MAN Financial Services creates R100m SME empowerment fund
Leading truck and bus supplier, MAN Truck & Bus SA and its Financial Services partner, MAN Finance, recently launched an Empowerment Financing scheme in conjunction with the Industrial Development Corporation (IDC). The R100 million fund facilitates long-term vehicle rental transactions for emerging black truck and bus transport operators and is geared to promote sustainable SME growth within the transport sector.
According to Elmarie Smith, national sales manager, MAN Financial Services, “the project was initiated 18 months ago following requests from SABOA (Southern African Bus Operators Association) requesting MAN to assist its smaller member companies in obtaining vehicle finance. The scheme was officially launched on 1st April 2011 and includes a mentorship programme headed by three transport consultants.”
Smith, assisted by Keneilwe Masilo, manager: business support, MAN Financial Services and Enock Metswamere, Business Analyst, ABSA Bank, says the initiative is a long-term venture and as such has adopted a low-key roll-out.
“The IDC is channelling leads from potential customers to Keneilwe and Enock. We have one approved deal thus far for five trucks and tipper trailers which will be delivered in early August 2011” says Smith.
Candidates for the scheme need to comply with a number of criteria to secure financing, including 25.1% BBBEE shareholding, proof of solid working experience in the bus/truck industries, a bankable transport contract and/or a viable business plan. They will also need to furnish proof of working capital to cover the period leading up to the first payment by their contracted customer.
“We conduct full due-diligence on applicants to ensure they have the necessary knowledge, direct transport contracts and cash resources to sustain their business. The scheme does not accept sub/third-party contracts. Applicants also need to commit a deposit of between 5-15% on the vehicles they procure from MAN,” Smith adds.
Successful applicants will secure funding in the form of vehicle rental contracts spanning 3-5 years for new and used MAN and VW vehicles. They will pay monthly rentals for each vehicle to MAN Financial Services.
“The vehicles will be maintained and serviced by MAN according to its manufacturer guidelines. Asset monitoring inspectors will ensure vehicles are kept in roadworthy condition,” Smith explains. “MAN Financial Services has its own insurance services division to assist candidates in obtaining optimum risk cover on their buses, trucks and trailers.”
The partners to the initiative share the risk burden, underwriting it on a 50/50 basis and would be offering individual operators funding up to R10 million. Smith says ideal candidates for the scheme are fleet operators running 5 to 10 vehicles.
“We are not in a position to finance the one-man/one-truck operator because it’s too risky. Much work has gone into mitigating our principal risk,” she says. “Used buses must be no older than six years with less than 400 000km, while used trucks must be less than five years old with 400 000km or less on the clock. Trailer financing can not exceed 10% of the fund amount.”
The scheme aims to empower 15 to 20 South African SME transport operators over the next two years, with both financial and business mentoring support.
“Our scheme customers will have full technical support to ensure their vehicles run reliably and efficiently, as well as access to the best mentors in the industry to help make their businesses sustainable. We believe the scheme has all the right ingredients and we hope to extend it even further following its initial roll-out,” concludes Smith.