The state-owned Thai Credit Guarantee Corporation (TCG) has recently approved a huge 57 billion baht (US$1.8b) worth of loan guarantees for SMEs qualified under the Bank of Thailand’s soft loan scheme. These SMEs, however, have yet to receive the soft loans because of financial institutions’ discretion over concerns associated with non-performing loans, said TCG president Rak Vorrakitpokatorn.
The 57 billion baht in loan guarantees will be conditioned on banks’ willingness to provide soft loans to SMEs because TCG will guarantee these two-year loans for another eight years, resulting in lower monthly repayment for SMEs, Mr Rak said.
In addition, Mr Rak also stated that around 110 billion baht has already been disbursed from a total soft loan amount of 500 billion baht. The central bank is offering 500 billion baht in soft loans at 0.01 percent interest to financial institutions for two years to re-lend to SMEs with a maximum credit line of 500 million baht at 2 percent interest.
The government has also promised to absorb interest charges for six months for SMEs that receive the soft loans. In order to qualify for said loans, SMEs must operate domestically within Thailand, be non-listed companies, have a credit line of up to 500 million baht from financial institutions, and continue to service debt or make late payments of less than 90 days as of the end of 2019.
The maximum draw-down for the soft loans is set at 20 percent of each bank’s outstanding loans at the end of December.
Another factor preventing many SMEs from accessing banks’ soft loans is the term of the loans, Mr Rak said.
With the two-year loan period in place, SMEs will have to repay the entire loan amount or refinance their borrowings in line with the normal bank interest after two years. The two-year loan period could potentially lead to high monthly repayment despite the low interest rate, as the financial liquidity of SMEs has been crippled by the COVID-19 pandemic.
The cabinet’s resolution to amend the soft loan conditions for SMEs to enable greater loan access and sustain jobs will enable these companies to receive loans from financial institutions with a 10-year instalment period.
Lenders will also still have collateral for providing these loans at a sufficient rate, said Mr Rak.