• 9 April 2020
  • Singapore SME|SME financing|SME funding

CNA938 Money Mind: Validus Helps Small Businesses Amid COVID-19

Our Co-founder Vikas joined Wui Lynn and Stanley of CNA938 Money Mind on Tuesday, to discuss how small businesses are faring in this COVID-19 period, relief measures by the Government and how Validus can help with addressing SMEs’ cash flow requirements. Here are key excerpts:

Difference between Validus, banks and other similar businesses

Most banks would look at the traditional credit models, balance sheets and financial statements etc. whereas Validus looks at forward-looking information, such as the kind of work orders and purchase orders and most importantly, what SMEs need for growth.

When compared to other similar businesses, it would be the way Validus work. It is mainly through partnerships and they could come in the form of online platforms, banks as well as corporates. Another differentiation is that we offer a straightforward, online presence for SMEs, where we try and pre-approve them as much as we can. Validus finds the clusters, do data analytics, use machine learning and then proactively approved these loans.

Main challenges for small business during this period

The main challenge is cash flow. Businesses are disrupted or halted and there is no status quo. Right now, SMEs are looking for ways to extend payments for the next few months in order to fulfill all their contracts and work orders.

Special initiatives in place to ensure that these SMEs are still given the due consideration when they require some form of capital to stay afloat, that when the next wave picks up again, they are able to ride it out? 

Validus is offering our SME borrowers increased limits. In line with Singapore Budget (in which government initiatives have been phenomenally brilliant and very timely) to further support our SMEs, Validus introduced a S$50 million VSupport Package in February for SMEs who are part of our Corporate Vendor Financing programme (where we work with large Corporates or government-linked entities, to offer fast financing to their SME suppliers and contractors in their ecosystem). This initiative will address cash flow issues, operational expenses and support their growth through increased financing limits, longer repayment terms, access to pre-approved financing and reduced interest rates. 

Being a conduit and having facilitated over 14,000 loans across Singapore in the last three years, we have the track record and ability to ensure viable businesses are able to access financing when they need it.

Validus rates compared to banks

We offer bank-plus rates to SMEs as banks usually prefer secured financing whereas all of our loans are 100% unsecured, and therefore carries a bit of a default risk.

The underwriter behind each Validus’ loan 

Validus internal team. There is tremendous SME loan underwriting experience within the team at Validus, stemming from in-depth experience at banks and fintechs across decades. They’re the ones who created our priority algorithm.

Using technology to drive financial inclusion for growing businesses

Validus looks at the specific clusters within supply chains, and often these small and medium enterprises are brick and mortar companies – cleaning companies, guard services companies. These SMEs are the ones that work with mid level and large corporates. We digest all of that data to do pretty much all of the pre-approvals beforehand so that gives us the agility moving forward.

On being ‘more’ discerning when it comes to lending money to certain businesses, especially those who have no track record, for example maybe the ones who started operations just before COVID-19

Unfortunately, Validus cannot do much where we don’t have access to digital footprints or some sort of business data. New businesses are very well supported by the government schemes and grants offered by by Enterprise Singapore. So the ones that Validus try and work with are the ones that are growing or have shown some kind of a growth phase.

On the phenomenally brilliant and timely Solidarity Budget and how it’ll be helpful for businesses, especially the jobs support scheme 

The first thing to remove is paranoia and fear. By taking care of 75% of the salary, the biggest benefit is the businesses get one month to breathe and to take decisions that are not based on emotions or fear, or paranoia. This provides huge support to small businesses whose biggest costs comes from salary and manpower.

May as ‘deadline’ for the coronavirus

In my opinion, we should start seeing a decline in the number of COVID-19 cases by summer. To return to status quo will take 6 – 9 months in my opinion, at least. Exactly what the Singapore Government is doing in this phased manner is what we need in terms of support – so that when things return back to normal, SMEs are set and ready in terms of gearing up for recovery and growth.

Call to businesses that are helping other businesses to also extend more assistance in some form or other given the kind of work and services that they offer 

This is the time everybody has to come together. Greed has to take a step back. And what we’ve seen is when you look at the cost of credit, if you take away the fact that the Singapore Government is really helping with the 1% MAS scheme and the 3% loan, our fear is that a lot of the money may not reach the final SMEs that really need it. It’ll still go to the SMEs but you know there’ll be sectors that will inevitably miss out on any reliefs. So what we are calling out for is that can we come together and see which are the brick-and-mortar companies, the SMEs that truly have been the backbone of the economy, employing probably a larger number of the workforce and how can we support them together.

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