Absa Business Banking Procurement Finance - Welcome to a new way of doing business

Absa Business Banking
       Procurement Finance

Welcome to a new way of doing business

Section A

The Procurement Finance Solutions

Challenges

•   SMEs’ inability to access funds due to a lack of or insufficient collateral to support working capital
    or expansion through traditional funding mechanisms.

•   This may result in their inability to meet their commitment to the corporate customer in time,
    ultimately losing the contract and having to close shop.

Broad Based Black Economic Empowerment (BBBEE)

 The table below shows the scorecard which measures a companies' empowerment progress
 with the various segments in which you can claim points.

Our solution

    Absa Business Banking now offers Procurement Finance
    (Vendor Finance and Invoice Clearing).

    This solution will:

•   Create a database of reliable SME suppliers with whom the corporate can work.

•   Enable the corporate to improve your BEE score based on the Preferential Procurement Element
    as well as the Enterprise Development Element which combined contribute a total of 35% toward
    the BEE score.

•   Assists SMEs to become better and more robust suppliers, enabling ED spend to work for you.

•   Address the need for mentorship and advisory services for SMEs – allowing the corporate to
    claim points with regards to the Enterprise Development Element.

•   Gives the corporate a competitive advantage in the market.

Vendor Finance

Vendor Finance:
•  Provides growth or expansion funding for SME suppliers that have a contract with a participating
   corporate customer.
•  Provides finance from the point a contract or purchase order is issued, to when invoices are received
   by the corporate.
•  Enables SME suppliers to take advantage of growth opportunities, expanding their service offering to
   their corporate customer.
•  Allows corporates to create a database of reliable SME suppliers with whom you can work.
•  Enables corporates to claim BEE points with regards to the Preferential Procurement Element.

What are the benefits?

•   Gives the corporate the confidence to acquire more goods or services from your SME
    suppliers.

•   The corporate can be assured of having SMEs who are financially better positioned to fulfill
    their contracts.

•   Can reduce or eliminate the need to supply funding to cover the SME’s operational costs.

•   Can reduce or eliminate the need to do early settlement of suppliers. This could assist in
    bettering the corporate’s own cash flow and/or Treasury position.

•   SME suppliers can be in any type of industry, as the decision to finance will be based on the
    strength of the contract with the corporate.

Invoice Clearing

Invoice Clearing:
•   Ensures that as a corporate, cash flow cycles are not disrupted by suppliers needing to receive
    payment earlier than the agreed terms of payment.
•   Gives the SME quick and uncomplicated access to working capital between the date of invoicing
    and the date of payment, so they can cover their operational expenses.
•   Can improves the treasury position (cash preservation) of the corporate by allowing for longer
    creditor cycles without negatively impacting the SME supplier.

What is the process?

•   A Memorandum of Agreement will be entered into between the corporate and Absa.

•   Key SME’s who could make use of this form of financial assistance are identified by the corporate.

•   A firm contract needs to be in place between the corporate and the SME supplier (Vendor
    Finance).

•   A trading history between the corporate and the SME supplier is preferable.

•   The SME should be supplying goods or services on a repeat basis not once off
    on an ad hoc basis.

•   Joint meeting convened between the corporate, Absa and identified suppliers to discuss options
    and provide more information on this solution to the suppliers.

•   Identified or interested suppliers make formal applications for either solution.

Procurement Finance Corporates 30 March
                 2011
•   Lonmin PLC
•   Edcon
•   Pick ‘n Pay
•   Rand Water
•   Johannesburg City Parks
•   IDT
•   Absa
•   Arcelor Mittal
•   IBM
•   Sedibeng District Municipality
•   Assmang
•   Woolworths
•   RBM

Corporates’ Logos

•

Specialised Funding provided to Suppliers 2011 YTD

     Solution            Value
     Invoice Clearing    R 125 000 000
     Vendor Finance      R 13 000 000
     Total               R 138 000 000

Vendor Finance Requirements

Vendor Finance

•   FICA Documents

•   A signed consent form. This gives Absa permission to obtain information on the supplier from the
    corporate customer.

•   A copy of the contract.

•   Suretyship of principals (This will be completed in an Absa Branch)

•   Cession of contract income (This will be completed in an Absa Branch)

•   Financial statements as well cash flow projections for the term of the finance.

•   Statement of Personal Assets and Liabilities for all shareholders and sureties.

•   Where there are facilities with other banks, 6 months bank statements are required per account.

•   A credit report will be drawn by Absa.

•   Confirmation of change of banking details from the corporate(upon approval of finance).

Invoice Clearing Requirements

Invoice Clearing

•   FICA Documents.

•   A signed consent form.

•   Company Registration documents.

•   Copy of Identity Documents of owners/directors.

•   Company Vat registration number.

•   Company contact names, telephone and fax numbers.

•   A nominated account for clearing payments(account type, bank name, branch code).

•   Company’s financials confirming turnover. The company’s annual turnover must be in excess of
    R1m per annum. Only company’s and CC’s may apply. Sole proprietorships and partnerships are
    excluded.

•   Confirm change of banking details from the corporate.

Contact Information

Denver Tavira

Tel: +2711 350 1145

Cell: +2779 516 9385

E-mail: denver.tavira@absa.co.za