“Hallo, and thank you for calling Larney Bank, where all our clients are valued. Please note your call is extremely important to us, and thus you are number 239 in the queue, due to more important clients who need our help. We thank you for your patience!”
Patience is a virtue, and unfortunately with the current economic climate, virtue won’t rake in the revenue any quicker. Businesses in South Africa need support on various levels – funding being one of the rather critical elements needed for success. Particularly asset finance – especially considering South Africa’s economy is championed by manufacturing and mining, for example, where capital equipment is an essential need. South Africa is also a “truck reliant” economy, as goods are transported predominantly through commercial vehicles (trucks and trailers).
The plot thickens, because manufacturing and mining are both electricity intensive industries, and we have that pesky little load shedding problem too. This is an obstacle businesses face across board – electricity intensive or not.
Business assets like solar, power generation, as well as the industry relevant assets like commercial vehicles, yellow metal and manufacturing equipment can thus be considered as critical. Usually, businesses need finance to secure the equipment, as there is also a capital equipment shortage. You thus need a funder who will move quickly with their vetting process so that you can secure the asset and obtain funding.
The problem with asset finance in South Africa is the turnaround time for application feedback and sometimes the lack of flexibility when it comes to niche assets or second-hand market assets – it can take up to months to instate a much-needed asset finance facility. Suppose you are in the transport and logistics industry, and you need additional vehicles to secure a contract. Many times, you can’t afford to wait weeks for an approval, as the contract has certain timelines tied to it and set deliverables.
A second-tier funder like Centrafin can fill this gap, with 24-hour turnaround time on application feedback, hands on service and its own funding.
Second-tier sounds like “second best” – but that is far from true. The concept of a second-tier funder refers to a financial institution that operates at a level below traditional primary lenders, such as banks, and provides financing options to businesses for assets that traditional funders may not be comfortable with funding (for example, used equipment). This alternative funding source acts as a steppingstone to bridge the gap between an organization’s immediate financial needs and their ultimate goals.
There are several compelling benefits to working with a second-tier funder. Firstly, these institutions have specialized knowledge and expertise in evaluating the unique requirements and risks associated with small and medium-sized enterprises (SMEs). Unlike larger banks, second-tier funders have a greater capacity to understand the specific challenges faced by growing businesses and can offer tailored solutions to address these needs effectively.
Moreover, second-tier funders often have a more flexible approach to lending, considering factors beyond stringent credit criteria. By establishing a relationship of trust with these funders, companies gain access to financial resources that would have otherwise been unattainable, facilitating their expansion plans and promoting innovation.
Additionally, collaboration with second-tier funders frequently extends beyond financial support. These institutions often provide invaluable networking opportunities to their clients. Their deep understanding of industry trends and market dynamics can guide businesses in making informed decisions, exploring new partnerships, and accessing potential customers or suppliers.
It is crucial to note that utilizing a second-tier funder is not limited to businesses struggling to obtain financing from mainstream lenders. Even organizations with stable financial standings can benefit from diversifying their funding sources by incorporating second-tier funders into their financial strategies. Such diversification enhances financial security, minimizes dependency on a single lender, and mitigates the implications of changing market conditions.
In conclusion, the advantages of using a second-tier funder cannot be overstated. The specialized knowledge, flexibility in lending, and additional support provided by these institutions empower businesses to overcome financial obstacles and thrive in a competitive environment. As businesses navigate the complexities of economic growth, a strategic partnership with a second-tier funder becomes an essential part of their success story. Second-tier funders play a vital role in South Africa’s funding landscape because they fill gaps left by the tier-one funders in the market.
So be open to work with a second-tier funder or accept being number 239 in the queue.