State-owned Thai Credit Guarantee Corporation (TCG) has approved 57 billion baht worth of loan guarantees for small and medium-sized enterprises (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.
About 110 billion baht has been disbursed from the total soft loan amount of 500 billion baht, he said.
The central bank is offering 500 billion baht in soft loans at 0.01% interest to financial institutions for two years to re-lend to SMEs with a maximum credit line of 500 million baht at 2% interest.
The government will absorb interest charges for six months for SMEs that receive soft loans.
To be eligible, SMEs must operate domestically, 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 last year.
The maximum draw-down for the soft loans is set at 20% 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 will lead to high monthly repayment despite the low interest rate, as the financial liquidity of SMEs has been crippled by the Covid-19 crisis, Mr Rak said.
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, Mr Rak said.
On Aug 18, the cabinet passed a resolution to review measures to assist struggling SMEs in terms of soft loans. SMEs that fall into the three categories of assistance are those that still cannot access banks' soft loans, operators of hospitality businesses and self-employed individuals.