Financial Entrepreneurship Gains Traction

Financial Entrepreneurship Gains Traction

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Entrepreneurs who need a cash injection for their businesses but who have not had success accessing funding from their bank, can turn to a new breed of financial entrepreneurs for help.

These are savvy individuals who are successfully challenging the established banking regime and creating a new market for business solutions by proposing tailored products for fellow entrepreneurs. This new breed of private lenders is offering innovative short-term lending solutions to asset-rich clients.

Why use a private money lender?

Private money lenders typically have borrowing guidelines that are different, and less stringent, than those imposed by traditional lenders, banks or credit unions.

These loans are typically offered at a higher interest rate than traditional loans, and investors are usually willing to pay the higher rates for simplicity and the ease of securing the loan quickly.

Private money lenders must adhere to the same licensing requirements and laws as any other lending institution. However they are not regulated in the same manner as a traditional bank or credit union and therefore do not have the strict underwriting requirements imposed by conventional lenders.

Trend is taking off in SA

This trend, already popular overseas, is finding acceptance in South Africa where individuals are offering their art collections, luxury cars, fine wine collections, jewellery and more as collateral for immediate access to cash.

This niche business has been brought about through SA’s banks reticence to lend money. Looking at alternative means to fund projects has led to valuing non monetary resources, which are now being utilised as an easy way of accessing capital.

 

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Charles Meyerowitz, co-founder and CEO of Lamna Finance, says that his experience in the dairy business (at Dairybelle) taught him how small businesses in need of cash often had assets that could not be converted into cash without selling them.

“I had all these assets which I had accumulated over time but could not temporarily monetise them into cash or convince the banks to recognise them as security for my short term cash needs. Some of these assets were cars or trucks the business had paid off, some of them were personal assets,” says Meyerowitz.

 

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