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Business gloom not as bad as some think – Bidvest Bank

By Bidvest Bank
01-08-2013

General impressions of negative business sentiment right across South African commerce and industry are wide of the mark, according to the asset-based lending and leasing division of Bidvest Bank.

Executives and entrepreneurs are becoming more opportunistic rather than more pessimistic and the trend is reflected in lending and leasing patterns this past year, says Byron Corcoran, head of asset-based lending at Bidvest Bank.

The asset-based finance and leasing arm of Bidvest Bank has achieved sustained growth across its vehicle financing, equipment financing and commercial property mortgage activities.

Corcoran adds: “Sometimes leasing growth reflects overall caution as many businesses prefer to hang on to cash, but you can’t assume this is because they are totally pessimistic about prospects. We get the impression they are looking for opportunities rather than looking to sit on capital indefinitely.

“In vehicle financing we see strong growth in full maintenance leasing and operational leases – solutions that clearly enable a business to retain capital.

“We also see significant growth in asset-based lending. It’s apparent that businesses are not prolonging equipment replacement cycles. They replace machinery promptly, especially revenue-generating assets. This suggests they expect high utilisation levels.”

Though cost reduction and taking working capital out the business seem to be priorities for many companies, other categories of client appear to be closet optimists.

“Expense management remains a priority for all clients,” says Corcoran . “They expect highly competitive rates and smart solutions. We also see businesses that appear to be growing in tough times. Many mid-size companies are looking to gear up so they are clearly looking for future growth.”

Another positive development was the growing number of approaches from business owners looking to buy the premises from which they operate.

Corcoran points out: “We have witnessed a recent uptick in commercial mortgage applications from entrepreneurs and mid-size businesses planning to buy their current factory premises or warehousing.

“The trend could be linked to the low interest rate environment, but it also sends a positive signal as it suggests some businesses are putting down roots and planning for the long term.”

The market-watchers at Bidvest Bank also detect a positive mood in the professional practice segment of the lending market.

“Researchers may track continued falls in business confidence,” says Corcoran, “but the growth in lending to professionals, growth-minded mid-size companies and some corporates tells us that pessimism is patchy rather than uniform across the economy.”