SMU alumnus and Chairman of Sheng Ye Capital Jeff Tung commented on the growth of the factoring market in China. His firm has focused on factoring and supply chain financing, two areas ripe for growth in a nation where smaller companies are becoming a larger part of the economy and are mostly cut-off from traditional credit. In contrast to traditional commercial lenders that ask for fixed asset collateral, Sheng Ye prices its factoring services by assessing the trade background and the quality of the accounts receivable. It develops its own database with reference to key financial data and previous trading record, which can be used to evaluate other business opportunities. “Taking a supplier of CNOOC as an example,” said Mr Tung, “we need to know whether this company has supplied the same cargo to CNOOC before, the pricing terms of cargo that they trade, and the pricing trend over the past few years to evaluate whether the invoice is authentic. Sometimes they may want to inflate the cargo value just to get more credit. We also need to know where they store the cargo, because we need to verify whether the cargo is really there.”
REDD Asia Online (Jan 24)