Want Want
Highlight: Through extensive sales analysis, the Taiwanese snack company, along with China Merchants Bank, has played a critical role in securing credit lines for around 1,000 of its distributors, without providing an explicit guarantee.

In partnership with China Merchants Bank (CMB), Want Want in 2012 piloted a supply chain finance scheme that provides micro financing to the company’s most trusted distributors at healthy rates. In 2013, it was rolled out nationwide.

Approximately 1,000 distributors, vetted by both Want Want and CMB, are tapping the revolving loans, which are capped at Rmb1 million each. A credit line can be maintained for a maximum of five years, but each loan tenor is less than
six months.

Programme details
The loans can be drawn down and repaid at anytime. The interest rate is applied on a daily basis, at a range typically varying between 30 to 40 basis points above the benchmark rate. The rate differs slightly depending on each distributor’s credit profile, history and length of collaboration with Want Want. The company stipulated its distributors must exceed the overall group’s yearly growth target to remain in the loan programme.

Distributors have to pass Want Want’s internal assessment to join the loan scheme. The company monitors the performance and assesses its pool of distributors on a monthly and yearly basis, analysing their sales and payment records to create a credit profile.

Want Want’s distributors are given A, B, C, D and E ratings. Only the first two tiers and those with at least three years of history working with the multinational are allowed to join the club. After the initial screening, about 2,000 distributors, accounting for about 40% of its total sales, are eligible.
Even though Want Want has not pledged a loan guarantee (something that other lenders, including Standard Chartered, requested) the programme offers an avenue for CMB to access a broad client base nationwide, offering it more opportunities to cross-sell other financial products.

ZTE
Highlight: Liao Ping, ZTE’s director of international financing, keys in on receivables financing and how she uses trade to cut the best deals, with the help of DBS.

ZTE is the fifth largest telecom supplier in the world. About 50% of sales originate from outside of China. The telco company goes to great lengths to find the funding for export projects, increase cash flow, and shorten accounts receivable periods.

The major ways of financing it uses is through buyer’s credits, accounts receivables discounting/forfeiting, project finance and leasing. Accounts receivables financing is its largest source of finance for its export projects.

For Liao Ping, ZTE’s director of international financing, one of her top three international banks is DBS, partly because it has a great relationship with Sinosure [China Export & Credit Insurance Corporation], and “partly because it offers tailor-made solutions to support our exports.”

ZTE’s accounts receivable are complicated. The firm has set up more than a hundred branches and subsidiaries. “We have sellers in China that are ZTE China, sellers in Hong Kong that are ZTE Hong Kong, and so on for many countries throughout Europe and Asia,” Ping said.

For ZTE the accounts receivables holders are all different, but DBS takes a group-wide credit approach to the structure. It allocates a big credit line to ZTE Group and it uses different lines within the group when needed. DBS typically provides a credit line within two weeks of working with a new ZTE client.

“We also have account receivables arising from other countries and regions that are held by local ZTE entities. [China’s] Onshore and offshore financial markets change from time to time, so in order to get most favourable terms we have to choose different DBS entities,” Ping said.
In 2012, ZTE’s DSO was about 200 days due to the nature of its business.

It can take one or two years for the construction, and the payback period is sometimes up to seven years. “We have decreased our DSO a lot by engaging in such finance,” Ping concluded.