Local firm gets $1 million IDB recovery loan to launch factoring product
Omni Financial Group Limited will be the first Bahamian private company to receive a recovery loan of $1 million from the Inter-American Development Bank (IDB), in an effort to launch its new accounts receivable financing (factoring) product, combined with a digital platform, to help expand access to finance for Bahamian small to medium-size enterprises (SMEs).
According to Omni Financial Group in a press release, the financial product is the “first financial technology-enabled option of its kind” available to Bahamian business owners.
Factoring is a financial transaction in which a business sells its accounts receivables to a third party at a discount. It is not a loan, but rather an agreement.
According to Omni in the press statement, “Not only will it facilitate SMEs’ access to capital, thereby leveraging commercial relationships with large corporates, but it will also incentivize large corporations to enter into commercial relationships with SMEs, especially those located in the Family Islands.”
The loans will be reimbursable and would depend on a business’ performance and services.
Omni was approved for $1 million funding through the IDB’s Multilateral Investment Fund (MIF), which is a private sector arm of the IDB Group.
“Prior to this project approval, the MIF had never provided a credit facility to a private Bahamian company,” said Omni.
Omni will also work with the Bahamas Agricultural & Industrial Corporation (BAIC) in the initial phase of the program.
Speaking at the signing ceremony for the loan yesterday, CEO of Omni Harvey Morris explained, “The signing does not mean IDB is going to disburse a million dollars to us and we are going to be lending funds tomorrow. It requires a lot more due diligence. We go through this round-up of where a lot of discipline is in, making sure that everything is documented; and likewise, the persons we are going to do business with, they are going to have to follow that pattern.
“This is just the first leg of the actual disbursement of funds. The second leg requires further engagement for the benchmarking and the developing of the profile. We are gathering a lot of
data now because it is something that is totally new to
The Bahamas, there isn’t a lot of historical data. Again, with BAIC, we have looked at where can this be used, then all of those benchmarks will become a condition precedent before the product is actually launched.”
Morris assured that SMEs will become more disciplined with a factoring agreement.
He pointed out that there are “many times” SMEs “are not disciplined enough”.
“Cash management is the main reason why most businesses fail, not necessarily the lack of business. Working with larger corporations for small business persons is both a blessing and a curse. You sell more, but you also have a longer time to wait to receive the payment necessary to facilitate the replenishing,” Morris added in a statement.
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