Funding under Covid-19 Context
– Our New Normal
“Funding in the Fog of War”
“When we are no longer able to change a situation – we are challenged to change ourselves.” Viktor Frankl
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Just as you’d visit a supermarket during the lockdown and find some aisles or products closed off as the supermarket restricts purchases to only focus on essential products – similarly, Spartan has paused its existing Who/What/How to adapt/change in the current context and focus on a New Who [Client Segments], a New What [Finance Products], a New How [Credit Process].
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This Covid-19 Context is war-like [a World War 3, in a sense]. Many funders, including Spartan SME Finance, are asking ourselves – how do we lend in this war-time context, and how do we assess & approve in the “fog of war” …?
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We will try to fund [in our new niches], despite our own fears …
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The Covid-19 Context is fluid, unpredictable and the ripples are still unfolding. Therefore, our adaptive & creative changes that we’re communicating below can/will change or even have intermittent pauses as & when the “fog of war” becomes harder to navigate. As an indication of our willingness to still back entrepreneurs – we assessed, transacted & disbursed our 1st new loan under Covid-19 Context – within 24 hours after SA’s lockdown started. Admittedly, it was to an existing client – but still …
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We will fund – despite our own fears …
- In peace-time, Spartan had broad, loose boundaries on types of SMEs we would finance with debt. The only restriction was age [3years] and annual turnover [ideally minimum R10M pa, and R5M pa as an exception]. Understandably, in war-time, we’ve now had to paradoxically tighten our criteria – and yet be open minded.
- In this “fog of war” there is no certainty, no clarity, no confidence.
- Therefore, if Spartan is to fund at all, we had to make some difficult choices – as to who we cannot finance and who we can finance.
- Please note: we do not finance amounts under R500k
Who can’t we finance?
- Defined as any business ranging from “wanting/about to start” to “less than 2 years old”
- Why not ?
- A start-up is risky to fund in peace-time – but in war-time it is near impossible to fund [due to no certainty, no clarity, no confidence in this “fog of war”]
- Spartan did not fund start-ups in peace-time. We cannot do so in war-time
- Defined as businesses negatively affected by Covid-19 Context yet still thinking in Pre-Covid-19 mindset or thinking that things will quickly bounce back to normal …
- Example
- Any business wanting to pursue their Pre-Covid-19 expansion plans [whether buying business premises or opening a new branch or expanding their plant, etc] and wanting finance to still do so after Lock-Down
- Why not ?
- In this “fog of war” there is no certainty, no clarity, no confidence
- Unless, expansion plans are counter-cyclical to Covid-19 Context [ie positively impacted by Covid-19 Context] – then those plans are now unviable for any lender to finance
- Businesses in Distress
- We understand that many businesses may fall under this scenario and need funding to carry them through the “fog of war” to the other side, but …
- Whilst this is not possible in the traditional sense by most funders [especially due to the “fog of war” Covid-19 Context] – there are several Relief Programmes available from Government & Private Sector for businesses affected due to the Covid-19 Context
- “Chronic VS Covid”
- Distressed PRIOR to Covid-19 Context
- Poor business health with pre-existing chronic condition prior to Covid-19 Context
- These businesses may have difficulty accessing relief from some of the Relief Programmes – but should still try to apply where possible
- Distressed DUE to Covid-19 Context
- Distressed caused due to Lock-Down or broader Covid-19 Context
- These businesses could access some relief from a few of the Relief Programmes
- Distressed PRIOR to Covid-19 Context
- What has Spartan done to assist & guide SMEs ?
- There are various Relief Programmes, from Government and Private Sector,to aid SMEs affected by the Covid-19 Context.
- To assist & guide SMEs with easily navigating the various options from one-single-spot Spartan created, what we have called, a Relief Registry resource tool [with daily updates]..
Navigate and find out all the details here.
Who can we finance?
