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Asset-rich, cash-strapped South Africans are increasingly leveraging the value of their personal assets to gain access to short-term loans.
Charles Meyerowitz, co-founder and CEO of short term asset-based lender LAMNA, comments: “We are servicing this fast growing trend, experiencing rare collectors’ coins valued at €20,000, high end boats of close to R1 million, esteemed whiskey collections of R100,000 and even William Kentridge paintings being put forward by our clients as collateral for loans, so that they can gain immediate access to liquidity for a variety of economic and personal reasons.”
“Typically, our clients possess valuable assets, which are passively reflected on their balance sheet, and don’t contribute to any active economic benefit,” says Meyerowitz. “We interact with many entrepreneurs whose businesses are rapidly expanding or highly leveraged, or whose debtors have delayed payments, or they need money to expand and require immediate convenient access to cash. We are often approached by the building industry where progress payments are irregular and difficult to predict due to factors beyond anyone’s control and we are a source of dependable, convenient access to immediate cash flow.”
LAMNA provides loans of on average R80,000 – R100,000 and typically for a five-six month period although this depends wholly on the client. Majority of clients (65%) tend to offer luxury vehicles, including Range Rovers, Jaguars and Porsches as collateral, but Toyota’s, Hyundai’s and the like are common ground. He comments further, “Around 14% of borrowers use their property to leverage funds. Some 10% of people offer jewellery, such as luxury watches and diamonds, and 7% give up artworks as surety.”
After the global financial crisis, traditional financial institutions tightened their lending criteria with South African banks soon following suit. “Our banks seem to have lost their bullish appetite to provide small and medium enterprises (SMEs) with access to finance and most don’t really recognise personal assets as leverage for transactions,” says Meyerowitz.
This often leaves the small business owner, who may be in dire need of working capital, in a financial predicament. In its two years’ existence LAMNA has provided over 1,200 loans to a number of individuals and business owners.
Privacy, discreetness and convenience are an essential characteristic of this style of financing, which is why more and more wealthy individuals are starting to view asset-based lending in a positive light. Prospective borrowers want to know their funding applications will be dealt with speedily and confidentially, which is why it has quickly become an acceptable and mainstream source of funding worldwide.
In the United Kingdom alone asset-based lenders have provided finance of close to £2 billion (R40 billion) to individuals and businesses in the last quarter of 2014, according to the Asset Based Finance Association’s statistics. Meyerowitz foresees a similar growth trend in South Africa, as the new breed of lenders have proved to be reliable, safe convenient and affordable.
“In the first ten months of operation, LAMNA’s book has grown solidly from a zero base,” says Meyerowitz. “In the second year it has grown 260% off the February base. We expect similar growth in the current financial year with compound growth in the future.”
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