- May 1, 2005
- Posted by: admin
- Category: Historical Investments
THE various BEE charters, and the Codes of Good Practice published by the Department of Trade and Industry, require companies to purchase a certain percentage of goods and services from black empowered suppliers. This has provided an enormous opportunity for BEE companies. Unfortunately, it has also created problems. BEE suppliers are typically small to medium sized enterprises (SMME’s) with little working capital or access to credit facilities. Landing a contract with a corporate typically requires the SMME to supply goods or services upfront, before being paid for them. The Financial Sector Charter requires financial services institutions to lend to black empowered suppliers – but most balk at lending to SMME`s given the greater levels of risk. In response to this situation, empowerment company Mettle, now wholly owned by HCI (Hosken Consolidated Investments), has established a factoring business – Mettle Factors – that facilitates BEE by providing working capital and bridging capital to black empowered SMME’s. Typically, the level of funds Mettle Factors makes available is directly related to the volume of sales generated by the business. This means that the finance facility grows in line with sales unlike traditional bank facilities which are capped at predetermined levels. Mettle Factors will advance up to 80% of the invoice value. Factoring, also known as debtor finance, is a continuous funding arrangement between a factoring house and the seller of goods or services on credit whereby the factoring house purchases the seller’s invoices for immediate cash. While all the larger banks have factoring operations, they are generally focused on corporates with minimum turnovers of R2 million per month upwards. This has left the market open for Mettle to apply its innovation and high levels of technical skills to capture a significant share of what the company says is a potentially enormous market. . “Debtor finance is the most appropriate way to finance the growth of a small business,” remarks Michael Woollands, from Mettle Factors. “It also enhances the financial controls of the business.” Debtor finance releases a company from cashflow constraints and enables it to focus on production and sales. “As soon as goods are delivered or a service is provided we can discount the invoice and advance the agreed percentage to the company, usually within 48 hours,” Woollands says. The arrangement also enables a company to obtain bulk settlement discounts from suppliers, thereby reducing the cost of funds and improving profitability. Conversely, the business can extend terms to debtors. Management time is released, enabling them to focus on core business issues, and bad debts are reduced due to the professional credit advice provided by the Mettle Factors team. “Debtor finance allows a business to expand without diluting ownership and overheads are reduced as the entire debtor administration is taken over by Mettle Factors.” Woollands says that Mettle Factors is expected to grow into a large component of Mettle’s business and should do so rapidly. He says the service is applicable to a wide range of industries, with the prime emphasis being on those products or services in which there is limited room for disputes or product defects. Currently the company offers discounting facilities for companies across the market spectrum and has already built up specialist funds for the panel beating industry and the property transfer industry. Michael Woollands; expand your business without diluting ownership.
Source: Cape Business News