“After 40 years in the business of financing and supporting entrepreneurs on their journey to success, we have incredibly valuable lessons to share,” says Jeremy Lang, executive director of Business Partners Limited, in conversation with Asset.
Originally known as the Small Business Development Corporation (SBDC), the organisation was founded in 1981 by South African business luminary Johann Rupert with assistance from his father, the late Dr Anton Rupert. Its shareholders represented both the public and private sector, and its role then was to provide investment capital and expert business support to viable small, micro and medium enterprises (SMMEs) while today its focus has shifted to small and medium enterprises (SMEs). In 1998, the SBDC was repositioned and rebranded as Business Partners Limited. Over the past 40 years it has approved over R20,5 billion in finance, and concluded 71,000 transactions.
Jeremy has been with Business Partners Ltd for 14 years and recently stepped up to the role of executive director. He remains very involved on the SME financing and support side – “that’s where the real impact with SME clients is experienced and where the greatest gratification lies for me” – but has assumed additional layers of responsibility at Board level. From a property portfolio consisting of 91 assets valued at R31 million in 1981, today the entity’s asset base – which includes a sizeable property portfolio – sits in excess of R5 billion, having grown well over the years, says Jeremy, with shareholders deriving good value from returns.
“We continue to operate a model which enables us to finance SMEs, collect and reinvest predominantly shareholder funds, thereby helping viable SMEs unlock necessary growth. Then, as they grow they generally require additional finance so we have good client retention – about 40 % of our business each year is with existing clients – with some clients having been financed numerous times over the years.
“To finance on the scale that we have done over 40 years and continue to do on a sustainable basis in the SME market, is something we are very proud of. However, we view our role at Business Partners Ltd as being about more than just financing to achieve a return. We are very focused on the impact we have in the SME sector: we assist entrepreneurs to create wealth for themselves, we facilitate and create employment and as a result also contribute to the economic growth of our country. The impact of our financing and support is significant and very much part of our vision.”
Jeremy says they are seeing a growing number of women entrepreneurs coming through the ranks. Over the last five years between 33 and 42 % of business finance approved annually has been in favour of female entrepreneurs (36,6 % in the last financial year) which, as he comments, leans into Business Partners Ltd’s desire to support more women in business. Another important focus of their impact strategy is the financing and empowerment of previously disadvantaged entrepreneurs to become part of the economic activity of the country, in order to create wealth for themselves and for future generations.
A distinguishing feature of Business Partners Ltd – and the one which differentiates it most strongly in the business loan provider market – is its financing model, which is characterised by a greater risk appetite and backed by a suite of unique products which includes debt, equity and quasi equity offerings. “We understand the challenges business owners often face when it comes to obtaining finance. We tailor our offerings to accommodate each business’s needs,” Jeremy says.
Clients frequently reference the ‘personal’ approach they encounter when dealing with Business Partners Ltd, and how much it is appreciated. Jeremy affirms that this approach is part of their DNA and 100 % authentic. “Yes, we really do engage with our clients, even post-investment. We visit their businesses, and take a keen interest in their growth path.”
“SMEs are the core of our business and one of the key reasons for our ongoing success is that in four decades we have not dispersed our focus. It remains SMEs. Entrepreneurs don’t have a big share of voice in the media so we strive to be their voice. We comment on many matters impacting the SME eco-system.
“What many people don’t know is that Business Partners Ltd has a property portfolio valued at R1,7bn, and is deeply engaged with the sector. Its property financing model is three-pronged in its approach, which once again sets it apart from traditional property finance institutions. The company offers up to 100% in commercial property finance.
“We finance properties in three different ways. Firstly, we invest in multi- tenanted properties particularly in the industrial and retail sectors where Business Partners Ltd acquires 100 %ownership of the property. How does this fit into our offering? The properties we target generally consist of smaller unit sizes thereby offering premises to SMEs from which they can trade.”
