One of the cruelest dilemmas facing small and medium sized enterprises (SMBs) is that business with Government or even a single large corporate can drive it into ruin. Often, the SMB is a start-up, or lacks a sizeable balance sheet, meaning it cannot negotiate supplier terms. Nor can it access debtor finance, which is one of the best methods of financing small business.
Reduction In Cash Flow Problems.
Now, entrepreneurs with a single contract from a major buyer can access a R100 million reverse factoring product recently launched jointly by Regent Factors and Khula Enterprise Finance. The product works by contracting a tripartite agreement that includes the buyer (Government or the major buyer).
The product is intended to reduce the cash flow problems for SMBs in respect of contracts awarded by a major buyer. It’s not a new concept, having been first introduced in Mexico in 1934 – but it is new to South Africa.
Who is Eligible?
Eligible for the product are those businesses that meet Khula’s criteria. It is mandated by Government to provide assistance to SMBs and black-owned businesses, and because Khula’s 130-strong branch footprint is particularly strong in rural areas, that’s where the focus lies.
Regent Group CEO Dennis Wilkinson says businesses can apply through any Regent or Khula office, or regionally by checking its website (www.regentgroup.co.za) for a local contact number. Regent manages the R100 million fund and has offices in Johannesburg, Durban, Cape Town, Port Elizabeth and Bloemfontein.
However, it operates through hundreds of registered intermediaries throughout the country. Once telephonic contact has been made, and an initial viability established, a Regent Factors representative will visit the prospective client’s premises.
- Applications may be made for amounts between R1 000 and R4 million
- The average deal size is currently R190 000
- For a first application, it takes 7-10 days to be approved, due to the initial credit checks and documentation required
- Additional applications take 24-48 hours
- On approval Regent pays out 75% of the invoice amount
- The remaining 25% is paid out on payment by the debtor
Regent Group MD Ryan Botha says this facility has expanded rapidly, and as a result of this popularity Regent is already seeking a second R100 million fund from Khula. He attributes much of the success to its mentoring programme.
“An SMB cannot triple its revenue overnight – it doesn’t have the capacity. We mentor them on restructuring their business, putting in financial systems and establishing the business efficiencies to meet higher volumes. When we take on a client, the major criteria is that it must be a sustainable business capable of eventually accessing normal bank finance. But initially, we’re dealing with people who often do not know how to negotiate with banks,” says Wilkinson.
Regent Factors, which was doing R36 million turnover four years ago, has so far this year done in excess of R1,3 billion.
For more information, contact Regent Group on + 086 11 REGENT or visit