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SBF proposes technology appraisal system for SMEs

By adopting a technology appraisal system like the Korean Technology Finance Corporation's, SBF says it can better improve the supporting environment for tech companies in Singapore. 

SINGAPORE: The Republic can learn from Korea in areas such as technology evaluation, so as to better improve the supporting environment for tech companies here, the Singapore Business Federation (SBF) said on Wednesday (Feb 10).

Earlier this year, SBF had invited the Korean Technology Finance Corporation (KOTEC) to share how its evaluation system promotes growth. SBF has since suggested having a technology appraisal system like KOTEC's to create a useful database for the Government and financial institutions.

KOTEC is a government agency that provides support for start-ups and small- and medium-sized companies in South Korea. A South Korean company that has benefited from KOTEC is Ioys. 

While it has only been a few months since the company started this business, it received nearly US$1 million (S$1.4 million) in loans from a bank with a certificate of guarantee from KOTEC, which also invested slightly less than that amount in the company in the belief that it has a bright future.

KOTEC’s senior manager, Park Hee-chang, said: "KOTEC is a financial institution under the government and we provide great guarantee service or direct investment service for technology-based SME so our client focus is on technology or cultural focused SMEs."

Mr Park added that the agency provides certificates of credit guarantee, allowing companies with no financial record to obtain loans from banks.

He said: "When we evaluate a company, we do not just look at the financial track record of company. We put much focus on the visibility of the technology plan of their intellectual property or their idea. We have a specific rating system focusing on the technology potential of a business idea."

KOTEC is able to conduct a proper evaluation of a firm because about half of its 1,100 employees are experts in various fields. The agency also sometimes invests in a company, hoping it succeeds to the point of launching an initial public offering, to get its investment back. 

Introducing such a system could also ease the due diligence burden on banks by valuing emerging technologies. CEO of SBF Ho Meng Kit, said: "If a third party can exercise this due diligence as a service, then it lowers the cost of SME lending for our banks as well."

“It's the same reasons why credit bureaus exist," he added. "But, a credit bureau will look backwards, based on financial history. This service would look at it from a forward looking technology potential and business potential of the company."

Currently, KOTEC offers support to about 70,000 firms, worth about 20 trillion won or US$16 billion.

About 40 per cent of them are start-ups, while the others are SMEs. The credit guarantee is usually for one year, but extensions are allowed.