TERENCE GREGORY Ecsponent’s bridging financing and support render companies more sustainable
Bridging finance plays an important role in creating sustainable businesses and the greatest challenge small and medium-sized enterprises (SMEs) face is a lack of technical acumen to complete a transaction, says JSE-listed private equity and financial services group Ecsponent CEO Terence Gregory.
“Only about 5% of SMEs seeking funding will secure the funding they require from commercial banks, while the remainder must look elsewhere to gain funding.
“It is here that bridging finance plays an important role in creating sustainable businesses, including black-owned SMEs that have been awarded a contract but require financing to meet the stipulations of the contract,” he says.
It is in this gap that Ecsponent saw the opportunity to develop a bridging finance offering for SMEs.
While SMEs often understand the technicalities of their industries, they are often unsure of how to secure cash availability to meet the requirements of a tender or contract, he says.
“In such bridging financing projects, we would typically secure assets worth twice the value of the loan we extend to the company. This reduces our risks, but we assist with the entire transaction to ensure that all the requirements of a contract or tender are met in detail and from a technical specification perspective.
However, SMEs looking to use bridging financing to grow their business must be able to demonstrate good prospects, good fundamentals of the business and well-structured expansion or work pipelines. This information is in addition to our own due diligence investigations of the company,” he adds.
Ecsponent’s management support typically includes calculating all tax implications; correctly pricing the equipment or service, based on industry information; ensuring that there is sufficient cash flow available to carry out the deal; and helping with the structure of the business and the deal.
“Ecsponent’s bridging finance offering enables companies to understand how to run the management side of a business, including the finances, thereby rendering [the business] more sustainable and competent,” he explains.
After helping a company through an average of seven bridging finance deals, the managers in the company develop sufficient business acumen, based on Ecsponent’s demonstrably successful interventions, to manage the business and become independent of its support.