Factoring Loans - Simply Brilliant
Straits Times 1st October 2007
(Home Section - Pg H19)
"Demand will come mainly from firms dealing in construction, say industry players."
"DBS, say industry watchers, is the largest in terms of market share, with more than a quarter of the factoring pie."
This is simply ingenious - something that can only be mastered by Singapore Inc. The premise is so simple yet incredibly implicative. The biggest 'users' of this type of loan are from the construction segment of the economy (which I hardly believe are 'small and medium enterprises' to begin with). And where do the large proportion of construction firms source for projects and contracts? Yes, my friends, our good old government.
Next, DBS is the biggest lender for these users. And who is DBS' biggest stakeholder? Bingo, it's the government at 27% - albeit through Temasek Holdings with a direct 12.28% interest and an indirect 15.15% through Maju Holdings which is itself is 100% Temasek-owned (source: DBS Annual Report).
So, basically, companies get to tender and secure a contract from the government worth $XXX and then go to DBS where they will get only 80% of $XXX immediately - with the rest being interest due to DBS. Nowhere does it state how much the interest rate is actually but based on the example of a $10,000 invoice being worth a $8,000 loan as stated in the report, that will be 20% - 'loanshark' rates, by the way, for a duration that should be about a year or less.
Once again, Singapore Inc comes up with an amazing strategy to (ab)use the concept of 'what thy giveth with the right hand, shall taketh with the left'...
In the pursuit of independent thinking, I offer you an alternative perspective...