No collateral needed with DBS mLoan for small businesses

DBS Bank in Singapore.
DBS Bank in Singapore.PHOTO: THE BUSINESS TIMES

DBS Bank has launched a new working capital loan aimed at small businesses that may struggle to get short-tenor unsecured loans.

The DBS mLoan pilot programme offers a loan of up to $100,000 with no collateral required.

It is expected to benefit small firms in the service industry, including retailers, restaurants and e-commerce merchants that may need more working capital for a short period of time, such as during the festive season.

DBS' regional head of SME Banking, Ms Joyce Tee, said in a statement this week: "Leveraging advanced credit and data analytics, we are able to design a working capital loan for these small businesses that might otherwise be under-served."

Typically, banks prefer to lend to companies that can provide collateral, have an established operating track record and at least two years of audited accounts.

However, by adopting advanced credit technologies, DBS said it is able to "finance historically under-served market", represented by small businesses without audited accounts and personal income statements.

The bank is working with Hong Kong-based financial technology provider AMP Credit Technologies on a new approach to assess loan applications and manage credit risk.

It is able to use electronically verifiable cash flows such as card payments to assess each loan application, DBS said. "These electronic cash flows are studied and measured against sector models of payments and collections and a credit assessment is made accordingly," the statement added.

AMP Credit Technologies chief executive Thomas DeLuca said the company looks forward to working with the bank for a successful rollout in Singapore, and "ultimately, across the region".

DBS mLoan is designed for small businesses that accept card payments and have been operating for at least six months.

Loan repayments are automatically drawn from their existing business bank accounts daily, over a typical loan tenor of three to 12 months, the bank said.

A version of this article appeared in the print edition of The Straits Times on January 13, 2016, with the headline 'No collateral needed with DBS mLoan for small businesses'. Print Edition | Subscribe