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Johannesburg - While unconventional, the lending against moveable assets can help businesses stay in business longer and pay employees and suppliers, according to economist Mike Schüssler.
"At present many small and medium businesses struggle to get normal finance and the method of asset based lending can help overcome cash flow problems," he said.
"Often small businesses have to pay VAT or suppliers before their clients pay them. So this non-traditional financing can help them sustain their operations."
He admits that no-one wants to lose a car, but if that is what businesses must do in the short-term, it shows that they have great faith in themselves and are willing to take risks to grow or survive.
With the current financial constraints it has become increasingly difficult to obtain cash, especially via traditional methods, like bank loans, according to Rob Ribeiro, CEO of Xcelsior, a registered financial services provider.
“We experience a massive demand for short term loans” said Ribeiro.
“We have offered loans against motor vehicle assets - cars, trucks, bikes and even motorised sports vehicles like quad bikes - that are used as collateral."
The vehicles are stored in a secure facility and returned upon settlement of the loans.
Should a client be unable to repay a loan, Xcelsior will sell the asset through its associated vehicle traders. In this way, the company recoups what is due to them and avoid incurring bad debt.
If there are surplus funds from this sale, they are paid out to the client.
“Our business grew extremely fast since we started Xcelsior four years ago, said Ribeiro.
Recently Xcelsior decided to move the ceiling of their maximum loans up to R500 000 per single asset.
"This came about due to market demand, as an executive with a large asset base is as prone to experience short term cash shortages as less affluent people, if not more," said Ribeiro.
"It could be that a business person urgently needs to acquire raw material for an unexpected new order and he does not have the time to go through the normal channels to obtain a short term loan."
- Fin24
