Local microfinance institution Sprint Financial Services has brokered a new partnership with theJamaica Manufacturers' and Exporters' Association(JMEA) to offer invoice factoring to its membership of Jamaican business owners.
Factoring is a transaction in which a business sells its invoices or receivables to a third-party financial company called a ‘factor’. The factor advances a majority percentage of the invoice value within 24 hours, then assumes the associated wait time for collecting payment on those invoices from the business’ customers.
This allows the business to immediately build up its cash flow, making it easier for them to take care of immediate expenses.
The MFI, since its initial offering of the island’s first invoice-factoring service via a pilot programme last year, is still currently the only local financial or money-lending entity to offer such a facility. The seven-year-old company has also reportedly doubled its customer base and, in turn, its total revenues since offering the much-needed service.
JMEAExecutive Director Imega Breese McNabsaid, “Manufacturing contributes over eight per cent to GDP and employs over 70,000 persons, making the sector a key pillar of economic growth and job creation. With greater access to working capital and reduced interest rates, we see this partnership as a major win for our members and Jamaica’s growth agenda.”
JMEAExecutive Director Imega Breese McNab
The partnership is just ahead of the upcoming launch of another groundbreaking product by the MFI that will provide this same service, but for clients expecting payments internationally via American company PayPal Holdings, which operates a worldwide online-payments system that supports online money transfers.
Christopher Barrett, Sprint Financial Services’ Chief Executive Officer, said, “The growth in the number of business owners who choose to utilise this service may be indicative of the number of persons being rejected by the local banks when applying for a business loan.” He continued, “When people want loans, they want it now. They don’t want to have to wait two or three weeks for it to be processed. That’s another problem that our clients have with the local banking system.”
The financial institution, which boasts catering to business owners from all social strata for both registered and unregistered businesses, provides the service without any maximum restriction on the value of an invoice. The service fee involves, on average, an eight to 12 per cent discount on the face amount of the invoice.
“Each client that we’ve had so far, they’ve all repeated. They are happy with the fact that they can get the funds in 24-48 hours and they don’t have to go through a whole lot of red tape,” Barrett explained. “So long as people are getting paid later than they desire, there will always be need for a service like this.”
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