On 29 Oct, major local newspapers have front paged the Government announcement on the overhaul of NAP (National Automotive Policy). Among the key measures to be implemented include prohibition of import of used auto parts from June 2011.
What is the implication of this message from the perspective of bank facility?
Everybody knows importers of cars used parts, especially from Japan, have been making good profit from the trade for years. If you are one of these importers and have been relying on bank facilities to facilitate your imports, don't you think your bankers is already trying to structure an exit plan so that your loan can be fully settled by June 2011 which is less than 2 years from now.
If you are now in the business, at least there are 2 things you need to look into :
- Voluntarily restructure your bank facility now by converting partial trade line into term loan so that your outstanding amount is paid down by then. Do not wait until the banks come to you and recall your facilities without yourself preparing for it.
- Tighten your credit policy if you are giving credit term to your dealers. This will helps you generate sufficient cashflow to meet the above term loan repayment and to prevent huge bad debt when other banks recall the bank facility of your dealers later.
This message is also useful for other trades which are sensitive to change of Government's policies from time to time.
