Impact SA

ProfitShare Partners disrupts market with innovative SME funding model

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It is often mooted that growing South Africa’s economy is largely reliant on the success of small businesses. Yet a lack of access to operating capital from banks and limited business experience can be major obstacles to entering the formal economy.

ProfitShare Partners has established an enviable track record in unlocking operating capital to SMEs and guaranteeing delivery using a model that has disrupted the market and allowed potential small and medium suppliers entrance to the supply chain of corporates and public entities.

Armed with a valid purchase order for a bankable transaction and with the operational ability to fulfill a contract, an emerging company can quickly access the capital needed by partnering with ProfitShare Partners to successfully complete and meet contractual obligations.

With a capital injection, and practical help in executing and delivering on the contract while navigating the BBBEE process components, SMEs are now able to deliver on the contract and move up the value chain.

The funder’s innovative system includes an online application and a streamlined due diligence process for approval within 48 hours. The entire transaction is set into motion in just seven days and offers peace of mind for corporates, with a guarantee that the SME will deliver to specifications.

An SME is able to access ProfitShare Partners support on a contract-by-contract basis until it is able to operate independently and can sever ties with ProfitShare at any stage, after having substantively grown its capital-base and experience.

To further enhance corporates or public-sector enterprise and supplier development initiatives, ProfitShare Partners has teamed up with SA Guarantee Specialists and developed a new funding mechanism to facilitate initiatives in growing small companies aligned with their business needs.

These emerging suppliers not only add value to companies, but also facilitate their compliance with BBBEE legislation. A veteran of many highly successful start-ups, including high-end debt restructuring ventures, CEO Andrew Maren has now conceived a new brainchild, being a funding solution for companies to nurture SMEs as part of the supplier and enterprise development initiatives using “inactive” capital on their balance sheets such as rental and municipal deposits.

The synergistic model frees up the disruptive funder’s corporate clients to concentrate on their core business, while expert SME developers Edge Growth and ProfitShare Partners help SMEs develop the skills, financial muscle and operational capacity they need to thrive. At the end of the cycle, in three to five years, ProfitShare Partners is even able to repay the initial stake to corporates raised from freeing up deposits held by landlords or municipalities, for example.

These funds are then channelled to the company for enterprise and supplier development initiatives managed by ESD specialists such as ProfitShare Partners and its various alliance partners including Edge Growth and True Impact.

They in turn support the SMEs to grow their capability and capacity to deliver into the company’s supply chain. Maren provides proof of concept with a great example of how the model has helped a major state-owned enterprise source engineered components from an emerging company for its use in its plant.

“Through access to ProfitShare Partners’ funding and incubation model, the SOE was able to partner with an SME in manufacturing and supplying the component to meet requirements. Over a period of three years, the SME has grown exponentially and now employs more than 18 full-time employees – many of them engineers – and about 30 contract staff. The SME was able to access growth funding without giving away equity.

“This not only benefits SMEs but it takes the financial and operational risk out of the equation for the corporate. South African Guarantee Specialists is underwritten by Old Mutual Group’s Mutual and Federal Risk Financing and our partner collaboration model allows for corporates to meet their ESD targets and contribute to the growth of small business in the true spirit of the act and ultimately benefit the economy as a whole. “ProfitShare Partners is expanding rapidly as the model offers only an upside for ESD partners. The model has global appeal and the funder is looking to expand into Africa and beyond. Enterprise and supplier development, as part of broader socioeconomic development, is a global imperative. We are looking to adapting our model to fit within the legal framework of new markets,” says Maren.


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