Recently, a supply chain financial credit for Beiqi Foton Motor Co., Ltd. (hereinafter referred to as “Beiqi Foton”), worth RMB 500 million, has entered into the internal approval procedure of Industrial Bank (IB).
If the credit is approved and granted smoothly, in the future, as long as Beiqi Foton submits the certificate for the accounts receivable to IB and the certificate passes the examination of the bank, the downstream distributors of the company may apply to IB for supply chain financing within the credit line.
“Of course, the qualifications of distributors should first pass the written verification of Beiqi Foton”. Relevant officers of the Trade Finance Department of IB said to the reporter that all distributors with the endorsement of Beiqi Foton for their credit standing could basically enjoy the “green channel” services for supply chain financing provided by IB. “Besides the accelerated procedure, certain concessions are also available for the financing interest rate.”
This unusual business is the factoring business for auto distributors provided by IB, a supply chain finance product offered innovatively by the bank, based on the good cooperation foundation between IB and Beiqi Foton, targeting at the characteristics of the industrial chain trade centering on Beiqi Foton. With the proceeding of the business, the cooperation between Beiqi Foton and IB will be further deepened.
Cooperation “seized" with services
Zhang Lijun, General Manager of the Financial Service Department of Beiqi Foton, indicated: “The services and team of IB has “seized” us and procured the cooperation.”
Beiqi Foton is the commercial vehicle supplier with the greatest varieties and largest scale. The company has sold a total of over 5 million vehicles, and it has ever ranked No.1 in terms of the sales volume of commercial vehicles for two consecutive years in the world.
IB and Beiqi Foton started cooperation at the end of 2010. Then, Beiqi Foton, who intended to develop the large auto finance, and IB, who hoped to extend the auto supply chain financial service, hit it off right away. In May 2011, IB granted Beiqi Foton with the advance payment based loan financing worth RMB 5 billion for its auto distributors and credit support for the mortgage business to terminal customers worth RMB 1 billion, to support Beiqi Foton to open the market at a fast rate and extend its business scale.
“With the financial support of IB, we quickly launched our business in many areas such as Shandong, Changsha and Urumchi”, recalled GM Zhang. By the end of 2011, the advance payment based loan financing granted by IB to Beiqi Foton has reached RMB 200 million, and the balance of mortgage loans to terminal distributors RMB 30 million.
GM Zhang said: “Before our cooperation, IB did not organized a specialized team for auto finance. Only in two years, however, it has not only established a team, but also built a well-established system in terms of specific products and services.”
The downstream distributors of Beiqi Foton have experienced the change best: At the beginning, their financing demands should be handled by the VIP Customers Department of IB Head Office, and it took a long time to report for approval. IB has promoted the specialization reform of corporate finance since 2012, optimizing relevant procedures. IB Beijing Branch was appointed as the host bank for the business of supply chain finance for sales network of Foton automobiles. In this way, the downstream distributors of Beiqi Foton only need to handle their demands with IB Beijing Branch.
Behind the change is the gradual perfection of the auto finance team of IB. In 2012, IB established the Auto Finance Business Headquarters, which is under the Trade Finance Department of the Head Office, responsible for the development of the whole bank's auto finance business. The bank has also been exploring the specialized business system for corporate finance business in the auto field in an active manner, so as to keep intensifying the innovation in auto finance products and improving the business approval procedure. Meanwhile, IB has also authorized the examination and approval for the mortgage loans to the downstream distributors and terminal customers of Beiqi Foton.
“This means that not only can our customers handle the business with IB Beijing Branch in a concentrated manner, but Beiqi Foton can handle such businesses as bill issuing in a concentrated way. This improves the handling efficiency”, said GM Zhang.
As learnt by the reporter, by the end of October 2012, the balance of advance payment financing for auto distributors handled by Beiqi Foton at IB has exceeded RMB 500 million, 2.5 times as many as the total of 2011.
In 2012, Beijing Indutee Guarantee Co., Ltd. under Beiqi Foton was established, and the company took over the responsibility to handle the supply chain financing business with IB.
Feeling the pulse of potential demands
Giving the service power to Beijing Branch, IB does not only take into consideration the current demands of customers, but feel the pulse of their potential demands. Considering the characteristics of commercial vehicle industry where Beiqi Foton belongs, IB innovatively released the two products, factoring financing for auto distributors and factoring for financing lease, in this year.
“Commercial vehicles are mainly used in the fields like construction production. In recent years, the stagnant economy made terminal enterprises face tense capital chain. Many of them hoped to lease such vehicles. In fact, this is a business mode generally adopted in the international community”, GM Zhang told the reporter. In the international community for the production of commercial vehicles, the penetration rate of financial services is around 80%, but it is only 60%~70% now at home.
Considering the situation, Beiqi Foton hoped that IB could lend support in the aspect of financing lease. IB immediately organized a special service team for auto finance to learn the actual demands of Beiqi Foton and its downstream distributors and terminal users, and made in-depth analysis over relevant trading elements. On that basis, the bank customized individualized services for Beiqi Foton, including factoring financing for auto distributors and factoring for financing lease.
In order to push forward the business of lease factoring, Beiqi Foton particularly established Beijing Zhongche Xinrong Automobile Leasing Co., Ltd. (Zhongche Xinrong) to handle relevant businesses with IB. According to the product plan designed by the auto finance team of IB, after a distributor or terminal enterprise of Beiqi Foton signs the purchase agreement with Zhongche Xinrong, the latter will sign a lease factoring financing agreement with or without recourse with IB, and then the distributor or terminal enterprise of Beiqi Foton may apply to IB for financing.
“For an enterprise producing construction vehicles, the higher the proportion of financial service application, the lower the price of product, and the stronger its competitiveness”, said GM Zhang.
As revealed by the disclosed data, at home, the equipment manufacturing industry with high requirements for capital all turned to the lease financing model after 2008, and the lease financing volume only in the field of commercial vehicles for construction hit RMB 1.28 trillion in 2011.
In the opinion of GM Zhang, the fields of commercial vehicles and construction machines not only have to do with the periodic fluctuation of economy, but are also under the influence of such factors as region and application conditions. As learnt by the reporter, the key factors for the operation of auto finance include capital cost and risk control. This requires the auto industry and the banking auto finance to carry out close cooperation and jointly release distinctive products. For instance: it has a period of frozen soil in winter in the north, but in some provinces in the south, the rainy season lasts very long. Hence, an enterprise may get fewer incomes during the rainy season due to the small construction volume in the south. Therefore, auto finance products should have corresponding individualized services in developing business in different areas.
“In the industry of commercial vehicles, Beiqi Foton is an expert, but in the aspect of auto finance, IB is a specialist. The combination of industry and finance constantly serves as the new power to boost the development of real economy”, GM Zhang said, “in the future, we will have further collaboration with IB.”