Largest SME funding in SA

2012-10-18 00:00

INNOVATIVE entrepreneurs who have “out of the box” ideas now have a door to knock on when it comes to accessing financial and business support.

However, they should not expect a straight forward loan from a new venture fund launched by specialist risk finance company for formal small and medium enterprises (SMEs), Business Partners Limited.

The company has announced the launch of the R400 million Business Partners Limited Venture Fund — billed as one of the largest SME financing funds in South Africa.

Gerrie van Biljon, executive director at Business Partners Limited told The Witness that South Africans, particularly young people, are creative people who tend to come up with great ideas, many of which could be applied to the business world.

Money is hard to come by

However, he added that SMEs are still plagued by limited funding and support.

“The Business Partners Venture Fund can now plug this hole. We recognise the potential benefit that innovative and high growth enterprises can bring to the country. It is for this reason that the company is launching the fund — to finance exactly this type of high impact entrepreneur,” said van Biljon.

While venture capitalists do exist in South Africa, they are few and far between and many are hesitant to actively invest money in the uncertain economic climate.

Unique venture fund

Van Biljon, who is also the head of investment finance at Business Partners, stressed that entrepreneurs should not expect a traditional loan offering from the new fund.

Business Partners would look at taking a stake in the business, and various other forms of support.

“Traditionally with these kinds of ventures, it is not a good idea to look at debt finance. It can be a long time between developing the product or service and realising the returns.

“We would look at introducing equity participation in the business. This takes pressure off the business, in terms of having to pay off a loan in a certain amount of time.”

He said the fund will consider first round finance deals up to R10 million.

There would be a strong level of financial and business support from the fund, including assisting entrepreneurs with product development and design, packaging, market development and distribution channels.

A winning concept

He stressed that the growth potential of the concept would be the key in making a decision on the business plan. Consideration will be given to early stage investments after the research and development phase.

“We currently see great potential and opportunity within clean energy, agri-processing, bio-tech and ICT sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level. Any industry where there is technology coming to the fore that was not there before, would be of interest. There are very few snazzy industries. Perhaps ICT and communication are snazzy.”

The process

Van Biljon said entrepreneurs can expect to receive a “principled decision” within seven working days.

Should this decision be favourable, Business Partners would conduct a full due diligence. “This depends on the complexity of the concept and how much research needs to be done. This could take up to three to four weeks to complete.”

A rollout process would then be undertaken with the entrepreneur, ensuring that a comprehensive business plan is constructed. This could also involve technical testing of the product.

The entrepreneur should then expect their full support.

Contacts

Kevin Govender of Business Partners will oversee the KZN market. He can be reached on 031 240 7700. For more information, visit www.businesspartners.co.za.

THE United States Agency for International Development (USAID) in partnership with Cadiz Asset Management, this week launched the Cadiz Protected High Impact Fund, aimed at creating tens of thousands of jobs in the next eight years by increasing access to finance to SMEs.

USAID said it would provide a risk-sharing agreement for Cadiz to raise over R1 billion of South African private capital for the High Impact Project Fund.

“The USAID development credit guarantee program allows USAID to risk-share with investors, banks, and financial institutions to mitigate risks and mobilise private capital, debt financing, to undeserved markets or sectors that are perceived as higher risk.

“The USAID risk-sharing guarantee has the full-faith of the USG [U.S. Government], and compared to our grant funding activities, it has a lower cost for the USG and significant leverage potential by aiming to move and place local private capital to work.”— BE.

 

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