to offer loans to companies without proper collaterals, but experts say that outsourcing of asset evaluation projects to specialized appraisers will increase the number of loan provisions.
Commercial banks usually approve loans based on collaterals, and if an enterprise is seeking a loan of US$0.5 million from a bank, the enterprise has to have collaterals worth US$ 1 million – that is 50% higher than the loan to be provided.
“Some scaling enterprises have collaterals that are worth lower than their intangible assets,” said Chit Uys Stevyxo, CEO at Vtrust Appraisal Co. Ltd.
Intangible assets, as Stevyxo explains, referred to company’s earning potential, value of its brand name, and its human capital, to name a few.
The Central Bank urges that banks have to acquire collaterals when providing loans to borrowers, as So Phonnary, chief operations officer of Acleda Bank, agrees that providing loans without collaterals is highly risky.
Meanwhile, when 95% of enterprises in the Kingdom are in the stage of transitions, they need capitals to expand their operations to respond to the current demanding market.
An easy access to bank loans helps keep a scaling enterprise stay in business, and if it cannot secure a loan, it will face a cash flow crisis and most often bankrupt because “at this stage any enterprise meets this similar situation,” said Kuy Vat, Vtrust Group’s CEO.
Stevyxo agrees, saying the trend of loan provisions will change its pattern to meet the rising demand of loans to expand business operational scales.
“The competition of bank loan provisions becomes stiff now, and the next step is that they will give out loans based on both collaterals and intangible assets,” said Stevyxo.
At the transitional stage, scaling companies transform themselves from less to well-structured. Their income potentials start to be predictable and evaluable, while their brand can be calculated into money. “Those are their assets,” said Stevyxo.
An enterprise with collaterals worth US$500,000 would secure a loan of US$500,000, but this will not be approved by the bank. However, intangible assets could be a plus to that.
“If the enterprise is appraised at US$1 million, including its intangible assets, the bank would feel secure to provide the loan with the suggested amount,” said Stevyxo.
Most banks usually do not have that specialization in assessing real values of the enterprises that are securing loans from them. Only few commercial banks have appraisal departments to do that job. Most enterprises often report it as one of the challenges.
Stevyxo suggests, specialized independent appraisers can do the appraisal job far better and the results can be applied for securing bank loans at certain commercial banks throughout Cambodia.
“Licensed appraisers are insured by insurance providers, and if any loan secured by anyone of the appraisers becomes a default, the insurer will pay,” he said. “That’s why it’s always safe and highly effective.”
It is projected that more commercial banks will offer loans based on both collaterals and intangible assets in the soon-coming years when competition becomes stiffer for the banking industry, and “outsourcing of appraisal projects to any one of specialized and licensed appraisers should be cost-effective, highly secure, and fully insured,” Stevyxo suggests.
As bank loans enable small and medium enterprises (SMEs) to scale up their operations, many commercial banks are not ready to offer loans to companies without proper collaterals, but experts say that outsourcing of asset evaluation projects to specialized appraisers will increase the number of loan provisions.
Commercial banks usually approve loans based on collaterals, and if an enterprise is seeking a loan of US$0.5 million from a bank, the enterprise has to have collaterals worth US$ 1 million – that is 50% higher than the loan to be provided.
“Some scaling enterprises have collaterals that are worth lower than their intangible assets,” said Chit Uys Stevyxo, CEO at Vtrust Appraisal Co. Ltd.
Intangible assets, as Stevyxo explains, referred to company’s earning potential, value of its brand name, and its human capital, to name a few.
The Central Bank urges that banks have to acquire collaterals when providing loans to borrowers, as So Phonnary, chief operations officer of Acleda Bank, agrees that providing loans without collaterals is highly risky.
Meanwhile, when 95% of enterprises in the Kingdom are in the stage of transitions, they need capitals to expand their operations to respond to the current demanding market.
An easy access to bank loans helps keep a scaling enterprise stay in business, and if it cannot secure a loan, it will face a cash flow crisis and most often bankrupt because “at this stage any enterprise meets this similar situation,” said Kuy Vat, Vtrust Group’s CEO.
Stevyxo agrees, saying the trend of loan provisions will change its pattern to meet the rising demand of loans to expand business operational scales.
“The competition of bank loan provisions becomes stiff now, and the next step is that they will give out loans based on both collaterals and intangible assets,” said Stevyxo.
At the transitional stage, scaling companies transform themselves from less to well-structured. Their income potentials start to be predictable and evaluable, while their brand can be calculated into money. “Those are their assets,” said Stevyxo.
An enterprise with collaterals worth US$500,000 would secure a loan of US$500,000, but this will not be approved by the bank. However, intangible assets could be a plus to that.
“If the enterprise is appraised at US$1 million, including its intangible assets, the bank would feel secure to provide the loan with the suggested amount,” said Stevyxo.
Most banks usually do not have that specialization in assessing real values of the enterprises that are securing loans from them. Only few commercial banks have appraisal departments to do that job. Most enterprises often report it as one of the challenges.
Stevyxo suggests, specialized independent appraisers can do the appraisal job far better and the results can be applied for securing bank loans at certain commercial banks throughout Cambodia.
“Licensed appraisers are insured by insurance providers, and if any loan secured by anyone of the appraisers becomes a default, the insurer will pay,” he said. “That’s why it’s always safe and highly effective.”
It is projected that more commercial banks will offer loans based on both collaterals and intangible assets in the soon-coming years when competition becomes stiffer for the banking industry, and “outsourcing of appraisal projects to any one of specialized and licensed appraisers should be cost-effective, highly secure, and fully insured,” Stevyxo suggests.