South African small business financier, Spartan SME Finance, has secured a R100-million investment from The SA SME Fund to anchor its R600-million debt financing fund. The funding will be immediately available to Spartan SME Finance to boost its lending to SMEs.
“Making finance available to this sector of the economy is critical to the sustainability and growth of small and medium sized South African businesses and their ability to create much needed jobs,” says Spartan SME Finance CEO, Kumaran Padayachee. The SA SME Fund is the anchor investor into Spartan SME Finance’s new Debt Fund.
Headed up by CEO Ketso Gordhan, The SA SME Fund was launched in 2016, by the private sector to stimulate the SME market. “On a strategic level our investment objectives align naturally with Spartan SME Finance’s debt fund initiatives, and we are extremely optimistic about the potential of this fund,” says Gordhan.
“The choice of Spartan SME Finance as a regulated SME funder with a 37-year track record means that the R100-million cash injection goes into safe, compliant and professional hands,” explains Gordhan. It is envisaged that at least half of The SA SME Fund’s R100 million investment will be loaned to African Black owned businesses.
Spartan SME Finance is uniquely placed in the market to provide alternative sources of funding for established SMEs. “Banks are reluctant to lend to SMEs, and their traditional funding mechanisms take too long which means small enterprise owners often miss out on good business opportunities,” adds Padayachee. Various products from Spartan SME Finance provide alternative funding to help SMEs access working capital and growth financing. The business owner can then use the funding where it is needed most – to grow the business.
About 24 months ago, Spartan SME Finance launched its Growth Finance and Working Capital finance products and has already seen half of their advances going into funding these two categories.
“We have an immediate pipeline of transactions to place into the fund – so the fund is good to go. The benefit of this fund is immediate – allowing Spartan SME Finance to create greater impact on funding the SME sector,” says Padayachee. The SA SME Fund’s investment facilitates an additional R500 million of institutional funding which will be contributed by a combination of Spartan’s current funders and new local and international institutions.
Padayachee highlights that the reason funding for SMEs takes so long is that the process is not designed with an empathetic view. He says that one cannot be empathetic to an SME unless there is total commitment and complete focus on that sector. “We believe this is what is special about our offering to the South African SME market. In essence it’s about finance for entrepreneurs, backed by entrepreneurs,” concludes Padayachee. Spartan has the ability to mobilise transactions quickly and often once first-time applicants have been through a rigorous but agile vetting process. The average turnaround time is 10 days.
The SA SME Fund’s investment into Spartan SME Finance’s new Debt Fund focuses on debt finance for SMEs and the full debt fund is expected to finance at least 100 SMEs every year.