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Sabrina Gordon, Business Reporter
Opposition spokes-man for investment and commerce Mark Golding says that the party, under its progressive agenda, is now considering the development of factoring, that is, selling receivables for immediate cash as a means for micro, small and medium-size enterprises to access funds more readily.
"It is an idea under development that we think will meet an important need for SMEs that have working capital needs ... or can't get cash to expand," said Golding.
"The proposal is that there be a fund of some kind in place, administered by, say, the Development Bank of Jamaica or Ex-Im Bank, or even more than one institution with a special window where an SME with an unpaid invoice can access funds using the invoice," he explained.
"It can be structured in either way, an outright purchase of the debt in which factoring is normally done, or the invoice being use as a type of collateral," he said.
Factoring is a financial transaction whereby a business sells its accounts receivables - invoices to a third party, called a factor, at a discount in exchange for immediate money with which to finance continued business operation. On the other hand, when the receivables are used as a collateral for borrowing it is termed invoice discounting. Many SMEs have a challenge to facilitate working capital and liquidity needs and this venture, Golding notes, will help to stimulate the economy by aggressively targeting the sector where there can be growth.
While the president of the Small Business Association, Dalma James, could not immediately endorse the initiative, he hails it as a good concept.
"The concept sounds good but until we see all the details, level of risk involve and implementation criteria, we can't criticise or endorse it now," James said.
"However, I think it would be very useful for companies that don't have collateral," he added.
Golding did not elaborate on the details of the venture being contemplated, saying that it was still in the early stages of development; and neither could he say how the special window would be funded.
"I can't go into how it would be funded, we have had discussions with people close to the SMEs, but not in any formal way; however, we have some time to develop the idea and will be doing so," he said.
While no legislative changes is anticipated to take place for its establishment, different protocols would need to be developed in terms of administration of the fund, documents needed, how invoices would be transferred, determination of the various criteria for particular customers suitable for this type of venture, among others.
At least one financial institution now offers receivable-invoice financing, but no institution was found offering the type of factoring finance now being considered by economic policy group of the opposition People's National Party.
"NCB offers a receivables-financing, facility product which enables SMEs to finance their working-capital requirements on an unsecured basis, pending collection of outstanding receivables from approved paying companies, which is a unique value proposition in the marketplace," said Garfield Palmer, manager for the business development, retail division, of the National Commercial Bank Jamaica Ltd.
Great opportunity
"SMEs are able to access up to 75 per cent of the accounts receivable-invoice, up to a maximum of J$10 million or US$150,000," he said.
"We would have to look carefully at the risk associated with that idea. We have not considered it in our strategy at this point, but we are looking at opportunities to enable small and micro entrepreneurs to effect business using the swipe card, debit and credit cards.
. We think that is a great opportunity to enable small and microenterprises to collect monies on a timely basis," said Earl Jarrett, general manager of Jamaica National.
But according to Golding, the Export-Import Bank of Jamaica provides companies with a type of factoring financing, but does so on a very restricted basis targeting general business.
"We want to target micro-, small- and medium-size sector, in particular," said Golding.
The Export-Import Bank, which provides financial support to a wide range of entities within the productive sector, did not respond to queries made on the matter up to press time.
sabrina.gordon@gleanerjm.com
Opposition spokes-man for investment and commerce Mark Golding says that the party, under its progressive agenda, is now considering the development of factoring, that is, selling receivables for immediate cash as a means for micro, small and medium-size enterprises to access funds more readily.
"It is an idea under development that we think will meet an important need for SMEs that have working capital needs ... or can't get cash to expand," said Golding.
"The proposal is that there be a fund of some kind in place, administered by, say, the Development Bank of Jamaica or Ex-Im Bank, or even more than one institution with a special window where an SME with an unpaid invoice can access funds using the invoice," he explained.
"It can be structured in either way, an outright purchase of the debt in which factoring is normally done, or the invoice being use as a type of collateral," he said.
Factoring is a financial transaction whereby a business sells its accounts receivables - invoices to a third party, called a factor, at a discount in exchange for immediate money with which to finance continued business operation. On the other hand, when the receivables are used as a collateral for borrowing it is termed invoice discounting. Many SMEs have a challenge to facilitate working capital and liquidity needs and this venture, Golding notes, will help to stimulate the economy by aggressively targeting the sector where there can be growth.
While the president of the Small Business Association, Dalma James, could not immediately endorse the initiative, he hails it as a good concept.
"The concept sounds good but until we see all the details, level of risk involve and implementation criteria, we can't criticise or endorse it now," James said.
"However, I think it would be very useful for companies that don't have collateral," he added.
Golding did not elaborate on the details of the venture being contemplated, saying that it was still in the early stages of development; and neither could he say how the special window would be funded.
"I can't go into how it would be funded, we have had discussions with people close to the SMEs, but not in any formal way; however, we have some time to develop the idea and will be doing so," he said.
While no legislative changes is anticipated to take place for its establishment, different protocols would need to be developed in terms of administration of the fund, documents needed, how invoices would be transferred, determination of the various criteria for particular customers suitable for this type of venture, among others.
At least one financial institution now offers receivable-invoice financing, but no institution was found offering the type of factoring finance now being considered by economic policy group of the opposition People's National Party.
"NCB offers a receivables-financing, facility product which enables SMEs to finance their working-capital requirements on an unsecured basis, pending collection of outstanding receivables from approved paying companies, which is a unique value proposition in the marketplace," said Garfield Palmer, manager for the business development, retail division, of the National Commercial Bank Jamaica Ltd.
Great opportunity
"SMEs are able to access up to 75 per cent of the accounts receivable-invoice, up to a maximum of J$10 million or US$150,000," he said.
"We would have to look carefully at the risk associated with that idea. We have not considered it in our strategy at this point, but we are looking at opportunities to enable small and micro entrepreneurs to effect business using the swipe card, debit and credit cards.
. We think that is a great opportunity to enable small and microenterprises to collect monies on a timely basis," said Earl Jarrett, general manager of Jamaica National.
But according to Golding, the Export-Import Bank of Jamaica provides companies with a type of factoring financing, but does so on a very restricted basis targeting general business.
"We want to target micro-, small- and medium-size sector, in particular," said Golding.
The Export-Import Bank, which provides financial support to a wide range of entities within the productive sector, did not respond to queries made on the matter up to press time.
sabrina.gordon@gleanerjm.com
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