As the economic crunch continues to bite into the IT distribution channel – there are already casualties 10 days into the new year – another capital funding company targeting this sector, Genuity Finance, has been formed by ex-Axiz regional director Bruce McDonald.
In partnership with Paul Alcock, whose financial background includes Investec and the United Bank of Switzerland, Genuity will focus on various aspects of asset financing for the channel.
“Research in the US has shown that more equipment is financed through leasing than bank loans or private equity, while in the UK approximately one third of capital expenditure is done on leasing," says McDonald. "In the South African ICT market we are lowly traded in terms of asset finance with a much smaller share of the total business currently being financed.”
He believes the reason for this is a more conservative buying mentality combined with a lack of awareness around the operating benefits derived from financing. Moreover, he adds, companies are reticent about applying for finance because this sector in the past has been plagued by hidden costs and contractual liability.
McDonald says that Genuity Finance aims to remove these myths and, with his expertise and relationships in the channel complemented by Alcock’s financial and risk management acumen, they are well positioned to make an impact. He adds that Axiz, one of the country's largest distributors, is endorsing the company and already referring business to it.
“We have been in business for a few months in KwaZulu-Natal and are taking an innovative portfolio of capital funding products and services to the ICT channel," McDonald explains. "This includes equipment leasing, asset-based and working capital finance, as well as leveraged capital solutions.
“Tailor-made leasing is offered across all asset classes ranging from computer hardware to office automation, telecoms, security/surveillance, machinery, satellites as well as software,” he says. "Other forms of customised structured financing will be made available on demand. Genuity has strategic relations with leading financial intermediaries and insurance companies who have acknowledged the opportunity and bought into the vision in support of this offering.”
McDonald says asset finance benefits the channel by improving cash flow and reducing trade risk as well as leveraging tax benefit, better capital preservation (off balance sheet funding) and mitigating obsolescence risk for end customers. Genuity will also assist with budgeting and other financial issues.
Going forward, the duo is talking to other vendor partners such as HP, Microsoft and Lexmark with the intention of expanding the business nationwide. McDonald says they selected KZN first due to their knowledge of the region and to ensure the business is properly geared towards service and delivery countrywide.
“Our intention is to hand pick partners in each of the major cities and operate alongside them as an outsource finance partner offering a clear value proposition around Genuitys' range of products," McDonald says. "As Genuity does not supply or service any equipment, there is no conflict of interest with the channel and the finance and insurance product will simply compliment the reseller’s solution offering to the market.
“The intention is to work with the channel and tailor financial solutions off the back of the equipment suppliers working totally transparently and taking away the fears and hesitations of hidden costs.
“We have seen the demand and the timing is right to bring a fresh and well-constructed finance option to the table to facilitate and structure the healthy supply of ICT and related equipment,” says McDonald.