GIVEN the huge value of assets involved in financial leasing, say container trucks or magnetic resonance imaging machines, one would conclude that such financial arrangements are the domain of major corporate players.
But leasing is also for small and medium enterprises.
In top financial leasing companies like BDO Leasing and Finance Corp., small companies go through the same process as big clients.
“Eighty percent of our clientele are small companies,” says Roberto Lapid, vice chairman and president of BDO Leasing.
“In fact, for individuals, we have a process that is able to come up with the approval in less than 10 days. We look for ways,” he says.
On the flipside is the perception, in the Philippines and in other countries, that those who engage the services of financing leasing companies to acquire capital-intensive equipment are usually borrowers with less than sterling credit.
This is not the case when dealing with creditworthy financial leasing companies, as indicated by credit ratings.
Last year, BDO Leasing was assigned a credit rating of “PRS Aa,” with a stable outlook, by the Philippine Rating Services Corp. or PhilRatings, the pioneer domestic credit rating service.
A PRS Aa-rated company is described as having a strong capacity to meet financial commitments compared with other companies.
Dealing with highly rated borrowers save on borrowing costs, says Lapid.
“The perception is if you’re borrowing from a leasing company, you’re charged more or higher. But in our case, since we’re rated, the perception is that of big savings. We’re Double-A, and not all leasing companies are rated. I think that mitigates the perception,” he explains.
Cheapest funding sources
As a result of its high credit standing, BDO Leasing is able to raise money, through short-term commercial papers (STCPs), at a lower cost—an advantage that benefits its clients as well.
It has the highest approved ceiling for STCPs in the industry, at P25 billion, under guidelines set by the Securities and Exchange Commission. BDO Leasing is in the process of renewing its STCPs.
“I believe that among the universal bank-affiliated leasing companies, we have the cheapest source of funds because so far we’re the only one that issues STCPs. If you have STCPs, you save within 15-30 basis points [in interest],” Lapid says.
Aside from STCPs, other funding sources are bank credit lines, with parent BDO Unibank and others, from which BDO Leasing can draw billions.
Big room for expansion
Lapid points out there is still a huge room for financial leasing operations to expand, as the company has tapped less than 5 percent of the client base of its parent, BDO Unibank. BDO Leasing plans to tap BDO Unibank’s institutional banking clients who need to lease equipment or accounts receivable financing.
“In the last two years, we’ve been successful in taking advantage of the synergy with the bank. We have not fully maximized the opportunity. There is a big room for us to get into that market within the bank,” Lapid notes.