Beware of Wing Hang Bank

sonic-dragon · 24-06-2010, 01:22 PM

My company (a limited company) took out a SME Loan Guarantee Scheme loan with Wing Hang Bank last year. It is guaranteed by the Government and also by me. The company reported a small loss for the financial year 2009. After providing WHB with the audited financial accounts, the bank has given us an ultimatum to either repay the loan in full or for me (personally) to make a cash deposit with Wing Hang Bank which although not pledged, they want me to sign an undertaking to keep the deposit until the loan is fully repaid, and failing to do so will constitute an event of default under the loan. They are relying on a clause in the loan agreement which says
"You hereby further undertake to us that you shall......if any information you supplied to us is no longer valid or found to be false repay in full all outstanding amounts under the Facilities."

Is this utterly bizarre or what ?

Mr. No · 24-06-2010, 01:34 PM

Surely there are legal venues you can appeal to, including in the government. Perhaps they are just trying (illegally), if they see you put up a fuss, they will back down.

hullexile · 24-06-2010, 01:45 PM

So what are they arguing, that the information you gave to them originally is no longer valid? Why, because you predicted a profit in your business plan but made a loss? Might be worth speaking to someone at the government end to see if they think what the bank is doing is acceptable.

Crocodile · 24-06-2010, 01:54 PM

While not common, it is not unheard of for a bank to request repayment of a loan or further guarantees.

Given the one quote you have provided, what they as requesting of you is legal. Your business is losing money (am guessing that the previous finanical statements you provided showed that you were making money). The information you previoiusly supplied is no longer valid.

sonic-dragon · 24-06-2010, 02:04 PM

Yes, they are saying that when we took out the loan the company was making a profit. Now that it has reported a net loss, the original information was no longer valid, and hence the loan is now repayable in full. Isn't it crazy ?

I should add that all loan repayments have been made on time as scheduled.

They said that when FY2010 accounts are submitted to them, if they are "satisfactory" (in their sole determination), they will "review" the need for the personal deposit. I have asked them to define "satisfactory" but they refuse to give me a definition.

The reason why I'm loathed to complain officially is that my company has a credit card merchant account (for customers to pay us by credit card) and I am worried that they could decide to close it, which they can do under the Merchant Agreement giving 30 days notice. We have a large pledged fixed deposit related to that account, and if the account were closed, it takes 6 months before the pledged deposit is returned. And on top of that, it's not easy to get a merchant account with another bank (which would also require a pledged fixed deposit) and our payment gateway only works with WHB and one other bank whose terms are not very good. Obviously, any reasonably minded person would not expect them to cause trouble for us with our merchant account since they are getting 2.3% fees on all our transactions, but neither would a reasonable person expect this bizarre behaviour with our loan account, so I just worry a lot about that.

sonic-dragon · 24-06-2010, 02:07 PM

Originally Posted by Crocodile:

While not common, it is not unheard of for a bank to request repayment of a loan or further guarantees.

Given the one quote you have provided, what they as requesting of you is legal. Your business is losing money (am guessing that the previous finanical statements you provided showed that you were making money). The information you previoiusly supplied is no longer valid.

Yes, I agree. What they are doing is within the terms of the agreement.

But who would expect a bank to act like this when the loan is guaranteed by the government ! ? Our FY2010 accounts will show a profit, but they refuse to tell me whether or not that will be acceptable or how much profit will be acceptable in order to remove this requirement for making a personal deposit. They also refuse to lower the amount of the deposit required when the loan outstanding is below the deposit amount ! I have to keep the full deposit with them until the loan is fully repaid.

sonic-dragon · 24-06-2010, 02:14 PM

Originally Posted by Crocodile:

While not common, it is not unheard of for a bank to request repayment of a loan or further guarantees.

Given the one quote you have provided, what they as requesting of you is legal. Your business is losing money (am guessing that the previous finanical statements you provided showed that you were making money). The information you previoiusly supplied is no longer valid.

Thinking about it again, could one argue that the information we gave (that the company was making a profit) is still valid. The company was making a profit. There is now new information, that at a later date the company was making a loss. This does not make the earlier information invalid or false.

We never made any projections for future profitability. They simply relied on our FY2008 accounts.

Crocodile · 24-06-2010, 02:44 PM

Without knowing the full details of your loan, basically the banks have a clause in there that says, if we want to change the terms of the loan, then we can.

Sounds like they have you wrapped up with the pledged deposit - but I don't have any experience with that.

Banks want to keep customers. A business customer lost, is one that they will never get back. A reasonable relationship with a bank manager is very helpful in business.

Sorry, I don't have any solution for you. But, if it was me, I would work out what i have to do to move banks (or even part of the banking).