Lifeline to help SMEs beyond Covid-19
A lifeline for small and medium-sized enterprises (SMEs) to stay afloat during the Covid-19 pandemic and remain afloat long after it subsides.
This is the goal of the Kisby SME Fund headed by former SA Post Office CEO Mark Barnes, who has set out to raise R5bn to support small businesses he sees as crucial to reviving the economy.
And just as a Kisby ring was a life-saving buoy designed to be thrown to a person in the water, Barnes said the fund would provide much-needed buoyancy for companies during the pandemic.
“The fund will serve as a bridge to the longer-term formal capital markets these types of companies will be able to access in the nearby future,” he said.
Kisby offers funding solutions for SMEs and aims to invest in firms with revenue ranging from R10m to R1bn.
The fund is a partnership between 4AX Africa Exchange, 4AX Debt Services, media company Arena Holdings -owners of The Herald — and online credit provider Rainfin.
Already, scores of Nelson Mandela Bay businesses have shut down while others continue to fight for survival.
“SMEs are SA’s largest employer and there is always lots of interest about them, but there is nothing concrete to help them,” Barnes said.
He said many capital funding solutions offered short-term loans for SMEs which came with high interest rates.
Because of this, Barnes said the cost of serving the debt was above the normal yield of a growing business.
The fund will provide two kinds of funding instruments, a three-year term prime interest rate loan and a CPI related loan.
“We have put together a couple of unique features,” Barnes said.
“A mix of debt and equity will be the source of funding.”
He said the fund would be ready to invest by spring, with the lowest amount offered to SMEs at about R1m.
“However, we might see merit in a smaller loan,” he said.
Barnes said there was a gap in the market for such funds that offered a multifaceted borrower support package.
Some aspects of the package include:
- Advertising in some of Arena Holdings’ newspapers and online products;
- Access to mentors through portals and applications;
- A legal clinic to assist with legal challenges;
- Access to modelling tools to assist in planning; and
- Training and support on financial services products such as payment tools.
“The Kisby investment criteria open funding up to those SMEs most affected by liquidity shortfalls,” Barnes said.
But Barnes said it was not just about loaning money to SMEs.
“We want to mentor them and get them access to markets and players in the economy they would not have access to during their current stage of growth.
“This will help the country by broadening the tax base and address unemployment in an accelerated form.”
He said many family businesses flew under the radar in SA and were not part of the formal capital markets.
“We will be investing in companies that will be there tomorrow,” he said.