Monday, November 26, 2007

WHAT is the value of loyalty?

WHAT is the value of loyalty? For executive director of Tiong Aik Group of Companies, Neo Tiam Boon, 45, he has seen how this virtue has been a key factor in enabling his family business to ride out a few rough patches in the last decade.

‘Businesses should stay loyal to their banks, and not move with their relationship managers (RMs) when they join another bank. After all, staff come and go. What is more important is that the loyalty and continuous rapport with your banks should be maintained at all times,’ Mr Neo said.

He was speaking from experience. The company’s long-time relationship with its principal banker, OCBC Bank, put it in good stead as it weathered the bad times. During the construction slump prior to the current boom, many construction companies were hit badly and did not survive the onslaught.

‘Before the turnaround one-and-a-half years ago, the construction industry saw very difficult times. We (Tiong Aik Construction) were not spared either,’ Mr Neo said emphatically, ‘our suppliers and creditors were tightening their credit to reduce their risk.

‘It was the banks who came in to give us liquidity support to allow us to continue running the projects without any problem.’

OCBC was one of the banks that did not pull back the credit lines extended to the Group. Instead, it provided them with the liquidity that they needed to run ahead with the few major projects that were on hand. On average, the group has about six major construction projects a year, of which OCBC provides 60 per cent of the funding.

Tiong Aik’s relationship with OCBC spanned almost three decades, taking into account its relationship with the now defunct Tat Lee Bank that took root in 1978. After Tat Lee Bank was acquired by Keppel Bank, which was subsequently merged with OCBC Bank in 2001, Tiong Aik, better known as a construction and property development group in Singapore, had remained steadfast in maintaining and growing the relationship with the bank all these years.

The group’s management understood that a relationship took time to grow, and with time, came trust and understanding that gave the bank a sense of security about them.

‘The plus-point in having built a long-term relationship with your bank is the understanding that comes with it. This will help companies in their dealings with their banks.’

Trust, along with a good understanding of the company’s profile and credit history, allowed the bank to grant better access to credit and faster loan approvals to Tiong Aik.

The Group always picks OCBC, its principal banker, when it comes to the financing of its biggest projects simply because the bank understands its businesses better, added Mr Neo.

‘There are instances when we are quite demanding in asking for a verbal approval for credit lines within a week, and I suppose not many banks are able to grant us the speedy approval,’ he said.

‘It is also important to know the bank’s management so that we can share with them how we work, and our commitment to the business. That will give them the confidence in our business.’

The group enjoys a very good relationship with OCBC, and other than the relationship manager who takes care of their accounts, they are also familiar with the bank’s management - CEO David Conner, former head and now senior adviser of Group Business Banking Tan Ngiap Joo, and head of Enterprise Banking Sng Seow Wah, whom Mr Neo said are very open and approachable.

For Mr Neo and his brothers who run the group’s various businesses which include an investment arm, travel business, training schools for construction workers, King Koil mattress retailing, engagement with the bank is not restricted to purely business dealings. They play the occasional game of golf together, have lunches and invitations to weddings are not unknown either.

Founded in 1972, the Tiong Aik Group of Companies had ventured into property development in 1997 and boasts several luxurious property developments in prime locations like the 120-unit The Inspira at Arnasalam Chetty Road, The Areca, Kovan 81, Casa Rosa, Leonie Hill and Trussville. The group, which saw an annual turnover of more than $280 million last year, is registered with the Building and Construction Authority as an A1 general building contractor.

Having a close relationship with a bank also helps when it comes to seizing a business deal, especially when the window of opportunity is narrow. A quick approval from a bank can make the difference between winning and breaking a deal.

In Tiong Aik’s case, its construction projects usually require the bank to issue the banker’s guarantee in double-quick time.

‘When it comes to vying with our competitors for a piece of land, we will need our OCBC bankers to say ‘Yes, you can go ahead!’ before we can move to secure the deal. This is very crucial to us especially when it is a neck-to-neck fight with certain competitors, which means we need to move very fast.’

One example is the Group’s Sea Breeze apartments project on Joo Chiat Road. The price of the plot was very low then, making it a highly prized property, and unsurprisingly, competition was intensely fierce. Tiong Aik managed to clinch the deal, backed by OCBC’s quick approval.

Like in all relationships, be it between husband and wife or a business owner and banker, trust and open communication are very important. Businesses tend to shy away from telling their bankers the bad news for fear that it would upset the latter.

Tiong Aik, however, understands the importance of the need to communicate with its banks regularly. The group’s Kembangan Villas, a 14 semi-detached and terrace houses project, hit a snag in 2001 and they were facing liquidity problems. What made it worse was that all their credit lines were fully utilised. Instead of hiding the bad news, they told their banker their problem.

‘Our RM looked at the problem and tried his best to restructure the credit lines. Instead of asking me if I have other security for the bank (He didn’t ask me that question at all!), he went out of his way to find a solution for us and thought of alternatives that we didn’t even think of. What he did was to help us find a solution by reducing some of the lines for other projects that we didn’t need. I was very, very impressed.’

Loyalty, trust and communication are key to a strong and lasting relationship, be it with your spouse, or with your bank.

‘Open communication and being honest with each other are helpful and healthy for a better working relationship. In business, there are bound to be problems. Even if we keep mum about the problem, other people will learn about it.

‘What is important is finding the solution.’ And the right bank.

This article is contributed by OCBC Bank

Source : Business Times - 26 Nov 2007

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