http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.23Change: -0.03
R/$ = 10.61Change: -0.05
Au 1300.07 $/ozChange: 2.51
Pt 1479.50 $/ozChange: 0.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Feb 17, 2012

Banks’ stringent finance criteria open way for alternative lenders

Back
Construction|Engineering|SECURITY|Africa|Paragon Lending|Price|Projects|Security|Africa|South Africa|Security|Security|Gary Palmer|Infrastructure|Security
Construction|Engineering|SECURITY|Africa|Projects|Security|Africa||Security|Security|Infrastructure|Security
construction|engineering|security|africa-company|paragon-lending|price-company|projects|security-company|africa|south-africa|security-facility|security-industry-term|gary-palmer|infrastructure|security-person
© Reuse this



The civil engineering and construction sectors, which are already expe- riencing a decline in year-to-year earnings, largely owing to government’s underspending on infrastructure, are now faced with an additional challenge of securing financing for projects and con- tracts through commercial banks, says private lending solutions provider Paragon Lending CEO Gary Palmer.

He explains that banks are under signifi- cant pressure to meet the more stringent liquidity and funding requirements of Basel 3, a global regulatory standard agreed by the Basel Committee on Banking Supervision members, of which South Africa is one.

“As banks become more selective in terms of financing, self-employed investors will need to seek alternative funding sources,” he says.

Further, Palmer points out that, as a result of the mounting pressure, banks are increasing their reliance on noninterest income as a source of earnings, shifting their focus from direct lending to growing trading income over the short term.

This trend is evident in an analysis of South Africa’s major banks conducted by global professional services firm Price- waterhouseCoopers and released in March last year, which revealed that noninterest income for the second quarter of 2010 was up 8.4% on that of the first quarter.

Noninterest income represented about 53.8% of total income across the four major banks, up from 53% in the first quarter of 2010.

Palmer notes that owner-managed companies, largely in the civil engineering and construction sectors, are likely to face challenges when securing funding from commercial banks.

“The engineering sector will battle to get funding from banks this year, because banks also consider the inconsistency of the sector, even if their relationship with the company has been a long one,” he adds.

However, Palmer highlights that, amid the challenging times, there are financing alternatives available to construction companies and engineers. “There are alternative lenders that are willing to provide financing for contracts and projects.

“We were recently approached by an engineering business to fund its potential growth. Given the new orders received by the business, we approved a financing facility within 36 hours,” he points out.

Palmer admits that more work needs to be put into creating awareness about nonbank lenders, so that companies have more options in securing financing for projects, as well as the sustainability of their businesses.

“Although we see the stringent criteria by banks to fund companies as a growth opportunity, we must continue to work hard to achieve the level of awareness that will help companies stay afloat and sustain our economy,” he says.

Further, he points out that there are differences between how commercial banks and alternative lenders assess financing applications.

“We look at a deal differently, [compared with] the bank. We look at future orders.”

Paragon Lending Solutions, which offers funding by securing property as collateral, says construction companies that are likely to experience greater financing challenges are those that do not have any security.

Meanwhile, Palmer stresses that keeping a company’s accounts and order book in order is key to securing funding.

“Bookkeeping is a skill that is sadly overlooked in many small businesses and entrepreneurial ventures because business owners try to minimise expenditure on extras,” he says.

However, he emphasises that accurate and up-to-date financial information provides a potential lender with information on the security of a loan and, there- fore, should not be overlooked.

Edited by: Chanel de Bruyn
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
Other Civil Engineering and Construction News
COEN SNYMAN The number of contract claims and subsequent disputes can be reduced if there is a proper understanding and assessment of claims and better decision-making with regard to the claims process as a whole
Many South African private and public construction projects are experiencing severe cost overruns and delays, which inevitably lead to claims by contractors for a revised or extended completion date and for the payment of additional and associated costs, says...
CONSTRUCTION RISKS Construction health and safety practitioners should not only consider noncompliance legal issues but also designer competencies, construction programmes and selection of contractors
The quality of construction work is one of several vital issues that should be considered before construction can start on major projects, as this eliminates the risks of facing challenges later on in the building phase, construction industry trade association Master...
QUALITY STANDARDS The South African construction industry faces severe problems regarding construction project delivery owing to skills shortage and low quality standards
The South African construction industry, which many expect to go through a high growth phase this year, owing to an increased number of construction projects, and a greater focus on housing projects and large-scale infrastructure projects, is facing severe problems...
More
 
 
Latest News
The Medupi power station project
Electricity producer Eskom has, for the first time, offered a detailed timeline for the synchronisation of Medupi Unit 6, which is officially scheduled for December 15, 2014. Addressing a joint meeting of the Portfolio Committees on Public Enterprises and Energy on...
As South Africa had largely exhausted the use of traditional mechanisms to stimulate the fiscus, government now needed to swing its focus to dealing with the internal structural issues that had, thus far, prevented the country from unlocking its true economic value,...
The Western Cape High Court will on Monday hear a Sanral application for information about the proposed N1/N2 Winelands Toll Highway Project to be kept secret, the City of Cape Town said. The application would be heard behind closed doors, mayoral committee member...
More
 
 
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
 
 
 
 
 
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
GARYN RAPSON Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will open the door for court battles to determine who will be held liable for the remediation
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks