Western Cape Business News

Send  Share  RSS  Twitter  24 Feb 2010

VENTURES: The Merchants Of Cash Flow


Recent Western Cape Business News

It looks like big things are expected from Cape-based factoring and trade finance specialist, Merchant Factors.

Founded in April 1988 by Johnny Philippou, Merchant Factors has built a viable niche around factoring and debtor administration services to small and medium enterprises (SMEs).

Basically the art of factoring revolves around offering working capital finance (usually turnover linked) to support smaller companies, many of whom don’t always get their invoices settled in a hurry.

Merchant Factors – for a fee, of course – offers funding that effectively ensures small businesses (ie companies with an annual turnover of between R1.2 million to R120 million) have sufficient working capital to fund their growth without straining the balance sheet.

Merchant Factors has a factoring and working capital book of over R500 million. This book, however, looks set to grow exponentially after Merchant Factor clinched a deal with empowerment giant Mvelaphanda Holdings at the end of 2009.

MvelaHold will pay R120 million for a 65% stake in Merchant Factors with management – led by Philippou – holding the remaining 35%.

The seller of the 65% stake was private equity specialist RMB Corovest – which, CBN understands, made a ‘lucrative’ exit after backing the business through its early years.

Philippou says the partnership with MvelaHold is exciting. “Together we will develop a joint strategy to offer empowerment and working capital funding to the SME market…”

He points out that the partnership between MvelaHold and Merchant Factors took place at a time when government was placing greater emphasis on the development of SMEs.

Mark Willcox, CEO of MvelaHold, recognised Merchant Factors as the ‘absolute leader’ in its field.

We will work closely with them to grow the company’s presence in this market.”

Philippou reckons the MvelaHold transaction will allow Merchant Factors to ‘take the next step’.

CBN believes that ‘next step’ could be a listing on the JSE – which probably means Merchant Factors could easily be pushing its book through the R1 billion mark in the next year or two.

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