Leonard Neill
ALTERNATIVE FINANCING mechanisms for small and medium enterprises which have been made available in South Africa by New Africa Finance Corporation have been welcomed by the Johannesburg Chamber of Commerce and Industry.
This comes at a time when SMMEs in this country are facing a tremendous challenge financially, says Letitia Schutte, the Chamber's manager of international trade.
It is all good and well to say these smaller business enterprises can accept export orders, but getting the finance to back that up is one of their hardest tasks.
New Africa Finance Corporation is a division
of the US-based New
Africa Advisers Group who
have teamed up with
First International Bank, a Connecticut organisation which provides financial solutions for small companies in inventory financing, equipment financing and sale finance, with manufacturing and exporters their target.
Financing for exports is made through letters of credit, payable at sight, ranging from $50 000 to $1million.
No collateral is required and no interest or fees are paid by the US customer. The exporter pays a commission based on the letter of credit amount and financing arm. This commission replaces all interest rates, fees and bank charges.
We have for many years been faced with the chicken and egg situation in this country, says Schutte. Collateral has been needed and exporters have had to use this to get their finance, but they need the finance to get going. It has never been easy under our banking system to access money.
The new alternative gives exporters another channel to work upon. They can't regard it as a donation as it will be granted on the successful appearance of a three-year balance sheet. But that speaks for itself. If an enterprise has been going for three years and has the figures to show its working ability, then the doors are open.
The local company is not being tied up in any way. All in all, it is a whole lot more satisfactory than what many have been doing by going along to moneylenders and paying the high interest rates demanded.
I think we can now safely say that more South Africans will be exposed to financial opportunities in the market.
New Africa Advisers Group manages almost $200m in private and listed equity investment funds in Africa, which includes $120m focused on investments in the southern African region. It has its own pool of capital available for direct equity investment and bridge financing.
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