The second approach empowers other property investors to invest with Business Partners Ltd in a joint venture arrangement. Again, retail and industrial multi-tenanted properties top the bill. Property entrepreneurs are invited to co-fund with Business Partners Ltd which wears the hat of both an equity investor and a debt financier, and is able to finance property acquisitions or developments up to R50 million.
The third approach is financing the purchase of owner-occupied property for established businesses, as Jeremy explains. “Take an engineering or retail concern as examples. If they are renting premises and rent increases are becoming unsustainable, it is incredibly expensive for them to move. A retail business’s success may be based on its location so it needs security of tenure. This financing model is earmarked for owners with sound operating businesses who want to buy their own property, from which they can trade, without worrying about the lease renewal terms or rent creep.”
“Although most commercial financiers will expect some form of deposit, Business Partners Ltd provides funding in this instance of up to 100 % of the purchase price or development costs, plus legal and admin costs including VAT, on the back of the performance of the underlying business. Owners acquire a pensionable asset which they can sell when they retire or rent out for regular income. It’s a very popular product with no pressure on businesses to draw deposits from working capital and put their much-needed cash flow under strain. It also gets owners into the real estate market so that they start to diversify the risk through investment in different asset classes.”
Business Partners Ltd provides a full range of property management services to more than 120 buildings across South Africa which it either owns or has a share in as a joint venture partner. It also counts a moderate number of third party (36) real estate clients on its books, managing administrative and leasing functions on their behalf.
“Interestingly we also finance properties which, by default, form an integral part of an entrepreneur’s business so that we can’t separate the real estate from the core business. Examples of this are operators who own guest houses, boutique hotels, student accommodation, independent schools, and hospitals or medical centres, amongst others. We also give financing consideration to investors looking to launch a residential development which they plan to sell immediately on completion, or a commercial development which they will rent to tenants.”
While poor economic activity is reflected in a largely stagnant real estate market, Jeremy remains optimistic that the market will bounce back within the next 12 to 18 months. The industrial property sector remains fairly active and neighbourhood retail convenience centres are trading relatively well, he reports. Business Partners Ltd’s clients, who were impacted by Covid-19 as well as by the looting and destruction of property over the past few months, have benefited from various relief measures offered to them. This includes R12,42 million provided in rental reductions and zero-rated increases for existing tenants in the last financial year.
“The property market is in a state of imbalance at the moment but we still see opportunities for entrepreneurs to secure property particularly in the industrial sector. However, you must do your homework thoroughly. Another market which is growing rapidly is self-storage, which is a niche area and one which we regularly consider for finance. Occupancy is sitting at over 90 % in most of these units as more people buy smaller, more affordable homes or downscale to smaller homes but are not yet ready to dispose of all their furniture and other possessions. Retailers also make good use of self-storage because the costs are less than storing stock in very expensive retail space.”
Jeremy feels strongly that loadshedding needs to be eradicated if the country is going to be able to show growth when the economy turns, which he believes it will. Business Partners Ltd supports the financing of alternative energy sources to green properties and is also throwing its weight behind ensuring that clients make use of these sources wherever possible, not only for stability of power supply but also for the purpose of reducing carbon footprint as much as is viable. “This is an area we want to explore more and hopefully introduce new innovative financing products in the process,” Jeremy says.
For 40 years Business Partners Ltd has ‘gone for gold’ in its financing innovations, in the way it mentors and supports entrepreneurs, and in its drive to support job and wealth creation for South Africans. It has long been synonymous with being a trusted partner to SMEs across a range of industries and offering a fair deal for all parties, says Jeremy, and that is exactly what it intends to continue doing.
“The radical nature of negative news always dominates but if you look deeper there are still very good investment and growth opportunities to be found. Entrepreneurs are by nature positive, and Business Partners Ltd will continue to be there to support them all the way.”
Source: Asset Magazine – https://assetmag.co.za/issue96/index.html?page=46