First Global Bank (FGB) Limited has set up a commercial unit to deal exclusively with the financing needs of small businesses.
The bank is targeting the information technology, agro-processing, tourism and energy firms, but Assistant Manager for Credit Deidre O'Connor-Heron says First Global is also open to funding projects in any industry.
First Global is the latest commercial bank to take more specific aim at the SME sector and is doing so at a time when lending to large firms is falling, while small and micro borrowing continues to show vibrancy.
In the last quarter surveyed by the central bank, small business borrowing represented 37 per cent of all loans in the period ending September 2014, up from 28 per cent in the June quarter.
First Global Bank manages a loan portfolio of $16 billion amid total assets of $40 billion at September 2014, according to industry data on commercial banks. The bank, which is a subsidiary of conglomerate GraceKennedy Limited, is No. 5 of six commercial banks, with just four per cent of a loan market that was last valued at $367 billion.
First Global has been advertising its new loans for small businesses, noting that it will not demand audited statements as a condition for considering loans.
O'Connor-Heron stated that the bank's new targets are those businesses with six to 20 employees and annual turnover of $10 million to $50 million.
For this segment, she said, First Global's rivals not only include other commercial banks, but also credit unions and other lending agencies. Loan rates will "depend on the risk associated with the lending as well as the adequacy of the collateral provided", but will be competitive, she added.
First Global plans to make inroads, the officer indicated, through the technology for which the bank is widely known, "specifically our groundbreaking online banking solution, Global Access, which allows our clients to transfer funds to any account housed in any bank, locally and internationally," she said.
O'Connor-Heron also said the bank is developing products specifically positioned to meet the needs of the segment. She did not specify what these were.
"FGB recognises and appreciates the challenges faced by SMEs and, as a consequence, we have taken the decision to find ways to meet them at their point of need through operating flexibly, given the significance of this sector," the spokeswoman said.
The non-requirement of audited financial statements is one such measure, though O'Connor-Heron also indicated that the bank will encourage loan prospects to progress to better accounting practices.
"We acknowledge the importance of information, which includes the audited financial statements, to the SME for growth and development and, hence, always encourage them to become compliant within 12 months," she said.
Commenting on the risk posed by First Global's approach to the SME market, O'Connor-Heron said "risk is inherent in any business transaction" but added that the bank's "credit risk assessment is and will remain robust to identify key risks in lending to this segment and will seek to mitigate appropriately".
The bank will accept both traditional and non-traditional assets as collateral for loans, she added, while noting that the bank was weighing the potential within the new National Security Interest in Personal Property (NSIPP) registry.
"We are currently exploring all the opportunities that SIPP offers and this has afforded us the ability to consider non-traditional assets," she said.
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