- Defined as pre-existing businesses, with pre-existing products/services that will enjoy a boost now and sustain it beyond – due to a sustained change in buyer behaviours
- Examples
- e-commerce businesses delivering own or 3rd party products or services [online order & delivery model; edtech; medtech; remote care]
- businesses involved in the data network ecosystem
- businesses enhancing & securing WFH mode [tech and non-tech based]
- businesses enhancing home convenience [tech and non-tech based]
- etc
- Defined as pre-existing businesses, with pre-existing products/services that are currently deemed Essential or Critical
- Examples
- medical products & services
- healthcare services or supporting healthcare
- food processing/manufacturing or supporting food sector
- transport & logistics [for essential services eg medical, food, water tankers, etc]
- water tanks
- etc
- Defined as pre-existing businesses, with pivoted products/services that becomes Essential or Critical now and/or beyond …
- Examples
- For now:
- medical products & services
- healthcare services or supporting healthcare
- food processing/manufacturing or supporting food sector
- transport & logistics
- etc
- For now & beyond:
- e-commerce businesses delivering own or 3rd party products or services [online order & delivery model; medtech; remote care;
- businesses involved in the data network ecosystem
- businesses enhancing & securing WFH mode [tech and non-tech based]
- businesses enhancing home convenience [tech and non-tech based]
- etc
- For now:
- Defined as any business that, as a result of its network or resources, is able to facilitate the supply of critical medical/healthcare products for patients, medical staff & general public
- Purchase Orders minimum R2,5M to R25M
- Examples
- certified masks [N95, KN95, FFP2, surgical masks]
- personal protective equipment [PPE]
- medical & hospital equipment
- sanitizers, wipes, hand soaps
- ventilators
- test kits
- jump suits
- etc
- find out more on our Purchase Order Finance page
- The real challenges for any commercial funder attempting new funding in this “fog of war” are:
- What type of financing products does one now offer?
- How long [over what period] does one offer [short or medium or long term] ?
- How does one price for the unfolding risks [eg. overseas supplier no longer want LCs or any collateral, if it’s even available is either drastically dropped in value or …] ?
- So our transaction model/terms is adapting/changing from structured & fixed – to customized & contextual
- Bridging Finance
- 1-3 month term
- Mainly for Purchase Orders of Essential or Critical supplies
- But could be to fund pivoting to new products/services
- Purchase Order Finance
- Purchase Orders minimum R2,5M to R25M
- financing specially to acquire product/supplies/equipment from local or international suppliers
- requires a solid purchase order from a reliable end-client/end-buyer
- our approach is to base the credit approval on the validity of your confirmed purchase order and not your financial standing or your collateral
- Short Term Loan
- 3-6 month term
- Specialised Asset Finance
- 12-36 months
- Growth Capital
- 12-60 months for the right type of expansion
- Venture Debt
- This is a mezzanine type approach providing debt financing [with an equity kicker given to Spartan]
- Only applicable for certain category of businesses
- Please note: we do not finance amounts under R500k
- Previous Approach: structured, defined processes – think “engineering”. Appropriate, when there is certainty, clarity, confidence – rather than “fog of war”.
- The New Adapted Approach: customized/contextual view on everything – think “artistic”. Appropriate when this no certainty, no clarity, no confidence – in this current “fog of war”.
- Please note: we do not finance amounts under R500k
- Ensure you properly complete the web forms on this website – if not, it will jeopardize your application
- There are 3 main web forms – you do not have to complete all
- BUT, if you wish to move swiftly & constructively – then its best to complete the forms in the following order:
- Alternatively, you can still call us here (+27 11 568 6294/5) – BUT the info/docs from the above web forms will still be asked for
- Thereafter, once we have the info/docs – one of our Credit Analyst will engage with you via calls, email and via Zoom video chat
- Credit Committee operations:
- We still have our usual Mon/Wed/Thurs 2pm-6pm sessions – BUT, also responsive outside those slots [depending on legitimate urgency]
- Internal Credit Committee assessment/deliberations via Microsoft Teams video call
- Credit Committee interviews entrepreneur team via Zoom video call
- Our turnarounds times might be slightly slower due to the “fog of war”, but still faster than most other funders
- Our transacting & contracting is still via e-signature on your devices, we have been using DocuSign for years