Economic downturn Get ready to fund small businesses
This CNBC video showed the problem faced by America in introducing a business loan funding program. Watch video.

Some of the problems highlighted are:

a) Excessive demand leading to the website crashing

b) Complicated forms that need to be simplified

c) Coordination between the federal govt and its agency and the lending banks.

Singapore will have to introduce a similar program in the near future. It is best to get our platform ready.

Here are my suggestions to avoid a similar hiccup.

a) Develop a light weight website for the lender to submit their request and receive an acknowledgement. This is a simple form that does not require interaction with the bank's backend system. Multiple websites can be developed to distribute the work load, but it operates on a common platform.

b) The borrower has to make declaration of the relevant figures on which the loan will be calculated. It will be an offense to make a false declaration (similar to a false income tax declaration).

c) The lending bank can access the request and contact the borrower for more details. This is done offline.

d) Disbursements under the program are to be done in monthly installments, to reduce the risk of large scale fraud.

e) The interest rate on the loan is agreed separately between the government and the lending banks.

f) The borrower may repay the loan partially or fully at any time, when they are able to.

g) After the economy has recovered, the borrowers will be required to make a monthly repayment of the loan, so that it can be finally extinguished. 
 
Here is an example of how a lending program can be structured.

a) The govt agrees to lend to the business a monthly sum equal to the rental expense and the payroll of the business from the starting date until the program is terminated.

b) On approval, the lending bank receives the first monthly payment by credit to the bank account.

c) On each monthly date, the borrower receives an email to confirm that the expense and payroll figures remain the same, for the next payment to be made. 

I hope that when the time comes for Singapore to introduce this program, we can avoid the problems that were faced in America. 

Tan Kin Lian



 

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